Capital III, Chapter 2 - Part 1

The Rate of Profit 

The general formula, which expresses capital as self-expanding value, is M-C-M'. The process that brings about this self-expansion is capitalist production, which results in the creation of surplus value. The process by which the surplus value is realised, is the process of circulation of capital.

Henry Ford did not produce thousands of cars because he wanted them for the utility they provided him. Like every other capitalist, he produced these commodities only because he could create surplus value by doing so. For the individual capitalist, looking at this process, it is not any one part of their capital that creates this surplus value, for them, but all of it together. The machines are no use without materials to process, and workers to operate them; the materials no use without workers to process them, and tools for the workers to use; the workers are no use without tools to use, and material to process.

If anything, as seen previously, it can seem that it is the capital itself that is the source of the surplus. Moreover, when an individual capital replaces labour with machines, it frequently sees its profit rise, reinforcing the idea that it is the application of the capital that is the source of the profit.

“The capitalist does not care whether it is considered that he advances constant capital to make a profit out of his variable capital, or that he advances variable capital to enhance the value of the constant capital; that he invests money in wages to raise the value of his machinery and raw materials, or that he invests money in machinery and raw materials to be able to exploit labour. Although it is only the variable portion of capital which creates surplus-value, it does so only if the other portions, the conditions of production, are likewise advanced. Seeing that the capitalist can exploit labour only by advancing constant capital and that he can turn his constant capital to good account only by advancing variable capital, he lumps them all together in his imagination, and much more so since the actual rate of his gain is not determined by its proportion to the variable, but to the total capital, not by the rate of surplus-value, but by the rate of profit.” (p 42)

In order for capital to continue functioning, on at least the same scale, in selling the commodity, it must at least recover the value of the capital used in its production. Marx's terminology is significant here, in relation to the debate over the TSSI. He writes,

“The costs of the product include all the elements of its value paid by the capitalist or for which he has thrown an equivalent into production. These costs must be made good to preserve the capital or to reproduce it in its original magnitude.” (p 42)

And later, in Volume III, Marx makes clear that when he speaks about “original magnitude” here, he means the original physical quantity, not the original value.

“In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness. If the productiveness of labour remains the same, then this replacement in kind implies replacing the same value which the constant capital had in its old form. But should the productiveness of labour increase, so that the same material elements may be reproduced with less labour, then a smaller portion of the value of the product can completely replace the constant part in kind. The excess may then be employed to form new additional capital or a larger portion of the product may be given the form of articles of consumption, or the surplus-labour may be reduced. On the other hand, should the productiveness of labour decrease, then a larger portion of the product must be used for the replacement of the former capital, and the surplus-product decreases.”

(Capital III, Chapter 49)

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