The important aspect of Marx's analysis here is his concentration on the value of the elements of capital in the production process, as opposed to the price paid for it. This is an extension of the previous argument whereby Rodbertus miscalculated by not including the value of the material reproduced in kind.
Assume the weaver produces everything and does so via a sequential production process using one capital. They lay out £90.91 of capital to grow cotton. They then use the cotton as raw material for spinning. To undertake this spinning, they lay out an additional £81.82. Finally they lay out an additional £163.64, to weave the yarn into cloth. Totalling up the laid out capital it is £90.91 + £81.82 + £163.64 = £336.36. A 10% profit gives a price of £370, but the value of the output is actually £400. The £9.09 of profit created in growing cotton was not an arbitrarily added amount of surplus, but reflects the labour performed in cotton growing creating this new value in the cotton, over and above what had been paid out for wages.
If we consider the value of the cotton that the capitalist then spins into yarn, as opposed to the price he has paid for it, of £90.91, it is £100, and at this point of the production process, he has £100 of capital tied up in constant capital.
The same is true when the yarn is processed. The cotton had the capital value of £100, and an additional £81.82 of capital was employed to spin it into yarn. But, the labour undertaken added a surplus value of £8.18 over and above what was required to reproduce that labour-power. So, the actual capital value of the yarn, as it entered the final stage of production, was not £90.91 + £81.82 = £172.73 that had been paid for it, but was £200. At this stage £100 of constant capital (cotton) is employed plus an additional; £81.82 of variable capital is advanced. The variable capital produces a surplus value of £8.18, meaning that £90 of new value is produced. However, the spinner dos not just require this £8.18 of surplus value, but also requires the 10% of profit on the £100 of constant capital they have advanced to production. So, the capital advanced here is £100 + £81.82 = £181.82, and 10% on this advanced capital is £18.18, which gives a value of the yarn advanced to the weaver of £200.
The point here is that, the producer has £100 of constant capital tied up in cotton, if they do not seek to obtain the 10% of profit on it, when they use it as a spinner, then there was no point in them engaging in spinning in addition to cotton growing. They could have simply sold the £100 of cotton to another spinner, and then employed this £100 of capital in cotton growing, which would have provided them with £10 of profit. This comes back to the point that Marx makes also about the rate of turnover of the circulating capital. In essence the capital advanced for cotton growing is now advanced for twice as long as it was before, because it does not return until it is spun into yarn, whereas previously it returned as soon as the grower sold it to the spinner.
The fact that the weaver does not realise the surplus value of £9.09 produced by the cotton growers, or the £81.18 of the spinner, at those stages of the production process, as separate cotton growing and spinning capitals would have done, does not change the fact that this additional value has been incorporated in the commodity.
It appears then that capital amounting to £90.91 + £81.82 + £163.64 = £336.36 has been advanced, giving a profit of £63.64, or a rate of profit of 18.91%. That would represent a surplus profit of 8.91%, which is what Rodbertus thinks makes possible a rent.
Marx argues that this is wrong, because the profit should not be calculated on one capital of £336.36, but on three capitals totalling £636.36. I'm not convinced that the argument Marx puts forward, in this form, is correct. In fact, the idea of three separate capitals being employed separately and simultaneously here seems at odds with his argument in Capital II, that there is one single capital that is employed simultaneously at different stages of the production and circulation process.
If we take the first capital of £90.91, we can see that a surplus value of £9.09 is produced, and this is a result of the value created by the labour employed being greater than the value of the labour-power. But, there is no basis for this £100 of constant capital (cotton) producing £10 of surplus value, when the producer then uses it in the spinning process. If what we have is a sequential production process, only an additional surplus value of £8.18 is created in this phase of production. Marx seems to make the same error as Ricardo here in assuming the addition of the 10% profit, without identifying the source of the surplus value from which it is paid.
If indeed we had a sequential production, and assuming each phase is equal to one year, we would have £90.91 of variable capital employed for one year, then £100 of constant capital (£90.91 + £9.09) employed for a further year, plus £81.82 of variable capital employed for this second year, and a total of £9.09 + £8.18 = £17.27 of surplus value would be produced.
Suppose, £90.91 might be laid out to produce cotton, which when produced is passed to the spinner. In year 2, a further £90.91 is laid out to pay wages for cotton production in the second year, whilst a further £81.82 is laid out to cover the wages of the spinners. At the end of year 2, the cotton growers have replaced the cotton required by the spinners, whilst the spinners have passed yarn to the weaver. In year 3, therefore, an additional £90.91 is required to cover the wages of cotton growers, an additional £81.82 is required to cover the wages of spinners, and £163.64 is required to cover the wages of weavers.
The total capital required for the three years is then £90.91 x 3 = £272.73, £81.82 x 2 = £163.64, and £163.64. That gives a total of £600 of capital required. The value of final output of calico is £400.
At the end of year 3, therefore, when the cloth is sold, a potential capital of £400 exists, as money-capital. But, because the total capital exists in a number of forms at different phases this is not the total capital. The weaver already has constant capital in the form of yarn ready to process, and the spinner has constant capital in the form of cotton ready to be spun. At the start of year 4, the cotton seed is reproduced in kind, whilst £90.91 is paid out of the £400 of capital to cover cotton growers wages. The spinners have the cotton they require to continue production, because they have received the output of the cotton growers from year 3. They are paid £81.82 out of the £400 of capital to cover their wages in year 4. The weavers have the yarn they require as a result of the production of the spinners from year 3. At the end of year, therefore, only £90.91 + £81.82 + £163.64 = £336.37 of the £400 of capital has been laid out. At the end of year 4, £400 of value of cloth is again sold. But, in year 5, because of continual and simultaneous production and employment of capital in each phase, all of the constant capital already physically exists, having been produced in the previous year, and once again, only £336.37 of variable capital needs to be advanced in addition to it.
Marx seems to confuse himself between value and use value, here, despite himself emphasising that it is the use value of the commodities consumed in production that must be replaced in kind, and not their value. So, for example, Marx states,
“We take his outlay on cotton-growing to be only £90 10/11 instead of 100, But he needs the whole product and this equals £100 and not 90 10/11. It contains the profit of 9 1/11. Or else he would be employing a capital of £90 10/11 which would bring him no profit. His cotton-growing would yield him no profit but would just replace his expenditure of £90 10/11. In the same way, spinning would not bring him any profit, but the whole of the product would only replace his outlay.” (p 53)
But, he does have the whole product. He has laid out £90.09 of capital and grown 4000 kilos of cotton with a value of £100. He does have the whole product of 4000 kilos to spin into yarn, even though he has paid only £90.09 for it, and not £100, which is its value. He has, thereby produced £9.91 of surplus value, on his production, so far, though he has not yet, realised this surplus value as profit. He will realise it when as a weaver, he sells the finished cloth, along with the surplus value produced in his labour as a spinner and as a weaver.
Similarly, he lays out an additional £81.82 for spinning, and this produces 4000 kilos of yarn. The fact that he has so far only laid out £90.09 plus £81.82 to obtain this 4000 kilos does not change the fact that he does have its entire use value to work with as a weaver. He then converts this 4000 kilos of yarn into 4000 metres of calico with a value of £400. This £400 contains the surplus value of £9.09 produced as a cotton grower, £8.18 as a spinner, and £16.36 as a weaver, giving a total surplus value/profit of £33.63. If we deduct this £33.63 from the £400 price of the final product we get £366.37, which is more than the value of the capital laid out of £336.37. The reason is that Marx in arriving at the value of £400 for the calico did so on the basis that the capital employed obtains the average rate of profit of 10%, and that rate of profit is based on the total capital advanced, not just on the variable capital advanced. In other words, it assumes that the price of the calico is a price of production, rather than the actual value.
It contains this surplus value of £33.63 not because it represents some arbitrary 10% uplift on the costs of production, which is what Marx slips into here, but because that is the actual amount of surplus value produced by the labour employed in these three stages of the production of the cloth.
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