Ricardo's starting point is then that there is some natural pre-existing rate of profit. As Engels discusses in his Supplement to Capital III, its obvious where this notion comes from, because for centuries the merchant guilds operated on the basis of fixed rates of profits that were strictly controlled. When merchants began to also enter into production, these rates of commercial profit formed an obvious starting point for the kind of rate of profit that was sought from industrial production, and also it encourages the notion that profit is simply an addition to the cost price of commodities, established almost on the basis of tradition. For Ricardo, then, this rate of profit is the norm, which tends to diminish over time, because of rising wages, but, at any one time, is only exceeded in a small number of industries, where specific relations of supply and demand cause higher prices. These exceptions are themselves evened out over time, as additional capital flows into the high profit areas.
“Ricardo, moreover, always assumes that the commodities whose prices yield more than the average profit stand above their value and that those which yield less than the average profit stand below their value. If competition makes their market-value conform to their value, then the level is established.” (p 434-5)
And so, on this basis, Ricardo argues that the market prices of commodities fluctuate around their exchange value.
“According to Ricardo, the level itself can only rise or fall if wages fall or rise (for a relatively long period), that is to say, if the rate of relative surplus-value falls or rises; and this occurs without any change in prices. (Yet Ricardo himself admits here that there can be very significant variations in prices in different spheres of production, according to the ratio of circulating and fixed capital.)” (p 435)
As Marx described, in Capital III, even when a general rate of profit is established, actual profit rates will differ from it. If not, capital would never move from one sphere to another, in search of higher profits. It would only be possible for all capital to be obtaining the average rate if the system was entirely static. There are numerous reasons why different capitals, in the same sphere, obtain actual rates of profit above or below the average, and why some spheres themselves obtain rates of profit above or below the average. Some spheres entail more risk, for which insurance has to be taken out; some spheres exhibit aspects of monopoly; and so on, which prevents the free flow of capital, so as to establish the average rate of profit in that sphere.
“But even when a general rate of profit is established and therefore cost-prices, the rate of profit in particular branches may rise, because the hours of work, in them are longer and consequently the rate of absolute surplus-value rises. That competition between the workers cannot level this out, is proved by the intervention of the state. The rate of profit will rise in these particular spheres without the market-price rising above the natural price. Competition between capitals, however, can and in the long run will prevent that this excess profit accrues entirely to the capitalists in these particular fields.” (p 435)
I have made a similar point in relation to the complex labour of footballers, actors, and other entertainers etc. Their complex labour means that an hour of their concrete labour is say the equivalent of 1,000 hours of simple labour, resulting in the equivalent of high levels of absolute surplus value, but the particular nature of this complex labour, means that the capital that employs it cannot accrue all of this surplus profit to itself, and is forced thereby to share it with the providers of that labour.
The same principle applies that, where such higher profits exist, capital, where it can will move into these areas, increasing the supply of those commodities, and thereby driving down the price and profit. Only where capital cannot freely do that will the equalisation of profits be frustrated. But, as seen with such a situation with agriculture, the consequence then is that the surplus profit becomes some form of rent. With agriculture, the existence of landed property prevents the free flow of capital, and so a surplus profit exists that is appropriated by the landlord. However, as Marx has demonstrated, the consequence here is not, as Ricardo believes, that the agricultural commodity is sold at a price above its value, but that it is sold at its value. It is sold, however, at a price above its price of production.
The same is true of other such circumstances. If we take a professional footballer, for example, it is not that the prices obtained by a football club (ticket sales, TV rights etc.) represent a price above the value of the product. The value produced by the labour employed is highly complex, and produces a commodity with a high value. If the labour employed were paid only wages according to the value of the labour-power, large surplus profits would exist. The consequence would be that capital would flood into this sphere, prices would fall, and profits would sink to the average level. However, the fact is that the specific labour of the top flight professional footballers is in limited supply. Capital employed in this sphere, therefore, competes for this labour-power, so that the surplus profit is appropriated as rent by the owners of that specific labour-power. It does not have the appearance of rent, because it is incorporated into the wage and other remuneration.
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