This illusion is inevitable, Marx says, because it appears that these three factors are themselves completely separate and independent contributors to the value of the commodity, and the value of each of these components in its turn is independently determined.
“But the value does not arise from a transformation into revenue; it must rather exist before it can be converted into revenue, before it can assume this form. The illusion that the opposite is true is strengthened all the more as the determination of the relative magnitudes of these three components in relation to one another follows different laws, whose connection with, and limitation by, the value of the commodities themselves no wise appear on the surface.” (p 868)
The second reason this illusion is fostered is that superficial observation seems to show such a correlation between wages and prices. In Chapter 12, Marx demonstrated that a general rise in wages causes opposite effects in terms of prices of production, for those firms that have higher than average organic compositions of capital, compared to those with lower than average compositions.
Firms with a higher than average composition of capital, actually see their price of production fall, when there is a general rise in wages, whereas firms with a lower than average composition of capital see their prices of production rise, whilst firms with an average composition see no change in their price of production.
Given that it is usually big capitals that operate with higher than average compositions, its clear why these capitals are more favourable to general rises in wages, or the establishment of Minimum Wages than are small capitals. These big capitals see their price of production fall, whereas small capitals see their price of production rise. The only way this can occur is if the supply of commodities by the former rises, and falls by the latter.
In other words, big capital expands and small capital contracts. Moreover, as a consequence of this process, even though the big capitals may obtain a lower rate of profit, the expansion of production in this sector, may result in an expansion of the mass of profit, which outweighs any fall in the rate of profit.
However, wages may rise, not on a general basis, but on a local basis, either geographically or by industry or type of labour. A rise in wages here may then be associated with a rise in prices. But, correlation here does not show causality. Wages may rise in a particular industry, because the industry itself is benefiting from monopoly profits. Wages are able to rise, because the particular capitals are able to pay them. It is not the higher wages which cause the higher monopoly prices.
“This rise in the relative value of one kind of commodity in relation to the others, for which wages have remained unchanged, is then merely a reaction against the local disturbance in the uniform distribution of surplus-value among the various spheres of production, a means of equalising the particular rates of profit into the general rate.” (p 868)
The same applies in relation to specific geographical variations. In a particular area, for example, London, the cost of many commodities, such as shelter, may be high, which increases the value of labour-power, in that area. Wages must be higher to cover this higher cost of living. Higher wages, and higher commodity prices in this area seem to be correlated, but the correlation is caused by high commodity prices pushing up the value of labour-power, not higher wages pushing up commodity prices.
And, in fact, something similar occurs where wages and prices in general rise. It is not the rise in wages that causes the commodity prices to rise, but the rise in commodity prices, which increases the value of labour-power, and thereby causes wages to rise.
In addition, wages and the rate of profit may move in the same direction, because the rate of profit is not the same as the rate of surplus value. Wages may rise, and the mass of surplus value fall. But, if the value of constant capital falls, the total of c + v may fall, even as v rises.
In that case, s/c + v may rise even as s falls, and v rises.
“Similarly if wages should rise as a result of a rise in the prices of the means of subsistence, the rate of profit may remain the same, or even rise, due to greater intensity of labour or prolongation of the working-day. All these experiences bear out the illusion created by the independent and distorted form of the component values, namely, that either wages alone, or wages and profit together, determine the value of commodities.” (p 869)
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