[2.] Formation of the General Rate of Profit. (Average Profit or “Usual Profit”)
[a) The Starting-Point of the Ricardian Theory of Profit Is the Antecedent Predetermined Average Rate of Profit]
Marx begins this section with a long quote from Ricardo, which, he says, shows that he is not theoretically clear on the question of the formation of a general rate of profit. Given that Ricardo has no objective basis for determining the mass of surplus value, that is not surprising. Ricardo is essentially left assuming that there is some already existing usual rate of profit, and that competition drives capital towards it.
Ricardo begins by noting that the market price for commodities varies from the natural or necessary price, as a result of short term imbalances of supply and demand. Ricardo says,
“This, however, is but a temporary effect. The high profits on capital employed in producing that commodity, will naturally attract capital to that trade; and as soon as the requisite funds are supplied, and the quantity of the commodity is duly increased, its price will fall, and the profits of the trade will conform to the general level.” (p 432)
This movement of individual prices and profits is then separate from what Ricardo sees as a general, historical downward movement in the average rate of profit, as a result of the rise in wages, previously discussed, which arises due to a growing population, and the need to provide the necessaries it requires, by moving to progressively less fertile soils. So, Ricardo says,
“A fall in the general rate of profits is by no means incompatible with a partial rise of profits in particular employments. It is through the inequality of profits, that capital is moved from one employment to another. Whilst then general profits are falling, and gradually settling at a lower level in consequence of the rise of wages, and the increasing difficulty of supplying the increasing population with necessaries, the profits of the farmer may, for an interval of some little duration, be above the former level. An extraordinary stimulus may be also given for a certain time, to a particular branch of foreign and colonial trade (l.c., pp. 118–19).” (p 432)
Ricardo goes on to relate how, in particular spheres, a more permanent shift in demand may occur, which causes prices and the rate of profit, in that sphere, to rise. In consequence, capital will then naturally be attracted to that sphere, increasing the supply of commodities, reducing prices and profits, until the surplus profit is eroded. He goes on,
“In the same manner, with every increased demand for corn, it may rise so high as to afford more than the general profits to the farmer. If there be plenty of fertile land, the price of corn will again fall to its former standard, after the requisite quantity of capital has been employed in producing it, and profits will be as before; but if there be not plenty of fertile land, if, to produce this additional quantity, more than the usual quantity of capital and labour be required, corn will not fall to its former level. Its natural price will be raised, and the farmer, instead of obtaining permanently larger profits, will find himself obliged to be satisfied with the diminished rate which is the inevitable consequence of the rise of wages, produced by the rise of necessaries” (l.c., pp. 119–20).” (p 433)
If the working-day, in each sphere, is more or less given to be the same, any variations are due to the specifics of that sphere, of the particular types of labour. Moreover, the general rate of surplus value can then be assumed to be given, because wages are, on average, the same.
“Ricardo is preoccupied with this idea, and he confuses the general rate of surplus-value with the general rate of profit. I have shown that with the same general rate of surplus-value, the rates of profit in different branches of production must be very different, if the commodities are to be sold at their respective values.” (p 433)
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