Theories of Surplus Value, Part II, Chapter 16 - Part 15

[b) Analysis of Ricardo’s Thesis that the Increasing Rent Gradually Absorbs the Profit]

Marx now analyses Ricardo's argument that rising rents, from rising agricultural prices, swallows up the profit. He uses the tables from Chapter 12, with modifications.

Table A

Class	C Capital £'s	T Output Tons	TV Total Value £'s	MV Market-Value £'s Per Ton	IV Individual Value £'s per Ton	DV Differential Value £'s per Ton	CP Cost-Price (price of production) £'s per ton	AR Absolute Rent £'s	DR Differential Rent £'s	AR in T Absolute Rent in Tons	DR in T Differential Rent in Tons	TR Total Rent £'s	TR in T Total Rent in Tons
I	100	60	120	2.00	2.00	0	1.833	10	0	5	0	10	5
II	100	65	130	2.00	1.846	0.153	1.692	10	10	5	5	20	10
III	100	75	150	2.00	1.600	0.400	1.466	10	30	5	15	40	20
Total	300	200	400					30	40	15	20	70	35

Table B

Class	C Capital £'s	T Output Tons	TV Total Value £'s	MV Market-Value £'s Per Ton	IV Individual Value £'s per Ton	DV Differential Value £'s per Ton	CP Cost-Price (price of production) £'s per ton	AR Absolute Rent £'s	DR Differential Rent £'s	AR in T Absolute Rent in Tons	DR in T Differential Rent in Tons	TR Total Rent £'s	TR in T Total Rent in Tons
II	50	32.5	60	1.846	1.846	0	1.692	5	0	2.708	0	5	2.708
III	100	75	138.461	1.846	1.600	0.246	1.466	10	18.461	5.250	10	28.461	15.416
IV	100	92.5	170.769	1.846	1.297	0.548	1.189	10	50.769	5.416	27.50	60.769	32.916
Total	250	200	369.230					25	69.230	13.541	37.50	94.230	51.041

Table C

Class	C Capital £'s	T Output Tons	TV Total Value £'s	MV Market-Value £'s Per Ton	IV Individual Value £'s per Ton	DV Differential Value £'s per Ton	CP Cost-Price (price of production) £'s per ton	AR Absolute Rent £'s	DR Differential Rent £'s	AR in T Absolute Rent in Tons	DR in T Differential Rent in Tons	TR Total Rent £'s	TR in T Total Rent in Tons
I	100	60	110.769	1.846	2.000	- 0.153	1.833	0.769	0	0.416	0	0.769	0.416
II	100	65	120.000	1.846	1.846	0	1.692	10	0	5.416	0	10	5.416
III	100	75	138.461	1.846	1.600	0.246	1.466	10	18.461	5.416	10	28.461	15.416
IV	100	92.5	170.769	1.846	1.297	0.548	1.189	10	50.769	5.416	27.50	60.769	32.916
Total	400	292.5	540.000					30.769	69.230	16.666	37.50	100	54.166

Table D

Class	C Capital £'s	T Output Tons	TV Total Value £'s	MV Market-Value £'s Per Ton	IV Individual Value £'s per Ton	DV Differential Value £'s per Ton	CP Cost-Price (price of production) £'s per ton	AR Absolute Rent £'s	DR Differential Rent £'s	AR in T Absolute Rent in Tons	DR in T Differential Rent in Tons	TR Total Rent £'s	TR in T Total Rent in Tons
I	100	60	110	1.833	2.000	- 0.166	1.833	0.	0	0	0	0	0.
II	100	65	119.166	1.833	1.846	- 0.012	1.692	9.166	0	5.000	0	9.166	5
III	100	75	137.500	1.833	1.600	0.219	1.466	10	17.500	5.454	9.545	27.500	15
IV	100	92.5	169.583	1.833	1.297	0.540	1.189	10	49.583	5.454	27.045	59.583	32.50
Total	400	292.5	536.250					29.166	67.083	15.909	36.590	96.25	52.50

Table E

Class	C Capital £'s	T Output Tons	TV Total Value £'s	MV Market-Value £'s Per Ton	IV Individual Value £'s per Ton	DV Differential Value £'s per Ton	CP Cost-Price (price of production) £'s per ton	AR Absolute Rent £'s	DR Differential Rent £'s	AR in T Absolute Rent in Tons	DR in T Differential Rent in Tons	TR Total Rent £'s	TR in T Total Rent in Tons
II	100	65	113.750	1.750	1.846	- 0.096	1.692	3.750	0	2.142	0	3.75	2.142
III	100	75	131.250	1.750	1.600	0.150	1.466	10	11.250	5.714	6.428	21.250	12.142
IV	100	92.5	161.875	1.750	1.297	0.493	1.189	10	41.875	5.714	23.928	51.875	29.642
Total	300	232.5	406.875					23.750	53.125	30.357	30.357	76.875	43.928

The basis of the tables is that £100 of capital is employed, comprising £60 c and £40 v. The rate of surplus value is 50%, so the value of output, in each case, is £120. This £120 is embodied in a greater or lesser quantity of output, dependent upon the fertility of the land, and so the productivity of the labour. If the average rate of profit, in industry, is 10%, the 20% profit, in agriculture, represents a surplus profit of £10 or 10%. So, £10 goes to profit, and £10 goes to absolute rent. 

The £40 variable-capital is taken to be wages for 20 workers. Marx originally says wages for a week, but, on the basis that the rate of profit is taken, as for the year, he modifies this to be wages for the year. As he says, whatever the time period taken, it does not really matter, provided all figures relate to the same period of time. 

As previously seen, in Chapter 12, and represented by these different tables, which land determines the market value depends on the conditions of supply and demand. It may be that demand can only be fully satisfied by utilising the production of the least fertile land, but that if the value of this less fertile land determined the market value, demand would constrict, and supply increase, to a level where supply exceeded demand, and pushed down market prices, for example. 

In Table A, land type I determines the market value. It produces 60 tons of grain. The total value of £120, divided by 60 tons gives a value of £2 per ton. The wages of £40, are then equal to 20 tons of grain. If we assume that workers are paid the value of their labour-power, and that it is comprised entirely of grain, we can then conclude that the 20 workers require for their subsistence 20 tons of grain. Suppose, to meet the level of demand, it is necessary to move to less fertile soil. Here, £60 of constant capital is employed, alongside £50 of variable-capital, still representing 20 workers, but now producing only 48 tons of grain. The variable-capital has risen here to £50, from £40, because the 20 workers still require 20 tons of grain for their subsistence, but the drop in productivity has caused the value of grain to rise. 

Now, the value of output remains £120, but with £110 of capital advanced, the surplus value falls to £10. The value of a ton of grain is now £120/48 = £2.50. The 20 tons of grain required as wages, is now, as said above, equal to £50. 

If production had to move to an even less fertile soil, where the value of £120 was embodied within only 40 tons of grain, the value per ton would rise to £3. The grain required as wages, of 20 tons, would now be equal to $60, so that the capital advanced rises to £60 c + £60 v = £120, so that all of the surplus value is wiped out. Indeed, if productivity fell so that only 30 tons of grain were produced, the value per ton would rise to £4, so that wages would rise to £80, the capital advanced would be £60 plus £80 = £140, so that instead of a surplus value, a loss would arise, because the value of labour-power is greater than the new value created by labour. It demonstrates Marx's point that all surplus value is ultimately relative surplus value, because surplus value itself is only possible when productivity rises to a minimum level so that more new value can be created in a day than is required to reproduce the consumed labour-power. 

Marx then sets this out from the alternative perspective, whereby the capital advanced, in each case, remains £100, but keeping the same technical composition of capital, the number of workers employed changes, as the value of wages rises, and consequently, the quantity of output is also affected. So, in the first instance, £60 of constant capital was set in motion by £40 of variable capital, which represented 20 workers. If the value of grain is £3, as in the case with the least fertile soil, where no surplus value is produced, the value of output is equal to the capital advanced, i.e. £100. The quantity of output must then be 33.33 tons. 

The assumption is that there is no change in the value of the constant capital, but that with less labour employed, less constant capital is employed. With £50 of constant capital, and the technical composition remaining the same, if previously we had 60c:20 workers, we now have 50c:16.66 workers. The quantity of grain paid as wages to each worker is equal to 1 ton. A ton of grain how has a value of £3. The total wages are then equal to 16.66 x £3 = £50. So, the composition of the capital is £50 c + £50 v = £100. 

The same applies in the second case, where the price is £2.50 per ton. The profit here was £10, on a capital of £110. If the capital advanced is only £100, the profit is likewise reduced, because less labour is employed. The profit is £9.09, so the total value of output is £109.09. The total output is then 43.63 tons at £2.50 = £109.09. Keeping the technical composition the same, constant capital is then £54.54, and variable capital is £45.46. That is equal to the labour of 18.18 workers. 

In both cases, the same capital sets in motion less constant capital and fewer workers. Although fewer workers are employed, they each cost more, because the price of grain is higher, and each still needs to consume the same quantity of grain as before. Because more of the variable capital has to be used to employ labour, less is available to buy constant capital, and because the technical relation between the quantity of constant capital and number of workers remains constant, less of each is employed. 

“In his calculations, Ricardo always presupposes that the capital must set in motion more labour and that therefore a greater capital, i.e., £120 or £110, must be laid out instead of the previous £100. This is only correct if the same quantity is to be produced, i.e., 60 tons in the cases cited above, instead of 40 tons being produced in case I, with an outlay of £120, and 48 in case II with an outlay of £110. With an outlay of £100, therefore, 33⅓ tons are produced in case I and 43 7/11 tons in case II. Ricardo thus departs from the correct view point, which is not that more workers must be employed in order to create the same product, but that a given number of workers create a smaller product, a greater share of which is in turn taken up by wages.” (p 441)

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