The fall in the value of the product from £150 to £120 arises from two causes. First, less material is processed and so passes £10 less value into the final product. Secondly, less labour is employed, and so £20 less new value is created. The ratio of c:v falls from 1:1 to 1:1.5, and usually a reduction in the ratio of c:v implies a rise in the rate of profit. But, that is only where that is a consequence of a lower organic composition of capital, due to lower social productivity. But, here the lower ratio is due to a higher cost of labour, which also results in a lower rate of surplus value. As Marx puts it,
“The rate of surplus-value—of surplus-labour—falls more than the ratio of variable to constant capital. For the same number of workers as before, that is the same absolute quantity of labour, needs to be employed in order to set in motion the same amount of constant capital. Of this absolute quantity of labour more, however, is necessary labour and less of it is surplus-labour. Thus the same quantity of labour must be paid for more dearly. Of the same capital—£100 for instance—less can thus be laid out in constant capital, since more has to be laid out in variable capital to set in motion a smaller constant capital.” (p 278)
It is then clear that, earlier, Marx simply misspoke when he said, “this must always bring about a rise in the rate of profit” (loc.cit.), having meant to say “this must always bring about a fall in the rate of profit”. Whenever the technical composition of capital remains constant, but the rate of surplus value falls, the rate of profit must also fall. However, this fall in the rate of profit arises due to a squeeze on profits caused by rising wages, which is the opposite of the situation that Marx describes in relation to the tendency for the rate of profit to fall. In that case, Marx explains that the rate of profit falls, not because the rate of surplus value is falling, but because it is rising; that productivity is rising, and so a greater mass of surplus value is produced. But, this rise in productivity then means that this rise in the mass of surplus value produced is less than the rise in the capital laid out to produce it.
Even where the value of the product remains constant, the price per unit of this product may rise. If we take the previous examples, in turn, the effects can be seen.
The units of c,v and of output are indicated in ()'s.
50 c (50) + 50 v (50) + 50 s = 150 (150). Price per unit of output £1.
60 c (40) + 40 v (40) + 40 s = 140 (120). Price per unit of output £1.166
40 c (40) + 60 v (40) + 20 s = 120 (120). Price per unit of output £1.
50 c (40) + 50 v (40) + 30 s = 130 (120). Price per unit of output £1.083.
The determinant of the number of units of output, is the quantity of material processed. In each case, 2 – 4, the quantity of material processed has fallen by 20%. The output is 3 units for each unit of material processed, giving 150 units in (1), and 120 units in (2 – 4).
In (2), the price per unit rises from £1 to £1.166, because the price of each unit of c contained within it has risen by 50%.
In (3), the price per unit remains £1, because there has been no change in the value of c. The total value of c only falls from 50 to 40, because less material itself is processed. The price of each unit of c processed and contained in the final output remains unchanged. In addition, the amount of new value created by each worker employed remains unchanged. The total new value created falls from 100 to 80 only because 40 rather than 50 units of labour are employed, as a result of the higher level of wages. But, those higher wages have no impact on the amount of new value produced by each worker. They only impact the division of that new value between variable capital and surplus value.
In (4), the rise in the price of c and v is the same, 25%, and so the ratio of c:v remains constant. As in (3), the rise in the value of v has no effect on the value of the product, or the price per unit. It only affects the division of the new value between v and s. The rise in the price per unit arises as in (2), from the rise in the price of c, because, although the overall value of the product falls from £150 to £130, because only £80 rathre than £100 of new value is produced, because fewer workers are employed, the fall in the quantity of output is greater, from 150 units to 120 units.
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