Theories of Surplus Value, Part II, Chapter 10 - Part 11

Marx dissects Ricardo's theory and begins by setting out all of the assumptions implied within it. Those include the assumption that nothing is spent on raw material; the farmers spends nothing for instruments of labour, and that the cloth maker and cotton goods producer have no value of wear and tear transferred from their machines to their output. Marx compares the situation between the farmer and cotton goods producer, because the inclusion of the cloth maker adds nothing to the analysis. He begins from the end. So, in the second year, the farmer lays out £5000 in wages, whilst the cotton goods producer advances £5500 in the machine and £5000 for wages.

If both make 10 per cent, the farmer sells his output for £5500, and the cotton goods producer his output for £6050.

“One absolutely cannot conceive what Ricardo intended to elucidate in this example, apart from the fact that the cost-prices of commodities—in so far as they are determined by the value of the outlay embodied in the commodities plus the same annual rate of profit—differ from the values of the commodities and that this difference arises because the commodities are sold at prices that will yield the same rate of profit on the capital advanced; in short, that this difference between cost-prices and values is identical with a general rate of profit.” (p 182)

As Marx says, the introduction of the question of fixed capital in the example is meaningless, because if the cotton goods producer had used an additional £5000 of circulating capital, in the shape of raw materials, the outcome would be exactly the same. To say, as Ricardo does, that they employed different quantities of "accumulated labour" is correct, although Ricardo equates this with fixed capital, as he has no category of constant capital.

“However, the fact that they employ “different quantities of accumulated labour” only means that they lay out “different quantities of capital” in their respective trades, that the amount of profit is proportionate to this difference in the size of the capitals they employ, because the same rate of profit is assumed, and that, finally, this difference in the amount of profit, proportionate to the size of the capitals, is expressed, represented, in the respective cost-prices of the commodities.” (p 183)

But, having recognized that they employed different quantities of accumulated labour, Ricardo fails to connect this to the price of production of the commodity, focusing solely on the amount of living labour, i.e. the amount paid out in wages, in determining the value of the commodity. The reason for this is quite simple. Ricardo has no concept of surplus value, and so cannot connect the fact that the surplus value is a product only of the variable capital, whereas the value of the commodity and the rate of profit are calculated on the basis of the total capital.

For Ricardo, the value of the commodity is nothing more than the value of the "accumulated labour" plus the wages plus an amount of average profit. But, this average rate of profit is itself merely an arbitrary figure that Ricardo simply presupposes to exist, without any enquiry as to its origin, or thought as to why it might be 10 per cent, rather than 20 per cent, or 100% or any other figure.

“This means that they do not employ the same quantity of labour—immediate and accumulated labour taken together—but they do employ the same quantity of variable capital, capital laid out in wages, the same quantity of living labour. And since money exchanges for accumulated labour, i.e., existing commodities, in the form of machines etc., only according to the law of commodities, since surplus-value comes into being only as the result of the appropriation without payment of a part of the living labour employed—it is clear (since, according to the assumption, no part of the machinery enters into the commodity as wear and tear) that both can only make the same profit if profit and surplus-value are identical.” (p 183)

But, it's clear that the surplus value and the profit could not be identical. Both capitals employed the same amount of variable capital, and thereby produce equal amounts of surplus value, but the cotton goods producer employs a further £5500 of capital in the shape of the machine, and they expect the average rate of profit on this machine too. It would require that the cotton goods producer sell their output at £5500, the same as the farmer, for them both to obtain the same rate of profit calculated only on their variable capital, and so equal only to the rate of surplus value, not the rate of profit. But, no capitalist would, as in this case, layout twice as much capital only to obtain the same amount, and so half the rate of profit.

If the cotton goods producer sold all of their output £5500 of machine + £5500 of cotton goods, they would obtain only £11,000, which would be a rate of profit of only five per cent per annum, while the farmer makes 10 per cent. If both the farmer and the cotton goods producer make 10 per cent profit then their commodities cannot sell at their exchange-value. If the latter arbitrarily adds an additional five per cent of profit to their price then both sets of commodities would sell at prices above their value, unless the surplus value made by the farmer is actually 15 per cent, so that, in selling at only 10 per cent profit, they sell at a price that is below the value. In that case, it would mean that taken together the commodities of the farmer and the cotton goods producer sell at prices equal to their total value. But, one sells at prices above value, by an equal amount to which the other sells at prices below value. From that perspective, Marx says, Ricardo's example hits upon the correct position, although Ricardo does not recognise it.

“Here, in Ricardo’s above proposition, when correctly modified, lies the truth, [namely] that capitals of equal size, containing [different] proportions of variable to constant capital, must result in commodities of unequal values and thus yield different profit; the levelling out of these profits must therefore result in cost-prices which differ from the values of the commodities.” (p 184)

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