Theories of Surplus Value - Part II, Chapter 8 - Part 6

[2. The Relationship of the Rate of Profit to the Rate of Surplus-Value. The Value of Agricultural Raw Material as an Element of Constant Capital in Agriculture]

Marx again analyses here the relation between the rate of surplus value and rate of profit, and the effects of different capital compositions. The fundamental composition of capital resolves into the division between constant capital and variable capital; the technical, and subsequently organic, composition of capital. But, the composition of the constant capital can itself be broken down into fixed and circulating capital, and into the instruments of labour and subject of labour. In other words, on the one hand, there are all those raw materials to be processed, which form the subject of labour, and there are all of those machines, buildings, tools, and so on, which the worker utilises in order to undertake that processing, i.e. the instruments of labour.

The difference between the fixed and circulating capital is that the entire value of the latter enters into, and is reproduced as part of, this labour process, whereas only a portion of the value of the former enters the value of production as wear and tear, and is thereby reproduced during this labour process. The rest of the value remains fixed within it. No matter how great the quantity and value of the fixed capital employed, therefore, it is only the portion of wear and tear that contributes to the value of the commodity.

Taking this into consideration, however, if we then calculate the rate of profit as s/(c + v), it is clear, Marx says, that it does not matter whether this c is comprised of a large amount or value of wear and tear of fixed capital, in relation to materials, or vice versa. If a capital comprises 100 machines, with a value of £100,000, which lose £10,000 p.a. in wear and tear, £20,000 of materials, £10,000 of labour-power, and produces £10,000 of profit, then its rate of profit is 10,000/(10,000 + 20,000 + 10,000) = 10,000/40,000 = 25%.

But, similarly, if a capital comprises 200 machines, with a value of £200,000, which lose £20,000 p.a., in wear and tear, £10,000 in materials, £10,000 in labour-power, and £10,000 of profit, the rate of profit is still 25%, i.e. 10/(20 + 10 + 10).

“For instance, in the production of coal the raw materials (after deducting coal itself which is used as an auxiliary material) may be reckoned as nought and the entire constant capital can be assumed to consist of machinery (including buildings and tools). On the other hand, with a tailor, machinery can be considered as nought and here the whole of constant capital resolves into raw materials (particularly where tailors running a large business do not as yet use sewing-machines and, on the other hand, even save buildings, as sometimes occurs nowadays in London, by employing their workers as outworkers.” (p 22-3) 

This determination of the rate of profit is not the same as the determination of the annual rate of profit, or average annual rate of profit, where the wear and tear is not included, but the full value of the fixed capital, whilst only the advanced circulating capital in materials and labour-power is included, rather than the laid-out capital on these items for the year.

Where the relation between the fixed capital and circulating constant capital is important is not these simple quantitative relations, but in what they might also reflect. For example, a large mass of fixed capital may represent a more developed stage of production, with higher levels of productivity, which in itself implies a larger mass of constant capital in total. Similarly, the higher level of productivity, resulting from it, may imply a different organic composition of capital, and rate of surplus value.

“Hence there are only two instances in which the ratio between the component parts of c, i.e., raw materials and machinery, can affect the rate of profit: 1. If a change in this ratio modifies the absolute magnitude of c. 2. If the ratio between the component parts of c modifies the size of v. This would imply organic changes in production itself and not merely the tautologous statement that if a particular part of c accounts for a smaller portion, then the other must make up a larger portion of the total amount.” (p 23)

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