Theories of Surplus Value, Part II, Chapter 10 - Part 32

It may be objected that profit is not a cost of production, and for the capitalist, it is not. But, Marx dealt with this objection in Capital III, in response to the false arguments of Proudhon. Profit is not a cost of production for the capitalist, but it is a cost of production for society. If a spinner works for 10 hours, and in that time produces 100 metres of yarn, the cost of production of the yarn (ignoring the cost of constant capital) is then 10 hours. The spinner may only require the value of 5 hours of their labour to reproduce their labour-power, but that is irrelevant to how much labour the yarn has cost to produce. The fact that the cost of producing the spinner's labour-power is only 5 hours, whilst they have expended 10 hours producing yarn, means that they have produced 5 hours of surplus value, which is embodied now within the yarn, along with the 5 hours of value required to reproduce their labour-power. If the spinner is a direct producer, who works with their own means of production, it is obvious to them that the 100 metres of yarn has cost them 10 hours of their labour to produce.

If the spinner works for a capitalist, the actual cost of production of the 100 metres of yarn remains 10 hours as before. The difference is that the cost cost of production for the capitalist is only the 5 hours of labour paid to the spinner as wages. The cost of production of the yarn is 10 hours as before, and it sells at this value. The cost of production to the capitalist is only 5 hours, and so they are able to pocket the other 5 hours of surplus value embodied in the value of the yarn, as profit.

What Smith and Ricardo needed to investigate, therefore, was what determined this relation. What determines the proportion of wages, as opposed to profit, or rent or interest. It was impossible for Smith to do that, because he argues that wages and profit and rent are independently determined, and interest is only a secondary revenue, resulting from the borrowing to be repaid out of wages, profit and rent. Its only if you start from a commodity value that you can analyse how it breaks down into these other revenues. So, for example, if we take the yarn, its value is 10 hours, but, if the value of the labour-power of the spinner is 8 hours, then the surplus value could only be 2 hours.

On the basis of Smith's view that the value of commodities is only the sum of the costs of its production, so that any variation of the market price from this natural price is a consequence of imbalances of supply and demand, arises a naïve belief that this supply represents some amount of industry required to produce the commodity, and thereby meet social needs/demand. This assumes that there is some definite social need that supply then meets, rather than that there is only a demand for commodities at a particular price, and this demand is different at different prices.

Smith here only refers to the effect of changes in values on these cost prices in passing, when talking about agriculture.

““the same quantity of industry will, in different years, produce very different quantities of commodities; while, in others, it will produce always the same, or very nearly the same. The same number of labourers in husbandry will, in different years, produce very different quantities of corn, wine, oil, hops, etc. But the same number of spinners and weavers will every year produce the same, or very nearly the same, quantity of linen and woollen cloth… In the other” (the non-agricultural) “species of industry, the produce of equal quantities of labour being always the same, or very nearly the same”, (i.e., so long as the conditions of production remain the same) “it can be more exactly suited to the effectual demand” ([O.U.P., Vol. I, pp. 64-65; Garnier,] l.c., pp. 117-18).” (p 221) 

But, as Marx points out, Smith's distinction between agriculture and industry does not stand up, according to his own theory and analysis, because he has shown that in industry too the same quantity of labour can produce very different quantities of products, as a result of the introduction of machinery etc.

“It is therefore not this difference which distinguishes agriculture from the other branches of industry; but the fact that in industry the degree of productive power applied is determined beforehand, while in the former, it depends on accidents of nature. But the result remains the same: the value of the commodities or the quantity of labour which, depending on its productivity, has to be expended on a given commodity, affects cost-prices.” (p 221)

Back To Part 31

Forward To Part 33