The position of capital and labour, and the effect on each from a rise in productivity, which reduces the value of commodities is indicated in the next quote from Ricardo that Marx gives.
““Suppose the value of the commodities produced in a particular manufacture to be £1,000, and to be divided between the master and his labourers” [here again he expresses the nature of capital; the capitalist is the master, the workers are his labourers] “in the proportion of £800 to labourers, and £200 to the master; if the value of these commodities should fall to £900, and £100 be saved from the wages of labour, in consequence of the fall of necessaries, the net income of the masters would be in no degree impaired” (l.c., pp. 511-12).” (p 421)
In other words, the value of commodities falls, so that what the capitalist gets when they sell them is reduced, but, by the same token, this reduction lowers the value of labour-power, so that profit rises. In fact, the position of the capitalist here is improved, because previously they laid out £800 to obtain £200 profit, giving a rate of profit of 25%, but now they lay out only £700 to get £200 profit, giving a rate of profit of 28.57%.
This is a point made by Ricardo, as will be seen later, as against Smith. Ricardo points out that it is not the total value of the national product that counts but the value of the net product, i.e. the surplus value.
In this quote, Ricardo also goes on to give the argument for the repeal of the Corn Laws, and for free trade in general, but only in so far as imported commodities are wage goods, so as to reduce wages and raise profits.
“...but if the commodities obtained at a cheaper rate, by the extension of foreign commerce, or by the improvement of machinery, be exclusively the commodities consumed by the rich, no alteration will take place in the rate of profits. The rate of wages would not be affected, although wine, velvets, silks, and other expensive commodities should fall 50 per cent, and consequently profits would continue unaltered.” (p 422)
This same principle applies to domestic production, so that reductions in the value of luxury goods, not consumed by workers, has no impact on profits. In fact, though, as Marx set out in Capital, a fall in luxury goods prices also means that capitalists and others can cover their consumption at lower cost, leaving money left over for additional capital accumulation. Falls in the prices of what are luxury goods today is also one means by which the market is extended, as some of these commodities become wage goods tomorrow.
In the next quote, Ricardo says,
““...by a better distribution of labour, by the invention of machinery, by the establishment of roads and canals, or by any means of abridging labour […] in the manufacture or in the conveyance of goods. These are causes which operate on price, and never fail to be highly beneficial to consumers; since they enable them, with the same labour […] to obtain in exchange a greater quantity of the commodity to which the improvement is applied; but they have no effect whatever on profit. On the other hand, every diminution in the wages of labour raises profits, but produces no effect on the price of commodities. One is advantageous to all classes, for all classes are consumers”” (p 422)
But, as Marx says, how is this beneficial to workers, because Ricardo has already described the way that, in so far as these commodities are wage goods, a fall in their value results in a fall in wages. If the commodities that fall in value are not wage goods, the workers are not consumers of them, and so a change in their price makes no difference to workers. Only if wages fall by less than any fall in the value of wage goods would this benefit workers as consumers, because it would mean a rise in their living standards. However, this would still result in a rise in profit. Only if the value of wage goods fell, but nominal wages did not, or fell only a small amount, would the rise in real wages also cause a fall in surplus value.
And Ricardo continues,
““the other is beneficial only to producers; they gain more, but every thing remains at its former price.”” (p 422)
But, as Marx comments, this is not possible because Ricardo's premise that profits rise, is based on the fact that wages fall, and wages fall only because the price of necessaries falls. And,
““In the first case they get the same as before; but every thing” [wrong again; should read every thing, with the exception of the necessaries] “on which their gains are expended, is diminished in exchangeable value” (l.c., pp. 137-38).” (p 423)
The passage is loosely worded, Marx notes, and adds in his previous objection that wherever the term “rate of profit” is used, Ricardo should have said “rate of surplus value”, because nowhere has Ricardo included the value of constant capital.
“Even in the case of luxury articles, such improvements can raise the general rate of profit, since the rate of profit in these spheres of production, as in all others, bears a share in the levelling out of all particular rates of profit into the average rate of profit. If in such cases, as a result of the above-mentioned influences, the value of the constant capital falls proportionately to the variable, or the period of turnover is reduced (i.e., a change takes place in the circulation process) , then the rate of profit rises.” (p 423)
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