## Tuesday, 21 April 2015

### Capital III, Chapter 1 - Part 3

Comparing the advanced capital and the commodity value, the advanced capital simply appears as a combination of the capital advanced to buy the means of production and the labour-power. That advanced capital also reappears as the cost price of the commodity because it is spent to buy the means of production and labour-power required for its production, and whose value is reproduced in the value of the commodity.

“The distinction between constant and variable capital has disappeared. The entire cost-price of £500 now has the double meaning that, first, it is that portion of the commodity-value of £600 which replaces the capital of £500 expended in the production of the commodity; and that, secondly, this component of the commodity-value exists only because it existed previously as the cost-price of the elements of production employed, namely means of production and labour, i.e., as advanced capital. The capital-value reappears as the cost-price of a commodity because, and in so far as, it has been expended as a capital-value.” (p 32)

In place of the distinction between constant and variable capital, what now appears is the distinction between fixed and circulating capital. If the fixed capital had a value of £1200, and loses £20 of this value due to wear and tear, then the capital advanced was £1,680, £1200 for the fixed capital, and £380 for materials, and £100 for labour-power. The materials must be £380, because the value of constant capital was £400, of which we now know £20 comprised the wear and tear of the fixed capital. So, the capital advanced is £1,680, but the cost price of the commodity is only £500.

“This difference between fixed and circulating capital with reference to the calculation of the cost-price, therefore, only confirms the seeming origination of the cost-price from the expended capital-value, or the price paid by the capitalist himself for the expended elements of production, including labour. On the other hand, so far as the formation of value is concerned, the variable portion of capital invested in labour-power is here emphatically identified under the head of circulating capital with constant capital (that part of capital which consists of materials of production), and this completes the mystification of the self-expansion process of capital.” (p 33-4)

Surplus value is an excess of value of the commodity over its cost price. But, as the cost price is equal to the consumed capital, the surplus value is an addition to that capital, which returns along with it via the sale of the commodity. Once the distinction between constant and variable capital is obscured by the lumping of both together as circulating capital, or as cost price, the surplus value appears as an expansion of the whole capital advanced, and not just the variable capital.

“However, surplus-value forms an increment not only of the portion of the advanced capital which goes into the self-expansion process, but also of the portion which does not go into it. In other words, it is an accretion not only to the consumed capital made good out of the cost-price of the commodity, but to all the capital invested in production.” (p 35)

That includes the fixed capital. The process began with a capital advanced of £1,680. £1,200 in fixed capital, £380 in circulating constant capital, and £100 in variable capital. At the end of the self-expansion process, it comprises £1,180 in fixed capital, and a commodity-capital of £600 (£380 circulating constant capital, £20 wear and tear of fixed capital, £100 variable capital, £100 surplus value), which equals £1,780.

“After deducting his advanced total capital of £1,680 there remains a value increment of £100. The £100 of surplus-value thus form as much of an increment in relation to the invested £1,680 as to its fraction of £500 expended during production.” (p 35)

It then appears clearly that this surplus value is the product of his capital advanced in production, because it did not exist prior to his advancing that capital. Moreover, it seems clear to him that this surplus value is the product equally of all his capital without distinction, be it fixed or circulating, used for the purchase of means of production or for labour-power.

And that, in practice, is how it seems in reality. The capitalist appears to obtain a profit proportionate to the size of their capital, irrespective of how that capital is comprised, despite the fact that we know that the surplus value is created only by the variable capital. The resolution to this conundrum is a central part of Marx's theory of how this general rate of profit comes about.

“For this reason, the surplus-value arises as much out of the portion of the advanced capital which goes into the cost-price of the commodity, as out of the portion which does not. In short, it arises equally out of the fixed and the circulating components of the utilised capital. The aggregate capital serves materially as the creator of products, the means of labour as well as the materials of production, and the labour. The total capital materially enters into the actual labour-process, even though only a portion of it enters the process of self-expansion. This is, perhaps, the very reason why it contributes only in part to the formation of the cost-price, but totally to the formation of surplus-value. However that may be, the outcome is that surplus-value springs simultaneously from all portions of the invested capital. This deduction may be substantially abbreviated, by saying pointedly and concisely in the words of Malthus:

'The capitalist ...expects an equal profit upon all the parts of the capital which he advances.'” (p 36)

In this way, the surplus value assumes the guise of profit, which is the product of capital.

“Hence, a certain value is capital when it is invested with a view to producing profit, or, there is profit because a certain value was employed as capital.” (p 36)

Moreover, the value of a commodity now appears to resolve itself into cost price and profit, and so the idea that profit arises simply by adding a given percentage on to the cost price is reinforced.

“The profit, such as it is represented here, is thus the same as surplus-value, only in a mystified form that is nonetheless a necessary outgrowth of the capitalist mode of production. The genesis of the mutation of values that occurs in the course of the production process, must be transferred from the variable portion of the capital to the total capital, because there is no apparent distinction between constant and variable capital in the assumed formation of the cost-price. Because at one pole the price of labour-power assumes the transmuted form of wages, surplus-value appears at the opposite pole in the transmuted form of profit.” (p 36-7)