Capital I, Chapter 16 - Part 4

Marx then examines the inadequacy of bourgeois economics in relation to the source of surplus value. The Mercantilists had argued that it arose as a result of price being above the cost of production. This could not hold because its clear that if A sells a commodity to B, at a price £10 above its cost of production, and B sells a commodity to A, likewise at a price £10 above its cost of production, the “profit” made by each cancels out. It is as though they had simply exchanged these commodities at their cost prices.

The Ricardian School, went beyond that theory and recognised that Surplus Value stemmed from the productiveness of labour, though Ricardo himself simply assumed and accepted its existence. However, they failed to pursue that logic to its conclusion to identify the source of surplus value in the exploitation by capital of that labour. And for good reason.

“In fact these bourgeois economists instinctively saw, and rightly so, that it is very dangerous to stir too deeply the burning question of the origin of surplus-value.” (p 483)

Marx is scathing of John Stuart Mill.

“Mill says:

'The cause of profit is that labour produces more than is required for its support.'

So far, nothing but the old story; but Mill wishing to add something of his own, proceeds:

'To vary the form of the theorem; the reason why capital yields a profit, is because food, clothing, materials and tools, last longer than the time which was required to produce them.

He here confounds the duration of labour-time with the duration of its products. According to this view, a baker whose product lasts only a day, could never extract from his workpeople the same profit, as a machine maker whose products endure for 20 years and more. Of course it is very true, that if a bird’s nest did not last longer than the time it takes in building, birds would have to do without nests.”

Marx continues, quoting Mill again,

“'We thus see,' he proceeds, 'that profit arises, not from the incident of exchange, but from the productive power of labour; and the general profit of the country is always what the productive power of labour makes it, whether any exchange takes place or not. If there were no division of employments, there would be no buying or selling, but there would still be profit.'

For Mill then, exchange, buying and selling, those general conditions of capitalist production, are but an incident, and there would always be profits even without the purchase and sale of labour-power!

'If, he continues, 'the labourers of the country collectively produce twenty per cent more than their wages, profits will be twenty per cent, whatever prices may or may not be.' This is, on the one hand, a rare bit of tautology; for if labourers produce a surplus-value of 20% for the capitalist, his profit will be to the total wages of the labourers as 20:100. On the other hand, it is absolutely false to say that 'profits will be 20%.' They will always be less, because they are calculated upon the sum total of the capital advanced. If, for example, the capitalist have advanced £500, of which £4OO is laid out in means of production and £100 in wages, and if the rate of surplus-value be 20%, the rate of profit will be 20:500, i.e., 4% and not 20%.” (p 483-4)

Marx criticises Mill for arguing that capitalist relations are universal. A peculiar claim, as Marx remarks, given that, at that time, it was only the case for a small percentage of the Earth! Mill had also suggested that instead of the capitalist paying wages to the worker, it would be possible for the worker, if he had the means, to wait until they had produced the commodity, and then be paid its full value. Mill notes that in this case, the labourer is really a capitalist providing some of the funds needed for production.

Marx notes,

“Mill might have gone further and have added, that the labourer who advances to himself not only the necessaries of life but also the means of production, is in reality nothing but his own wage-labourer. He might also have said that the American peasant proprietor is but a serf who does enforced labour for himself instead of for his lord.” (p 484)

The economic relations whereby a slave works
for a slave owner, or a peasant provides a surplus
product to a landlord, or a worker provides surplus
value for a capitalist cannot be understood as simply
economic relations.  They are also social relations. 
They reflect the social power of one class as a ruling
class over the other as exploited class.

In other words, what Marx is criticising here is that Mill in no sense grasps the idea of economic relations also being social relations. What Marx is getting at, is that a surplus product does not simply arise automatically, and certainly its appropriation by some other person is not some simple economic reality that arises spontaneously. It is determined by social relations, which themselves arise as part of a long process of historical development. That these social relations, and this historical development is itself a product of economic relations that arise “behind men's backs”, as a consequence of changes in the productive forces, is the key to understanding Marx’s Historical Materialism. In short, it is a dialectical process by which one development, acts as a feedback loop on to the other.

The natives living off the Sago tree, had the potential of surplus labour, but there was no imperative that drove them to engage in it. They were masters of their own destiny, in that regard. But, had the land and the trees on it, been owned by a landlord, then they would have been forced to pay rent to that lord for being able to obtain their subsistence from the tree. The rent would be in the form of surplus labour, labour undertaken over and above what was required for their own subsistence, but required for the subsistence of the landlord. The same is true of the US peasants. They were able to acquire land for nothing, or for very little during European colonisation. As a result, all the labour they undertook on that land was for their own benefit. But, as soon as all the land in the US, like the land in Europe, becomes the property of a small class of people, that small class is able to charge those who farm it a rent. They are able to force the producers to do surplus labour for them. This force might not be the same kind of force as that used by a slave owner against a slave, but it is force all the same, it is the force that stems from economic power, consequent upon property ownership. This is also the basis of Marx’s differentiation between labour being formally subordinated to capital, and then its real subordination to capital, when the worker has no real alternative but to supply their labour-power as factory labour.

Mill goes on to argue that the worker was really a capitalist too, who lends a part of his labour-power to the capitalist by selling it below the market price, and then receives it back with interest! But, as Marx has demonstrated, workers do not sell their Labour power below its market price. It is the fact that the value they produce is greater than the value of their labour power which is the source of the surplus value.

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Forward To Chapter 17

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