“...suppose, the labourers themselves are in possession of their respective means of production and exchange their commodities with one another. In that case these commodities would not be products of capital. The value of the various means of labour and raw materials would differ in accordance with the technical nature of the labours performed in the different branches of production. Furthermore, aside from the unequal value of the means of production employed by them, they would require different quantities of means of production for given quantities of labour, depending on whether a certain commodity can be finished in one hour, another in one day, and so forth.” (p 175-6)
If we assume that these workers work the same length of day, and that the rate of surplus value is the same, then its clear that whilst the materials etc., in one sphere, constitute a higher or lower value than in another sphere, the new value, and, therefore, the surplus value created in each sphere will be the same. For example, a cotton spinner needs only a hand held spindle, or a spinning wheel, plus the cotton to be spun. A weaver requires a hand loom plus cotton or woollen yarn to be woven. However, an iron maker requires a furnace, plus large amounts of charcoal, or coal, as well as iron ore.
The value of the means of production for the latter are considerably more than for the first two, relative to the amount of new labour to be expended. We might have for the same amount of new labour, for the spinner £10, for a spinning wheel, £5 for cotton, and £20 for the new value added, half of which is surplus value. For the weaver it might be £15 for a loom, £10 for yarn, and £20 for new value added. Finally, for the iron producer it might be £100 for a furnace, £10 for coal, £10 for iron ore, and £20 of new value added. For all these direct producers, they are only concerned to obtain a return of what they have spent, and what they have expended in their own labour-time.
If we assume that all equipment lasts for 10 years, and gives up 10% of its value each year, we would have:-
Spinner
Spinning Wheel £1
Cotton £5
Labour £20
Price of commodity £26
Weaver
Loom £1.50
Yarn £10
Yarn £10
Labour £20
Price of commodity £31.50
Iron Maker
Furnace £10
Coal £10
Iron ore £10
Labour £20
Price of commodity £50
But, when the capitalist looks at this situation, what do they see? Firstly, although in each case, the fixed capital gives up 10% of its value each year, the fact remains that the whole of this capital has to be advanced for production to take place. You can't produce iron with only 10% of a furnace. This capital is tied up and the capitalist will measure their profits against it, to determine their rate of profit. The capitalist then sees.
Spinning
Constant Capital
Spinning wheel £10
Cotton £5
Variable Capital £10
Surplus Value £10
Cost of production = £1 (wear and tear) + £5 cotton + £10 variable capital = £16, profit = £10
Capital advanced = £10 spinning wheel + £5 cotton + £10 variable capital = £25, profit £10, rate of profit = 10/25 = 40%.
Weaving
Constant capital
Loom £15
Yarn £10
Variable capital £10
Surplus Value £10
Cost of production = £1.50 (wear and tear) + £10 yarn + £10 variable capital = £21.50, profit = £10.
Capital advanced = £15 loom + £10 yarn + £10 variable capital = £35. Profit = £10, rate of profit = 10/35 = 28.57%.
Iron making
Constant Capital
Furnace £100
Coal £10
Iron ore £10
Variable capital £10
Surplus Value £10
Cost of production = £10 (wear and tear) + £10 coal + £10 iron ore + £10 variable capital = £40, profit = £10.
Capital Advanced = £100 furnace + £10 coal + £10 iron ore + £10 variable capital = £130, Profit = £10, rate of profit = 10/130 = 7.69%.
So, it is then clear, when a capitalist looks at these investment opportunities, where they will invest their capital first. If they invest their capital in spinning, they can make a profit of 40%, in weaving only 28.57%, and in iron production only 7.69%.
“The exchange of commodities at their values, or approximately at their values, thus requires a much lower stage than their exchange at their prices of production, which requires a definite level of capitalist development.” (p 177)
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