Thursday, 21 June 2018

Theories of Surplus Value, Part II, Chapter 16 - Part 28

[e) Ricardo’s Explanation for the Fall in the Rate of Profit and Its Connection with His Theory of Rent]

Marx begins this section with a very long quote from Ricardo, where Ricardo sets out his argument for the tendency for the rate of profit to fall. Ricardo says, 

“With the progress of society the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural price is regulated, has a tendency to become dearer, from the greater difficulty of producing it. As, however, the improvements in agriculture, the discovery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so will the same causes produce the correspondent effects on the natural price of labour.” (p 461) 

In other words, food becomes dearer, because, as the population grows, cultivation moves to less fertile land, so the price of food and raw materials rise. Improvements in agriculture, and cheaper imports only affect this temporarily. However, rising productivity in manufacturing reduces the value of all other commodities, and to the extent these comprise workers' necessaries, this reduces the value of labour-power. But, as population rises, the fall in the value of these manufactured necessaries does not offset the rise in food prices. Ricardo continues. 

“Instead, therefore, of the money wages of labour falling, they would rise; but they would not rise sufficiently to enable the labourer to purchase as many comforts and necessaries as he did before the rise in price of those commodities… 

“Notwithstanding, then, that the labourer would be really worse paid, yet this increase in his wages would necessarily diminish the profits of the manufacturer; for his goods would sell at no higher price and yet the expense of producing them would be increased…” (p 461) 

So, Ricardo's explanation of the falling rate of profit is a squeeze on profits themselves. On the one hand, rising agricultural prices cause rising rents, which take a chunk out of profit, on the other, although workers' pay rises do not cover the full cost of the rises in their food bill, so their living standard drops, the rise in their money wages still takes another chunk out of profits, so that profit is squeezed from two directions. 

Whilst workers lose out, because the rise in their money wage is not enough to cover the rise in food prices, the landlord is protected. Ricardo says, 

“The rise in the money value of rent is accompanied by an increased share of the produce; not only is the landlord’s money rent greater, but his corn rent also” (p 462) 

Ricardo's quote ends with the following. 

““We have shewn that in early stages of society, both the landlord’s and the labourer’s share of the value of the produce of the earth, would be but small; and that it would increase in proportion to the progress of wealth, and the difficulty of procuring food” (l.c., p. 109).” (p 462) 

Marx responds, 

“These “early stages of society” are a peculiar bourgeois fantasy. In these early stages, the labourer is either slave or self-supporting peasant, etc. In the first case he belongs to the landlord, together with the land; in the second case he is his own landlord. In neither case does any capitalist stand between the landlord and the labourer. The subjugation of agriculture to capitalist production, and hence the transformation of slaves or peasants into wage-labourers and the intervention of the capitalist between landlord and labourer—which is only the final result of capitalist production—is regarded by Ricardo as a phenomenon belonging to the “early stages of society”. (p 462) 

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