Theories of Surplus Value, Part II, Chapter 10 - Part 23

Suppose wheat was the money commodity, and contains a higher than average proportion of variable-capital. If wages rise, this does not increase the value of wheat, but will cause its price of production to rise. In other words, we might have something like this.

c 100 + v 400 = k 500 + 20% p = 500 + 100 = 600

c 100 + v 500 = k 600 + p 15% = 600 + 90 = 690

So, the rise in wages causes the general rate of profit to fall from 20% to 15%, but the price of production of wheat rises from 600 to 690, because although the profit falls from 100 to 90, the cost of production has risen from 500 to 600. But, if the prices of various other commodities are measured now in wheat, their prices will all have changed accordingly, not dependent on their respective compositions of fixed capital, but consequent on the higher price of wheat. If previously, a kilo of wheat bought 600 metres of yarn, now it would buy 690 metres of yarn, for example.

“The commodities into which more fixed capital entered, would be expressed in less wheat than before, not because their specific price had fallen compared with wheat but because their price had fallen in general.” (p 200)

If commodities exchanged at their values, then we might have a situation where:-

c 100 + v 400 + s 100 = 600.

A rise in wages would not affect the value of wheat. But, suppose productivity falls so that more labour is required to produce the wheat.

c 100 + v 440 + s 110 = 650.

If the value of all other commodities remain unchanged, then the prices of all these other commodities, priced in wheat, will fall. But, where there are prices of production, rather than values, it is the change in wages and its effect on the rate of profit, which then has the consequent effect on prices of production. If the money commodity represents capital of average composition, then a rise in wages will leave its price of production unchanged, whilst the price of production of commodities of higher composition will fall, and those of lower composition will rise. Measured in the money commodity, they would move in the same way.

But, suppose that the value of gold rises, as the money-commodity, because more labour is required for its production. In that case, the price of production rises, but there is no change in the general rate of profit, and no change in the prices of production of all other commodities. In that case, all money prices would fall, because the value of gold/price of production would have risen, relative to all other commodities.

This is the point that Marx is making, here, against Ricardo, which is that it is not just that gold determines the prices of these other commodities, in the process of exchanging with them and circulating them. First, the prices of production of those commodities are determined, and measured in money prices, before the exchange occurs.

“If the same causes which raised the price of wheat, raised, for example, the price of clothes, then although the clothes would not be expressed in more wheat than previously, those [commodities], whose price had fallen compared with wheat, for instance cotton, would be expressed in less. Wheat would be the medium in which the difference in the price of cotton and clothes would be expressed.” (p 200-01) 

So, here, the price of production of wheat and clothes rises by the same amount, so that, if previously, 1 kilo of wheat exchanged for six shirts, this relation still holds. But, the price of production of cotton falls, so that 1 kilo of wheat, or six shirts, now exchanges for, say, 2 kilos of cotton, whereas previously it only exchanged for 1.

But, Ricardo makes the assumption not that there has been a variation in the relative prices of production between clothes and cotton, which is only manifest in the change in their relative money prices, but that wheat has risen in value, as against cotton, but not against clothes, as a consquence of a rise in wages.

“In itself, the assumption that variations in the price of wages in England, for instance, would alter the cost-price of gold in California where wages have not risen, is utterly absurd. The levelling out of values by labour-time and even less the levelling out of cost-prices by a general rate of profit does not take place in this direct form between different countries.” (p 201) 

But, Ricardo's concept of a “price” for this money-commodity is itself also an absurdity, because it is the money-commodity which is the measure of money prices. Price is only the exchange-value/price of production of a commodity expressed in money. But, it is then absurd to talk about a price of money. It would only be possible for there to be a price of money if this money was then measured against some other commodity. In fact, the price of the money-commodity can only be represented in its exchange relation to every other commodity.

“... for in each of these prices in which the exchange-value of the commodity is expressed in money, the exchange-value of money is expressed in the use-value of the commodity. There can therefore be no talk of a rise or fall in the price of money. I can say: the price of money in terms of wheat or of clothes has remained the same; its price in terms of cotton has risen, or, which is the same, that the money price of cotton has fallen. But I cannot say that the price of money has risen or fallen. But Ricardo actually maintains that, for instance, the price of money in terms of cotton has risen or the price of cotton in terms of money has fallen, because the relative value.” (p 201-2)

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