Theories of Surplus Value, Part II, Chapter 10 - Part 18

Ricardo wrongly concludes that, because there can be no rise in wages, without a fall in profits, that the converse is true, that there can be no rise in profits without a fall in wages.

“The first law refers to surplus-value. But since profit equals the proportion of surplus-value to the total capital advanced, profit can rise though the value of labour remains the same, if the value of constant capital falls. Altogether Ricardo mixes up surplus-value and profit. Hence he arrives at erroneous laws on profit and the rate of profit.” (p 193)

Marx only refers to the rate of profit here, but, of course, its also quite possible that wages can remain constant, or even rise, whilst the mass of profit also rises. If wages are equal to five hours, and surplus value three hours, wages could rise to six hours, and surplus value to four hours, if the working-day rises from eight hours to ten hours. Similarly, the working-day may remain at eight hours, whilst surplus value rises from three hours to four hours, if the necessary working-day falls from five hours to four hours, due to higher social productivity. Nominal wages would fall by 20%, but real wages would remain constant.

The difference is that a rise in profits, due to increased absolute or relative surplus value, may or may not also result in wages rising, remaining constant, or falling. The higher rate of surplus value makes a rise in wages possible, and in some conditions necessary. However, a rise in wages, which may arise because the value of labour-power rises, or because the demand for labour-power rises, relative to supply, can only result in a fall in surplus value.

The longer-term consequence of that may be, and, in fact, is likely to be, that capital will respond by introducing labour-saving machines, and so on, to reduce the demand for labour-power, and to raise relative surplus value. But, that is not the immediate consequence of the rise in wages.

In his first chapter “On Value”, Ricardo starts from an assumption of a general rate of profit. But, he should have deduced the laws determining both wages and profit from his analysis of value.

Marx quotes Ricardo's conclusion from his last illustration, where he tries to show that the variation of values from prices arises due to the effects of wage rises in those capitals that use a lot of fixed capital, as opposed to those that do not.

““The degree of alteration in the relative value of goods, on account of a rise or fall of labour” (or, which amounts to the same thing, rise or fall in the rate of profit), “would depend on the proportion which the fixed capital bore to the whole capital employed. All commodities which are produced by very valuable machinery, or in very valuable buildings, or which require a great length of time before they can be brought to market, would fall in relative value, while all those which were chiefly produced by labour, or which would be speedily brought to market would rise in relative value” (l.c., p. 32).” (p 193)

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