Ch. 50: Illusions Created by Competition

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It has been shown that the value of commodities, or the price of production regulated by their total value, resolves itself into:

1) A portion of value replacing constant capital, or representing past labour, which was used up in the form of means of production in making the commodity; in a word, the value, or price, which these means of production carried into the production process of the commodities. We are not referring at all here to individual commodities, but to commodity-capital, that is, the form in which the product of the capital during a definite period of time, say a year, manifests itself; the individual commodity forms one element of commodity-capital, which, moreover, so far as its value is concerned, resolves itself into the same analogous constituents.

2) The portion of value representing variable capital, which measures the income of the labourer and is transformed into wages for him; i.e., the labourer has reproduced these wages in this variable portion of value; in short, the portion of value which represents the paid portion of new labour added to the above constant portion in the production of the commodities.

3) Surplus-value, i.e., the portion of value of the produced commodities in which the unpaid labour, or surplus-labour, is incorporated. This last portion of value, in its turn, assumes the independent forms which are at the same time forms of revenue: the forms of profit on capital (interest on capital as such and profit of enterprise on capital as functioning capital) and ground-rent, which is claimed by the owner of the land participating in the production process. The components 2) and 3), that is, the portion of value which always assumes the revenue forms of wages (of course only after the latter have first gone through the form of variable capital), profit and rent, is distinguished from the constant component 1) by the fact that in it is embodied that entire value in which the new additional labour added to the constant part, to the means of production of the commodities, is materialised. Now, apart from the constant portion, it is correct to say that the value of a commodity, i.e., to the extent that it represents newly added labour, continually resolves itself into three parts, which constitute three forms of revenue, namely, wages, profit and rent,[1] the respective magnitudes of whose value, that is, the aliquot portions which they constitute in the total value, are determined by various specific laws developed above. But, it would be a mistake to state the converse, namely, that the value of wages, rate of profit and rate of rent form independent constituent elements of value, whose synthesis gives rise to the value of commodities, apart from the constant component; in other words, it would be a mistake to say that they are constituent elements of the value of commodities, or of the price of production.[2]

The difference is easily seen.

Let us assume that the value of the product of a capital of 500 is equal to 400c + 100v + 150s = 650; let the 150s in turn, be divided into 75 profit + 75 rent. We will also assume, in order to forestall useless difficulties, that this is a capital of average composition, so that its price of production and its value coincide; this coincidence always takes place whenever the product of such an individual capital may be considered as the product of some portion — corresponding to its magnitude — of the total capital.

Here wages, measured by variable capital, form 20% of the advanced capital; surplus-value, calculated on the total capital, forms 30%, namely 15% profit and 15% rent. The entire value component of the commodity representing the newly added labour is equal to 100v + 150s = 250. Its magnitude does not depend upon its division into wages, profit and rent. We see from the relation of these parts to each other that labour-power, which is paid with 100 in money, say £100, has supplied a quantity of labour represented by money to the amount of £250. We see from this that the labourer performed 1½ times as much surplus-labour as he did labour for himself. If the working-day = 10 hours, then he worked 4 hours for himself and 6 hours for the capitalist. Therefore, the labour of the labourers paid with £100 is expressed in a money-value of £250. Apart from this value of £250, there is nothing to divide between labourer and capitalist, between capitalist and landlord. It is the total value newly added to the value of the means of production, i.e., 400. The specific commodity-value of 250 thus produced and determined by the quantity of labour materialised in it constitutes the limit, therefore, for the dividends which the labourer, capitalist and landlord will be able to draw from this value in the form of revenue — wages, profit and rent.

Let us assume that a capital of the same organic composition, that is, the same proportion between employed living labour-power and constant capital set in motion, is compelled to pay £150 instead of £100 for the same labour-power which sets in motion the constant capital of 400. And let us further assume that profit and rent share in the surplus-value in different proportions. Since we have assumed that the variable capital of £150 sets the same quantity of labour in motion as did the variable capital of £100, the newly produced value would = 250, as before, and the value of the total product would be 650, also as before, but we would then have 400c + 150v + 100s and these 100s would divide, say, into 45 profit and 55 rent. The proportion in which the newly produced total value would be distributed as wages, profit and rent would now be very different; similarly, the magnitude of the advanced total capital would be different, although it only sets the same total quantity of labour in motion. Wages would amount to 27 3/11%, profit — 8 2/11%, and rent — 10% of the advanced capital; thus, the total surplus-value would be somewhat over 18%.

As a result of the increase in wages, the unpaid portion of total labour would be different and thereby the surplus-value too. If the working-day contained 10 hours, the labourer would have worked 6 hours for himself and only 4 hours for the capitalist. The proportions of profit and rent would also be different; the reduced surplus-value would be divided in a different proportion between the capitalist and the landlord. Finally, since the value of the constant capital would have remained the same and the value of the advanced variable capital would have risen, the reduced surplus-value would express itself in a still more reduced rate of gross profit, by which we mean in this case the ratio of the total surplus-value to the total advanced capital.

The change in the value of wages, in the rate of profit, and in the rate of rent, whatever the effect of the laws regulating the proportions of these parts to each other, could only move within the limits set by the newly produced commodity-value of 250. An exception could only take place if rent should be based on a monopoly price. This would nowise alter the law, but merely complicate the analysis. For if we consider only the product itself in this case, then only the division of surplus-value would be different. But if we consider its relative value as compared with other commodities, then we should find solely this difference — that a portion of the surplus-value had been transferred from them to this particular commodity.

To recapitulate:

Value of the ProductNew

Value

Rate of

Surplus

Value		Rate of

Gross Profit

First Case:400c + 100v + 1505 = 650250150%30%
Second Case:400c + 150v + 100s = 65025066⅔%18 2/11%

In the first place, the surplus-value falls one-third of what it was, i.e., from 150 to 100. The rate of profit falls by a little more than one-third, i.e., from 30% to 18%, because the reduced surplus-value must be calculated on an increased total advanced capital. But it by no means falls in the same proportion as the rate of surplus-value. The latter falls from 150/100 to 100/150, that is, from 150% to 66⅔%, whereas the rate of profit only falls from 150/500 to 100/550, or from 30% to 18 2/11%. The rate of profit, then, falls proportionately more than the mass of surplus-value, but less than the rate of surplus-value. We find, furthermore, that value, as well as mass of products, remains the same, so long as the same quantity of labour is employed, although the advanced capital has increased due to the augmentation of its variable component. This increase in advanced capital would indeed be very much felt by a capitalist undertaking a new enterprise. But considering reproduction as a whole, augmentation of the variable capital merely means that a larger portion of the value newly created by newly added labour is converted into wages, and thus, in the first place, into variable capital instead of into surplus-value and surplus-product. The value of the product thus remains the same, because it is limited on the one hand by the value of the constant capital = 400, and on the other by the number 250, in which the newly added labour is represented. Both, however, remain unaltered. This product would, as before, represent the same amount of use-value in the same magnitude of value, to the extent that it would itself again enter into the constant capital; thus, the same mass of elements of constant capital would retain the same value. The matter would be different if wages were to rise not because the labourer received a larger share of his own labour, but if he received a larger portion of his own labour because the labour productivity had decreased. In this case, the total value in which the same labour, paid and unpaid, would be incorporated, would remain the same. But the mass of products in which this quantity of labour would be incorporated would have decreased so that the price of each aliquot portion of this product would rise, because each portion would contain more labour. The increased wages of 150 would not represent any more product than the wages of 100 did before; the reduced surplus-value of 100 would represent merely ⅔ the former product, i.e., 66⅔% of the mass of use-values formerly represented by 100. In this case, the constant capital would also become dearer to the extent that this product would enter into it. However, this would not be the result of the increase in wages, but rather the increase in wages would be a result of the increase in the price of commodities and a result of the diminished productivity of the same quantity of labour. It appears here as though the increase in wages had made the product dearer; however, this increase is not the cause, but rather the result, of a change in the value of the commodities, due to the decreased productivity of labour.

On the other hand, all other circumstances remaining the same, i.e., if the same quantity of employed labour is still represented by 250, then, if the value of the means of production employed should rise or fall, the value of the same quantity of products would rise or fall by the same magnitude. 450c + 100v + 150s gives a product-value = 700; but 350c + 100v + 150s gives a value for the same quantity of products of only 600, as against a former 650. Hence, if the advanced capital, set in motion by the same quantity of labour, increases or decreases, then the value of the product rises or falls, other circumstances remaining the same, if the increase or decrease in advanced capital is due to a change in the magnitude of the value of the constant portion of capital. On the other hand, the value of the product remains unchanged if the increase or decrease in advanced capital is caused by a change in the magnitude of the value of the variable portion of capital, assuming the labour productivity remains the same. In the case of the constant capital, the increase or decrease in its value is not compensated for by any opposite movement. But in the case of the variable capital, assuming the labour productivity remains the same, an increase or decrease in its value is compensated for by the opposite movement on the part of the surplus-value, so that the value of the variable capital plus the surplus-value, i.e., the value newly added by labour to the means of production and newly incorporated in the product, remains the same.

But if the increase or decrease in the value of the variable capital or wages is due to a rise or fall in the price of commodities, i.e., a decrease or increase in the productiveness of the labour employed by this investment of capital then the value of the product is affected. But the rise or fall in wages in this case is not a cause, but merely an effect.

On the other hand, assuming the constant capital in the above illustration to remain = 400c, if the change from 100v + 150s to 150v + 100s, i.e., the increase in variable capital, should be due to a decrease in the productiveness of labour, not in this particular branch of industry, say, cotton spinning, but perhaps in agriculture which provides the labourer’s foodstuffs, i.e., due to a rise in the price of these foodstuffs, then the value of the product would remain unchanged. The value of 650 would still be represented by the same quantity of cotton yarn.

It follows, furthermore, from the above: If the decrease in the expenditure of constant capital is due to economies, etc., in lines of production whose products enter into the labourer’s consumption, then this, just like the direct increase in the productivity of the employed labour itself, may lead to a decrease in wages due to a cheapening of the means of subsistence of the labourer, and may lead, therefore, to an increase in the surplus-value; so that the rate of profit in this case would grow for two reasons, namely, on the one hand, because the value of the constant capital decreases, and on the other hand, because the surplus-value increases. In our consideration of the transformation of surplus-value into profit, we assumed that wages do not fall, but remain constant, because there we had to investigate the fluctuations in the rate of profit, independent of the changes in the rate of surplus-value. Moreover, the laws developed there are general ones, and also apply to investments of capital whose products do not enter into the labourer’s consumption, whereby changes in the value of the product, therefore, are without influence upon the wages.

Thus, the separation and resolution of new value annually added by new labour to the means of production, or to the constant part of capital, into the various forms of revenue, viz., wages, profit and rent, do not at all alter the limits of the value itself, the total value to be distributed among these various categories; any more than a change in the mutual relations of these individual parts can change their total, this given magnitude of value. The given number 100 always remains the same, whether it is divided into 50 + 50, or into 20 + 70 + 10, or into 40 + 30 + 30. The portion of the value of the product which is resolved into these revenues is determined, just like the constant portion of the value of capital, by the value of the commodities, i.e., by the quantity of labour incorporated in them in each case. Given first, then, is the quantity of value of commodities to be divided among wages, profit and rent; in other words, the absolute limit of the sum of the portions of value of these commodities. Secondly, as concerns the individual categories themselves, their average and regulating limits are likewise given. Wages form the basis in this limitation. They are regulated on the one hand by a natural law; their lower limit is determined by the physical minimum of means of subsistence required by the labourer for the conservation of his labour-power and for its reproduction; i.e., by a definite quantity of commodities. The value of these commodities is determined by the labour-time required for their reproduction; and thus by the portion of new labour added to the means of production, or by the portion of each working-day required by the labourer for the production and reproduction of an equivalent for the value of these necessary means of subsistence. For instance, if his average daily means of subsistence have a value = 6 hours of average labour, then he must work on an average six hours per day for himself. The actual value of his labour-power deviates from this physical minimum; it differs according to climate and level of social development; it depends not merely upon the physical, but also upon the historically developed social needs, which become second nature. But in every country, at a given time, this regulating average wage is a given magnitude. The value of all other revenue thus has its limit. It is always equal to the value in which the total working-day (which coincides in the present case with the average working-day, since it comprises the total quantity of labour set in motion by the total social capital) is incorporated minus the portion of the working-day incorporated in wages. Its limit is therefore determined by the limit of the value in which the unpaid labour is expressed, that is, by the quantity of this unpaid labour. While the portion of the working-day which is required by the labourer for the reproduction of the value of his wages finds its ultimate limit in the physical minimum of wages, the other portion of the working-day, in which surplus-labour is incorporated, and thus the portion of value representing surplus-value, finds its limit in the physical maximum of the working-day, i.e., in the total quantity of daily labour-time during which the labourer can, in general, be active and still preserve and reproduce his labour-power. Since we are here concerned with the distribution of the value which represents the total labour newly added per year, the working-day may be regarded here as a constant magnitude, and is assumed as such, no matter how much or how little it may deviate from its physical maximum. The absolute limit of the portion of value which forms surplus-value, and which resolves itself into profit and ground-rent, is thus given. It is determined by the excess of the unpaid portion of the working-day over its paid portion, i.e., by the portion of the value of the total product in which this surplus-labour exists. If we call the surplus-value thus limited and calculated on the advanced total capital — the profit, as I have done, then this profit, so far as its absolute magnitude is concerned, is equal to the surplus-value and, therefore, its limits are just as much determined by law as the latter. On the other hand, the level of the rate of profit is likewise a magnitude held within certain specific limits determined by the value of commodities. It is the ratio of the total surplus-value to the total social capital advanced in production. If this capital = 500 (say millions) and the surplus-value = 100, then 20% constitutes the absolute limit of the rate of profit. The distribution of the social profit according to this rate among the capitals invested in the various spheres of production creates prices of production which deviate from the values of commodities and which are the real regulating average market-prices. But this deviation abolishes neither the determination of prices by values nor the regular limits of profit. Instead of the value of a commodity being equal to the capital consumed in its production plus the surplus-value contained in it, its price of production is now equal to the capital, c, consumed in its production plus the surplus-value falling to its share as a result of the general rate of profit, for instance 20% on the capital advanced in its production, counting both the consumed and the merely employed capital. But this additional amount of 20% is itself determined by the surplus-value created by the total social capital and its relation to the value of this capital; and for this reason it is 20% and not 10 or 100. The transformation of values into prices of production, then, does not remove the limits on profit, but merely alters its distribution among the various particular capitals which make up the social capital, i.e., it distributes it uniformly among them in the proportion in which they form parts of the value of this total capital. The market-prices rise above and fall below these regulating prices of production, but these fluctuations mutually balance each other. If one examines price lists over a more or less long period of time, and if one disregards those cases in which the actual value of commodities is altered by a change in the productivity of labour, and likewise those cases in which the process of production has been disturbed by natural or social accidents, one will be surprised, in the first place, by the relatively narrow limits of the deviations, and, secondly, by the regularity of their mutual compensation. The same domination of the regulating averages will be found here that Quetelet pointed out in the case of social phenomena. If the equalisation of the values of commodities into prices of production does not meet any obstacles, then the rent resolves itself into differential rent, i.e., it is limited to the equalisation of the surplus-profits which would he given to some capitalists by the regulating prices of production and which are now appropriated by the landlord. Here, then, rent has its definite limit of value in the deviations of the individual rates of profit, which are caused by the regulation of prices of production by the general rate of profit. If landed property obstructs equalisation of the values of commodities into prices of production, and appropriates absolute rent, then the latter is limited by the excess of the value of the agricultural products over their price of production, i.e., by the excess of the surplus-value contained in them over the rate of profit assigned to the capitals by the general rate of profit. This difference, then, forms the limit of the rent, which, as before, is but a definite portion of the given surplus-value contained in the commodities.

Finally, if equalisation of surplus-value into average profit meets with obstacles in the various spheres of production in the form of artificial or natural monopolies, and particularly monopoly in landed property, so that a monopoly price becomes possible, which rises above the price of production and above the value of the commodities affected by such a monopoly, then the limits imposed by the value of the commodities would not thereby be removed. The monopoly price of certain commodities would merely transfer a portion of the profit of the other commodity-producers to the commodities having the monopoly price. A local disturbance in the distribution of the surplus-value among the various spheres of production would indirectly take place, but it would leave the limit of this surplus-value itself unaltered. Should the commodity having the monopoly price enter into the necessary consumption of the labourer, it would increase the wage and thereby reduce the surplus-value, assuming the labourer receives the value of his labour-power as before. It could depress wages below the value of labour-power, but only to the extent that the former exceed the limit of their physical minimum. In this case the monopoly price would be paid by a deduction from real wages (i.e.. the quantity of use-values received by the labourer for the same quantity of labour) and from the profit of the other capitalists. The limits within which the monopoly price would affect the normal regulation of the prices of commodities would be firmly fixed and accurately calculable.

Thus just as the division of the newly added value of commodities, and, in general, value resolvable into revenue, finds its given and regulating limits in the relation between necessary and surplus labour, wages and surplus-value, so does the division of surplus-value itself into profit and ground-rent find its limits in the laws regulating the equalisation of the rate of profit. As regards the division into interest and profit of enterprise, the average profit itself forms the limit for both taken together. It furnishes the given magnitude of value which they may split among themselves and which alone can be so divided. The specific ratio of this division is here fortuitous, i.e., it is determined exclusively by conditions of competition. whereas in other cases the balancing of supply and demand is equivalent to elimination of the deviations in market-prices from their regulating average prices, i.e., elimination of the influence of competition, it is here the only determinant. But why? Because the same production factor, capital, has to divide its share of the surplus-value between two owners of the same production factor. But the fact that there is no definite, regular limit here for the division of the average profit does not remove its limit as part of the commodity-value; just as the fact that two partners in a certain business divide their profit unequally due to different external circumstances does not affect the limits of this profit in any way.

Hence, although the portion of the commodity-value in which the new labour added to the value of the means of production is incorporated is divided into various parts, which in the form of revenue assume mutually independent forms, this is no reason for now considering wages, profit and ground-rent as the constituent elements which, in combination or taken all together, are the source of the regulating price (natural price, prix necessaire) of the commodities themselves; so that it is not the commodity-value, after deducting the constant portion of value, which would be the original unit that divides into these three parts, but rather, conversely, the price of each of these three parts would be independently determined, and the price of the commodities would then be formed by adding these three independent magnitudes together. In reality, the commodity-value is the magnitude which precedes the sum of the total values of wages, profit and rent, regardless of the relative magnitudes of the latter. In the above erroneous conception, wages, profit and rent are three independent magnitudes of value, whose total magnitude produces, limits and determines the magnitude of the commodity-value.

In the first place it is evident that if wages, profit and rent were to form the price of commodities, this would apply as much to the constant portion of the commodity-value as to the other portion, in which variable capital and surplus-value are incorporated. Thus, this constant portion may here be left entirely out of consideration, since the value of the commodities of which it is composed would likewise resolve itself into the sum of the values of wages, profit and rent. As already noted, this conception, then, denies the very existence of such a constant portion of value.

It is furthermore evident that value loses all meaning here. Only the conception of price still remains, in the sense that a certain amount of money is paid to the owner of labour-power, capital and land. But what is money? Money is not a thing, but a definite form of value, hence, value is again presupposed. Let us say, then, that a definite amount of gold or silver is paid for these elements of production, or that it is mentally equated to them. But gold and silver (and the enlightened economist is proud of this discovery) are themselves commodities like all other commodities. The price of gold and silver is therefore likewise determined by wages, profit and rent. Hence we cannot determine wages, profit and rent by equating them to a certain amount of gold and silver, for the value of this gold and silver, by means of which they should be evaluated as in their equivalent, should be first determined precisely by them, independently of gold and silver, i.e., independently of the value of any commodity, which value is precisely the product of the above three factors. Thus, to say that the value of wages, profit and rent consists in their being equivalent to a certain quantity of gold and silver, would merely be saying that they are equal to a certain quantity of wages, profit and rent.

Take wages first. For it is necessary to make labour the point of departure, even in this view of the matter. How, then, is the regulating price of wages determined, the price about which its market-prices oscillate?

Let us say that it is determined by the supply and demand of labour-power. But what sort of labour-power demand is this? It is a demand made by capital. The demand for labour is therefore tantamount to the supply of capital. In order to speak of a supply of capital, we should know above all what capital is. Of what does capital consist? If we take its simplest aspect, it consists of money and commodities. But money is merely a commodity-form. Capital, then, consists of commodities. But the value of commodities, according to our assumption, is determined, in the first instance, by the price of the labour producing the commodities, by wages. Wages are here presupposed and are treated as a constituent element of the price of commodities. This price then should be determined by the ratio of available labour to capital. The price of the capital itself is equal to the price of the commodities of which it is composed. The demand by capital for labour is equal to the supply of capital. And the supply of capital is equal to the supply of a quantity of commodities of given price, and this price is regulated in the first place by the price of labour, and the price of labour in turn is equal to that portion of the commodity-price constituting the variable capital, which is granted to the labourer in exchange for his labour; and the price of the commodities constituting this variable capital is again determined, in turn, primarily by the price of labour; for it is determined by the prices of wages, profit and rent. In order to determine wages, we cannot, therefore, presuppose capital, for the value of the capital is itself determined in part by wages.

Moreover, dragging competition into this problem does not help at all. Competition makes the market-prices of labour rise or fall. But suppose supply and demand of labour are balanced. How are wages then determined? By competition. But we have just assumed that competition ceases to act as a determinant, that its influence is cancelled due to equilibrium between its two mutually opposing forces. Indeed, it is precisely the natural price of wages that we wish to find, i.e., the price of labour that is not regulated by competition, but which, on the contrary, regulates the latter.

Nothing remains but to determine the necessary price of labour by the necessary means of subsistence of the labourer. But these means of subsistence are commodities, which have a price. The price of labour is therefore determined by the price of the necessary means of subsistence and the price of the means of subsistence, like that of all other commodities, is determined primarily by the price of labour. Therefore, the price of labour determined by the price of the means of subsistence is determined by the price of labour. The price of labour is determined by itself. In other words, we do not know how the price of labour is determined. Labour in this case has a price in general, because it is considered as a commodity. In order, therefore, to speak of the price of labour, we must know what price in general is. But we do not learn at all in this way what price in general is.

Nevertheless, let us assume that the necessary price of labour is determined in this agreeable manner. Then how is the average profit determined, the profit of every capital under normal conditions, which constitutes the second element in the price of commodities? The average profit must be determined by an average rate of profit; how is this rate determined? By competition among the capitalists? But the competition already presupposes the existence of profit. It presupposes various rates of profit, and thus various profits — either in the same or in different spheres of production. Competition can influence the rate of profit only to the extent that it affects the prices of commodities. Competition can only make the producers within the same sphere of production sell their commodities at the same prices, and make them sell their commodities in different spheres of production at prices which will give them the same profit, the same proportional addition to the price of commodities which has already been partially determined by wages. Hence competition can only equalise inequalities in the rate of profit. In order to equalise unequal rates of profit, profit must exist as an element in the price of commodities. Competition does not create it. It lowers or raises its level, but does not create the level which is established when equalisation has been achieved. And when we speak of a necessary rate of profit, what we wish to know is precisely the rate of profit independent of the movements of competition, which in turn regulates competition itself. The average rate of profit sets in when there is an equilibrium of forces among the competing capitalists. Competition may establish this equilibrium but not the rate of profit which makes its appearance with this equilibrium. When this equilibrium is established, why is the general rate of profit now 10, or 20, or 100%? Because of competition? No, on the contrary, competition has eliminated the causes producing deviations from 10, 20, or 100%. It has brought about a commodity-price whereby every capital yields the same profit in proportion to its magnitude. The magnitude of this profit itself, however, is independent of competition. The latter merely reduces, again and again, all deviations to this magnitude. One person competes with another, and competition compels him to sell his commodities at the same price as the other. But why is this price 10 or 20 or 100?

Thus, nothing remains but to declare rate of profit, and therefore profit, to be in some unaccountable manner a definite extra charge added to the price of commodities, which up to this point was determined by wages. The only thing that competition tells us is that this rate of profit must be a given magnitude. But we knew this before — when we dealt with general rate of profit and "necessary price" of profit.

It is quite unnecessary to wade through this absurd process anew in the case of ground-rent. One can see without doing this that, when carried out more or less consistently, it makes profit and rent merely appear as definite extra charges added by unaccountable laws to the price of commodities, a price primarily determined by wages. In short, competition has to shoulder the responsibility of explaining all the meaningless ideas of the economists, whereas it should rather be the economists who explain competition.

Now, disregarding here the illusion of a profit and rent being created by circulation, i.e., price components arising through sale — and circulation can never give what it did not first receive — the matter simply amounts to this:

Let the price of a commodity determined by wages = 100; let the rate of profit be 10% of wages, and the rent 15% of wages. Then the price of the commodity determined by the sum of wages, profit and rent = 125. This additional 25 cannot arise from the sale of the commodity. For all who sell one another commodities sell at 125 that which costs 100 in wages; which is the same as if they had all sold at 100. Thus, the operation must be considered independently of the circulation process.

If the three share the commodity itself, which now costs 125 — and it does not alter matters any if the capitalist first sells at 125, and then pays 100 to the labourer, 10 to himself, and 15 to the landlord — the labourer receives 4/5 = 100 of the value and of the product. The capitalist receives 2/25 of the value and of the product, and the landlord 3/25. Since the capitalist sells at 125 instead of 100, he gives the labourer only 4/5 of the product incorporating the latter’s labour. Thus, it would be just the same as if he had given 80 to the labourer and retained 20 — of which 8 would fall to his share and 12 to the landlord. In this case he would have sold the commodity at its value, since in fact the additions to the price represent increases that are independent of the value of the commodity, which under the assumption made above is determined by the value of wages. This, in a roundabout way, amounts to saying that according to this conception the term "wages," here 100, means the value of the product, i.e., the sum of money in which this definite quantity of labour is represented; but that this value in turn differs from the real wage and therefore leaves a surplus. But, here the surplus is realised by a nominal addition to the price. Hence, if wages were equal to 110 instead of 100, the profit would have to be = 11 and the ground-rent = 16½, so that the price of the commodity would = 137½. This would leave the proportions unaltered. But since the division would always be obtained by way of a nominal addition of definite percentages to wages, the price would rise and fall with the wages. Wages are here first set equal to the value of the commodity, and then divorced from it again. In fact, however, this amounts to saying in a roundabout and meaningless way that the value of the commodity is determined by the quantity of labour contained in it, whereas the value of wages is determined by the price of the necessary means of subsistence, and the excess of value above the wage forms profit and rent.

The splitting of the value of commodities after subtracting the value of the means of production consumed in their creation; the splitting of this given quantity of value, determined by the quantity of labour incorporated in the produced commodities, into three component parts, which assume, as wages, profit and rent, independent and mutually unrelated forms of revenue — this splitting appears in a perverted form on the surface of capitalist production, and consequently in the minds of those captivated by the latter.

Let the total value of a certain commodity = 300, of which 200 is the value of the means of production, or elements of constant capital, consumed in its production. This leaves 100 as the amount of new value added to the commodity during its process of production. This new value of 100 is all that is available for division among the three forms of revenue. If we let wages = x, profit = y and ground-rent = z, then the sum of x + y + z will always = 100 in our case. But to the industrialists, merchants and bankers, and to the vulgar economists, this appears quite different. For them, the value of the commodity, after subtracting the value of the means of production consumed by it, is not given = 100, this 100 then being divided into x, y and z. But rather, the price of the commodity simply consists of the value of wages, the value of profit and the value of rent, which magnitudes are determined independently of the value of the commodity and of each other, so that x, y and z are each given and determined independently, and only from the sum of these magnitudes, which the may be smaller or larger than 100, is the magnitude of value of the commodity itself obtained by adding these component values together. This quid pro quo is inevitable because:

First: The component parts of the value of a commodity, appear as independent revenues in relation to one another, and as such are related to three very dissimilar production factors, namely labour, capital and land, and therefore they seem to arise from the latter. Ownership of labour-power, capital and land is the cause for these various component values of commodities falling to the share of the respective owners, and thus transforming themselves into revenue for them. But the value does not arise from a transformation into revenue; it must rather exist before it can be converted into revenue, before it can assume this form. The illusion that the opposite is true is strengthened all the more as the determination of the relative magnitudes of these three components in relation to one another follows different laws, whose connection with, and limitation by, the value of the commodities themselves nowise appear on the surface.

Secondly: We have seen that a general rise or fall in wages, by causing a movement of the general rate of profit in the opposite direction — other circumstances remaining the same — changes the prices of production of the various commodities, i.e., raises some and lowers others, depending on the average composition of capital in the respective spheres of production. Thus, experience shows here that in some spheres of production, at any rate, the average price of a commodity rises because wages have risen, and falls because wages have fallen. But "experience" does not show that the value of commodities, which is independent of wages, secretly regulates these changes. However, if the rise in wages is local, if it only takes place in particular spheres of production as a result of special circumstances, then a corresponding nominal rise in the prices of these commodities may occur. This rise in the relative value of one kind of commodity in relation to the others, for which wages have remained unchanged, is then merely a reaction against the local disturbance in the uniform distribution of surplus-value among the various spheres of production, a means of equalising the particular rates of profit into the general rate. "Experience" shows in this case that wages again determine the price. Thus, in both of these cases experience shows that wages determine the prices of commodities. But "experience" does not show the hidden cause of this interrelation. Furthermore: The average price of labour, i.e., the value of labour-power, is determined by the production price of the necessary means of subsistence. If the latter rises or falls, the former rises or falls accordingly. Thus, experience again shows the existence of a connection between wages and the price of commodities. But the cause may appear as an effect, and the effect as a cause, which is also the case in the movements of market-prices, where a rise of wages above their average corresponds to the rise of market-prices above the prices of production during periods of prosperity, and the subsequent fall of wages below their average corresponds to a fall of market-prices below the prices of production. To the dependence of prices of production upon the values of commodities prima facie there would always have to correspond, apart from the oscillatory movements of market-prices, the experience that whenever wages rise the rate of profit falls, and vice versa. But we have seen that the rate of profit may be determined by movements in the value of constant capital, independently of the movements of wages; so that wages and rate of profit, instead of moving in opposite directions, may move in the same direction, may rise or fall together. If the rate of surplus-value were to directly coincide with the rate of profit, this would not be possible. Similarly if wages should rise as a result of a rise in the prices of the means of subsistence, the rate of profit may remain the same, or even rise, due to greater intensity of labour or prolongation of the working-day. All these experiences bear out the illusion created by the independent and distorted form of the component values, namely, that either wages alone, or wages and profit together, determine the value of commodities. Once such an illusion appears with respect to wages, once the price of labour and the value created by labour seem to coincide, the same automatically applies to profit and rent. Their prices, i.e., their money-expression, must then be regulated independently of labour and of the value created by the latter.

Thirdly: Let us assume that according to direct experience the values of a commodity, or the prices of production — which merely appear to be independent of the values — always coincide with the market-prices of the commodity rather than merely prevailing as the regulating average prices by constant compensation of the continual fluctuations in market-price. Let us assume, furthermore, that reproduction always takes place under the same unaltered conditions, i.e., labour productivity remains constant in all elements of capital. Finally, let us assume that the component value of the commodity-product, which is formed in every sphere of production by the addition of a new quantity of labour — i.e., a newly produced value — to the value of the means of production, always split into constant proportions of wages, profit and rent, so that the wage actually paid always directly coincides with the value of labour-power, the profit actually realised — with the portion of the total surplus-value which falls to the share of every independently functioning part of the total capital by virtue of the average rate of profit, and the actual rent is always limited by the bounds within which ground-rent on this basis is normally confined. In a word, let us assume that the division of the socially produced values and the regulation of the prices of production takes place on a capitalist basis, but that competition is eliminated.

Thus, under these assumptions, namely, if the value of commodities were constant and appeared so, if the component value of the commodity-product which resolves itself into revenues were to remain a constant magnitude and always appeared as such, and finally, if this given and constant component value always split into constant proportions of wages, profit and rent — even under these assumptions, the real movement would necessarily appear in distorted form; not as the splitting of a previously given magnitude of value into three parts which assume mutually independent forms of revenue, but, on the contrary, as the formation of this magnitude of value from the sum of the independent and separately determined, each by itself, constituent elements — wages, profit and ground-rent. This illusion would necessarily arise, because in the actual movement of individual capitals, and the commodities produced by them, not the value of commodities would appear to be a precondition of its splitting but, conversely, the components into which it is split function as a precondition of the value of the commodities. In the first place, we have seen that to every capitalist the cost-price of his commodities appears as a given magnitude and continually appears as such in the actual price of production. The cost-price, however, is equal to the value of the constant capital, the advanced means of production, plus the value of labour-power, which, however, appears to the agent of production in the irrational form of the price of labour, so that wages simultaneously appear as revenue of the labourer. The average price of labour is a given magnitude, because the value of labour-power, like that of any other commodity, is determined by the necessary labour-time required for its reproduction. But as concerns that portion of the value of commodities which is embodied in wages, it does not arise from the fact that it assumes this form of wages, that the capitalist advances to the labourer his share of his own product in the form of wages, but from the fact that the labourer produces an equivalent for his wages, i.e., that a portion of his daily or annual labour produces the value contained in the price of his labour-power. But wages are stipulated by contract, before their corresponding value equivalent has been produced. As an element of price, whose magnitude is given before the commodity and its value have been produced, as a constituent part of the cost-price, wages thereby do not appear as a portion which detaches itself in independent form from the total value of the commodity, but rather, conversely, as a given magnitude, which predetermines this value, i.e., as a creator of price and value. A role similar to that of wages in the cost-price of commodities is played by the average profit in their price of production, for the price of production is equal to cost-price plus average profit on the advanced capital. This average profit figures practically, in the mind and calculation of the capitalist himself, as a regulating element, not merely in so far as it determines the transfer of capitals from one sphere of investment into another, but also in all sales and contracts which embrace a process of reproduction extending over long periods. But so far as it figures in this manner, it is a pre-existent magnitude, which is in fact independent of the value and surplus-value produced in any particular sphere of production, and thus even more so in the case of any individual investment of capital in any sphere of production. Rather than appearing as a result of a splitting of value, it manifests itself much more as a magnitude independent of the value of the produced commodities, as pre-existing in the process of production of commodities and itself determining the average price of the commodities, i.e., as a creator of value. Indeed, the surplus-value, owing to the separation of its various portions into mutually, completely unrelated forms, appears in still more concrete form as a prerequisite for creating commodity-value. A part of the average profit in the form of interest confronts the functioning capitalist independently as an assumed element in the production of commodities and of their value. No matter how much the magnitude of the interest fluctuates, at each moment and for every capitalist it is a given magnitude entering into the cost-price of the commodities produced by him as individual capitalist. The same role is played by ground-rent in the form of lease money fixed by contract for the agricultural capitalist, and in the form of rent for business premises in the case of other entrepreneurs. These portions into which surplus-value is split, being given as elements of cost-price for the individual capitalist, appear conversely therefore as creators of surplus-value; creators of a portion of the price of commodities, just as wages create the other. The secret wherefore these products of the splitting of commodity-value constantly appear as prerequisites for the formation of value itself is simply this, that the capitalist mode of production, like any other, does not merely constantly reproduce the material product, but also the social and economic relations, the characteristic economic forms of its creation. Its result, therefore, appears just as constantly presupposed by it, as its presuppositions appear as its results. And it is this continual reproduction of the same relations which the individual capitalist anticipates as self-evident, as an indubitable fact. So long as the capitalist mode of production persists as such, a portion of the newly added labour continually resolves itself into wages, another into profit (interest and profit of enterprise), and a third into rent. In contracts between the owners of various agencies of production this is always assumed, and this assumption is correct, however much the relative proportions may fluctuate in individual cases. The definite form in which the parts of value confront each other is presupposed because it is continually reproduced, and it is continually reproduced because it is continually presupposed.

To be sure, experience and appearance now also demonstrate that market-prices, in whose influence the capitalist actually sees the only determination of value, are by no means dependent upon such anticipation, so far as their magnitude is concerned; that they do not correspond to whether the interest or rent were set high or low. But the market-prices are constant only in their variation, and their average over longer periods results precisely in the respective averages of wages, profit and rent as the constant magnitudes, and therefore, in the last analysis, those dominating the market-prices.

On the other hand, it seems plain on reflection that if wages, profit and rent are creators of value since they seem to be presupposed in the production of value, and are assumed by the individual capitalist in his cost-price and price of production, then the constant portion, whose value enters as given into the production of every commodity, is also a creator of value. But the constant portion of capital is no more than a sum of commodities and, therefore, of commodity-values. Thus we should arrive at the absurd tautology that commodity-value is the creator and cause of commodity-value.

However, if the capitalist were at all interested in reflecting about this — and his reflections as capitalist are dictated exclusively by his interests and self-interested motives — experience would show him that the product which he himself produces enters into other spheres of production as a constant portion of capital, and that products of these other production spheres enter into his own product as constant portions of capital. Since the additional value, so far as his new production is concerned, seems to be formed, from his point of view, by the magnitudes of wages, profit and rent, then this also holds good for the constant portion consisting of the products of other capitalists. And thus, the price of the constant portion of capital, and thereby the total value of the commodities, reduces itself in the final analysis, although in a manner which is somewhat unaccountable, to a sum of values resulting from the addition of independent creators of value — wages, profit and rent — which are regulated according to different laws and arise from different sources.

Fourthly: Whether the commodities are sold at their values or not, and hence the determination of value itself, is quite immaterial for the individual capitalist. It is, from the very outset, a process that takes place behind his back and is controlled by the force of circumstances independent of himself, because it is not the values, but the divergent prices of production, which form the regulating average prices in every sphere of production. The determination of value as such interests and has a determining effect on the individual capitalist and the capital in each particular sphere of production only in so far as the reduced or increased quantity of labour required to produce commodities, as a consequence of a rise or fall in productiveness of labour, enables him in one instance to make an extra profit, at the prevailing market-prices, and compels him in another to raise the price of his commodities, because more wages, more constant capital, and thus more interest, fall upon each portion of the product, or individual commodity. It interests him only in so far as it raises or lowers the cost of production of commodities for himself, thus only in so far as it makes his position exceptional.

On the other hand, wages, interest and rent appear to him as regulating limits not only of the price at which he can realise the profit of enterprise, the portion of profit falling to his share as functioning capitalist, but also at which he must generally be able to sell his commodities, if continued reproduction is to take place. It is quite immaterial to him whether or not he realises, through sale, the value and surplus-value incorporated in his commodities, provided only that he makes the customary, or larger, profit of enterprise at given prices, over and above his individual cost-price determined by wages, interest and rent. Apart from the constant portion of capital-wages, interest and rent appear to him, therefore, as the limiting and thereby productive determining elements of the commodity-price. Should he succeed, e.g., in depressing wages below the value of labour-power, i.e., below its normal level, in obtaining capital at a lower interest rate, and in paying less lease money than the normal amount for rent, then it is completely irrelevant to him whether he sells his product below its value, or even below the general price of production, thereby giving away gratis a portion of the surplus-labour contained in the commodities. This also applies to the constant portion of capital. If an industrialist, e.g., can buy his raw material below its price of production, then this buffers him against loss, even should he sell it in the finished product under its price of production. His profit of enterprise may remain the same, or even increase, if only the excess of the commodity-price over its elements, which must he paid, replaced by an equivalent, remains the same or increases. But aside from the value of the means of production which enter into the production of his commodities as a given price magnitude, it is precisely wages, interest and rent which enter into this production as limiting and regulating price magnitudes. Consequently they appear to him as the elements determining the price of the commodities. Profit of enterprise, from this standpoint, seems to be either determined by the excess of market-prices, dependent upon accidental conditions of competition, over the immanent value of commodities determined by the above-mentioned elements of price; or, to the extent that this profit itself exerts a determining influence upon market-prices, it seems itself, in turn, dependent upon the competition between buyers and sellers.

In the competition of individual capitalists among themselves as well as in the competition on the world-market, it is the given and assumed magnitudes of wages, interest and rent which enter into the calculation as constant and regulating magnitudes; constant not in the sense of being unalterable magnitudes, but in the sense that they are given in each individual case and constitute the constant limit for the continually fluctuating market-prices. For instance, in competition on the world-market it is solely a question of whether commodities can be sold advantageously with existing wages, interest and rent at, or below, existing general market-prices, i.e., realising a corresponding profit of enterprise. If wages and the price of land are low in one country, while interest on capital is high, because the capitalist mode of production has not been developed generally, whereas in another country wages and the price of land are nominally high, while interest on capital is low, then the capitalist employs more labour and land in the one country, and in the other relatively more capital. These factors enter into calculation as determining elements in so far as competition between these two capitalists is possible. Here, then, experience shows theoretically, and the self-interested calculation of the capitalist shows practically, that the prices of commodities are determined by wages, interest and rent, by the price of labour, capital and land, and that these elements of price are indeed the regulating constituent factors of price.

Of course, there always remains an element here which is not assumed, but which results from the market-price of commodities, namely, the excess above the cost-price formed by the addition of the aforementioned elements: wages, interest and rent. This fourth element seems to be determined by competition in each individual case, and in the average case by the average profit, which in its turn is regulated by this same competition, only over longer periods.

Fifthly: On the basis of the capitalist mode of production, it becomes so much a matter of course to split up the value, in which newly added labour is represented, into the forms of revenue, of wages, profit and ground-rent, that this method is applied (leaving aside earlier stages of history, from which we gave illustrations in our study of ground-rent) even where the preconditions for these forms of revenue are missing. That is, all is subsumed by analogy under these forms of revenue.

When an independent labourer — let us take a small farmer, since all three forms of revenue may here be applied — works for himself and sells his own product, he is first considered as his own employer (capitalist), who makes use of himself as a labourer, and second as his own landlord, who makes use of himself as his own tenant. To himself as wage-worker he pays wages, to himself as capitalist he gives the profit, and to himself as landlord he pays rent. Assuming the capitalist mode of production and the relations corresponding to it to be the general basis of society, this subsumption is correct, in so far as it is not thanks to his labour, but to his ownership of means of production — which have assumed here the general form of capital — that he is in a position to appropriate his own surplus-labour. And furthermore, to the extent that he produces his product as commodities, and thus depends upon its price (and even if not, this price is calculable), the quantity of surplus-labour which he can realise depends not on its own magnitude, but on the general rate of profit; and likewise any eventual excess above the amount of surplus-value determined by the general rate of profit is, in turn, not determined by the quantity of labour performed by him, but can be appropriated by him only because he is owner of the land. Since such a form of production not corresponding to the capitalist mode of production may thus be subsumed under its forms of revenue — and to a certain extent not incorrectly — the illusion is all the more strengthened that capitalist relations are the natural relations of every mode of production.

Of course, if wages are reduced to their general basis, namely, to that portion of the product of the producer’s own labour which passes over into the individual consumption of the labourer; if we relieve this portion of its capitalist limitations and extend it to that volume of consumption which is permitted, on the one hand, by the existing productivity of society (that is, the social productivity of his own individual labour as actually social), and which, on the other hand, the full development of the individuality requires; if, furthermore, we reduce the surplus-labour and surplus-product to that measure which is required under prevailing conditions of production of society, on the one side to create an insurance and reserve fund, and on the other to constantly expand reproduction to the extent dictated by social needs; finally, if we include in No. 1 the necessary labour, and in No. 2 the surplus-labour, the quantity of labour which must always be performed by the able-bodied in behalf of the immature or incapacitated members of society, i.e., if we strip both wages and surplus-value, both necessary and surplus labour, of their specifically capitalist character, then certainly there remain not these forms, but merely their rudiments, which are common to all social modes of production.

Moreover, this method of subsumption was also characteristic of previous dominant modes of production, e.g., feudalism. Production relations which nowise corresponded to it, standing entirely beyond it, were subsumed under feudal relations, e.g., in England, the tenures in common socage (as distinct from tenures on knight’s service), which comprised merely monetary obligations and were feudal in name only.

  1. ↑ In breaking down the value added to the constant portion of capital into wages, profit and ground-rent, it goes without saying that these are portions of value. One may, indeed, conceive of them as existing in the direct product in which this value appears, i.e., in the direct product produced by labourers and capitalists in some particular sphere of production — for instance, yarn produced in the spinning industry. But in fact they do not materialise in this product any more or any less than in any other commodity, in any other component of the material wealth having the same value. And in practice wages are indeed paid in money, that is, in the pure expression of value, likewise interest and rent. For the capitalist, the transformation of his product into the pure expression of value is indeed very important; in the distribution itself this transformation is already assumed. Whether these values are reconverted into the same product, the same commodity, out of whose production they arose, whether the labourer buys back a part of the product directly produced by himself or buys the product of some other labour of a different kind, has nothing to do with the matter itself. Herr Rodbertus quite unnecessarily flies into a passion about this.
  2. ↑ "It will be sufficient to remark that the same general rule which regulates the value of raw produce and manufactured commodities is applicable also to the metals; their value depending not on the rate of profits, nor on the rate of wages, nor on the rent paid for mines, but on the total quantity of labour necessary to obtain the metal and to bring it to market." (Ricardo, Principles, Ch. III, p. 77.)
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