## Tuesday, 3 October 2017

### [7. Rodbertus’s Erroneous Views Regarding the Factors Which Determine the Rate of Profit and the Rate of Rent]

“What I call rate of profit and rate of interest or rate of rent, Rodbertus calls

Level of Profit on Capital and Interest” (p. 113).” (p 71)

Marx quotes Rodbertus again to demonstrate his confusion.

“This level “depends on their ratio to capital… In all civilised nations a capital of 100 is taken as a unit, which provides the standard measurement for the level to be calculated. Thus, the larger the figure that expresses the relation between the gain or interest falling to the capital of 100, in other words, the ‘more per cent’ a capital yields, the higher are profit and interest” (pp. 113–14).

“The level of ground-rent and of rental follows from their proportion to a particular piece of land” (p. 114).” (p 71)

This confuses several different measurements. The rate of profit, rate of interest, and rate of rent are measured against the capital. But, the proportion of the rent to an acre of land, for example, an acre or a hectare, is the rental.

“The rent yielded by an acre is the rental, the absolute amount of rent. It may rise if the rate of rent remains the same or is even lowered.” (p 71)

In other words, as shown in Capital III, if farming is undertaken on a more intensive basis, so that more capital is applied to a given area of land, the rate of rent may fall relative to this larger mass of capital, but the rental, the rent per hectare may then rise. Suppose £1,000 of capital is applied to a hectare of land with the rent being £50. The rate of rent is 5%, and the rental is £50 per hectare. Now, if £2,000 of capital is applied to this hectare of land, and the surplus profit rises, the rental may rise to say £75, per hectare, but this represents a rate of rent of only 3.5% on the capital outlay of £2,000.

Rodbertus says,

““The level of the value of land follows from the capitalisation of the rent of a particular piece of land, The greater the amount of capital derived from the capitalisation of the rent of a piece of land of a given area, the higher is the value of the land” (p. 114).” (p 71)

But, as Marx says, the terminology here is meaningless, where he refers to the level of the value of land. What Rodbertus should say is that the price of land – land has no value, as it is not produced by labour – is indeed determined by the capitalised rent. In other words, it depends on the rental and the average rate of interest.

#### [a) Rodbertus’s First Thesis]

Rodbertus considers what regulates the rate of surplus value, which he calls “the level of rent in general”. Marx says its good that Rodbertus realises that to calculate this rate, the value of the constant capital must be discounted, i.e. it is a measure of the surplus value against the variable capital.

Rodbertus also grasps the inverse relation between wages and surplus value, and consequently also the role of productivity, so that as productivity rises, so the value of labour-power/wages fall, and surplus value rises.

But, Rodbertus goes on to argue that as wages fall, so the value of constant capital falls. It may be the case that the value of constant capital falls, for the same reason that wages fall, due to a rise in productivity. However, the rise in productivity necessitates a rise in the mass of material processed, relative to the labour-power employed. So if 100 units of material with a value of £1,000 were previously processed by 10 units of labour, this 10 units of labour may now process 200 units of material with a value of £1500. The value of material falls from £10 per unit to £7.50 per unit, but, as twice as many units are processed, the value of material processed rises by 50%.

“Hence the rate of profit can fall with the reduction in wages. The rate of profit is dependent on the amount of surplus-value, which is determined not only by the rate of surplus-value, but also (by] the number of workers employed.” (p 73)

Of course, this is dependent on the majority of production being a production of material commodities, which require the processing of materials. Today that is not the case, as 80% of the economy is involved in service industry. If we take other types of production, such as transport, the same thing applies. A train that covers a distance in half the time its predecessor required would transport twice as many passengers and freight with the same amount of labour, but it would process no materials, apart from auxiliary materials, that go into a product. The wear and tear of the train would also be proportionately less, and the actual value of the train, as fixed capital, would tend to be lower, as a result of the technological developments, which raised productivity. So, today, rises in productivity do tend to reduce wages, and so raise the rate of surplus value, whilst reducing the value of fixed capital, via moral depreciation, whilst resulting in no great increases in the mass of materials processed (in fact, the same technological developments tend to reduce that too) so that the value of constant capital falls and the rate of profit rises.

“Rodbertus correctly defines the necessary wage as equal to

the amount of necessary subsistence, that is to a fairly stable definite quantity of material products for a particular country and a particular period” (p. 118).” (p 73)

But, Rodbertus' formulation of this inverse relation between wages and profits, and the role of productivity, is put forward in a very confused manner, because, as Marx says, instead of using labour-time as the measure, he uses “quantities of product” and meaningless differentiation between “level of the value of the product” and “magnitude of the value of the product.”

By “level of the value of the product” Rodbertus means unit cost, or the labour-time required to produce each commodity unit. If a given amount of labour-time produces a large volume of commodities then this level is “low” and vice versa.

Rodbertus says that because the worker obtains the same amount of product whether this level is high or low, then wages will fall and profits rise when productivity rises and reduces this level of the value of the product. But, as Marx points out, this is only true in respect of those commodities that are necessary for the worker's reproduction.

A worker may require 1,000 units of food per year, and if it takes 1,000 hours to produce this food, that is necessary labour. If productivity rises, the worker will still only require the 1,000 units but these may now be produced in 800 hours. So, 200 hours now become additional surplus labour. Wages fall and profits rise.

But, if the worker produces luxury goods, consumed by the rich, any reduction in the time required to produce them has no bearing on the labour-time required to produce workers' necessaries, and so no effect on wages or profits.

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