The ratio between the fixed and circulating capital does not in itself affect the rate of profit. However, capitals with a large amount of fixed capital may be capitals that also have a high organic composition of capital. Additionally, a capital with a lot of fixed capital may have a lower rate of turnover, for example, a shipyard. On the other hand they may have a higher rate of turnover if it is in the form of machines that radically raise the productivity of workers.
“If capitals are divided into fixed and circulating capital in different proportions, this will naturally always influence the period of turnover and cause differences in it. But this does not imply that the period of turnover, in which the same capitals realise certain profits, is different. For instance, A may continually have to convert the greater part of its product into raw materials, etc., while B may use the same machinery, etc., for a longer time, and may need less raw material, but both A and B, being occupied in production, always have a part of their capital engaged, the one in raw materials, i. e., in circulating capital, and the other in machinery, etc., or in fixed capital. A continually converts a portion of its capital from the form of commodities into that of money, and the latter again into the form of raw material, while B employs a portion of its capital for a longer time as an instrument of labour without any such conversions. If both of them employ the same amount of labour, they will indeed sell quantities of products of unequal value in the course of the year, but both quantities of products will contain equal amounts of surplus-value, and their rates of profit, calculated on the entire capital invested, will be the same, although their composition of fixed and circulating capital, and their periods of turnover, are different. Both capitals realise equal profits in equal periods, although their periods of turnover are different.” (p 151)
In other words, two different capitals may be composed of the same amount of constant and variable capital, but one has more fixed capital than the other. One has capital tied up as machinery, which only transfers its value gradually, whilst the other has capital tied up in materials that have to be continually replaced. If the surplus value produced is the same in each case, the rate of profit will be the same because the same amount of constant capital has been advanced, just in different proportions.
But, this is basically wrong, as Engels sets out.
“[It follows from Chapter IV that the above statement correctly applies only when capitals A and B are differently composed in respect to their values, but that the percentages of their variable parts are proportionate to their periods of turnover, i. e., inversely proportionate to their number of turnovers. Let capital A have the following percentages of composition: 20c fixed + 70c circulating and thus 90c + 10v = 100. At a rate of surplus-value of 100% the l0v produces 10s in one turnover, yielding a rate of profit for one turnover = 10%. Let capital B = 60c fixed + 20c circulating, and thus 80c + 20v = 100. The 20v produce 20s in one turnover at the above rate of surplus-value, yielding a rate of profit for one turnover = 20%, which is double that of A. But if A is turned over twice per year, and B only once, then 2 × 10 also make 20s per year, and the annual rate of profit is the same for both, namely 20%. — F.E.]” (Note 21, p 152)
This conclusion that different rates of profit must exist in different spheres, as a result of different organic compositions of capital and different rates of turnover, applies, of course, only on the assumption, used throughout, so far, that commodities are sold at their values. Yet, in reality, allowing for a variety of other factors, the wide variation in rates of profit that would seem to follow from this do not exist. Indeed, to the extent they do exist there will always be a tendency to remove them, because capital will always seek to obtain the highest rate of profit.
“It would seem, therefore, that here the theory of value is incompatible with the actual process, incompatible with the real phenomena of production, and that for this reason any attempt to understand these phenomena should be given up.” (p 153)
For any capital, the distinction between the constant and variable capital is abolished in the cost price. The capitalist is only interested in the profit they can make on this total, the total capital they have advanced.
“The cost-prices are the same for equal capitals in different spheres, no matter how much the produced values and surplus-values may differ. The equality of cost-prices is the basis for competition among invested capitals, whereby an average profit is brought about.” (p 153)
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