Ricardo’s Miscellanea. John Barton
[A.] Gross and Net Income
Net revenue is the way the Physiocrats conceived of surplus value, which, for them, consists only of rent. For the Physiocrats, profit is merely a form of wage for the capitalist. In this conception, the gross product consists of the capital outlay, consisting of the elements of the constant capital and variable capital, both of which must be reproduced in kind, and of the surplus product. The surplus value is then the value equivalent of the surplus product.
“Net revenue is therefore in fact the excess of the product (or the excess of its value) over that part of it which replaces the capital outlay, comprising both constant and variable capital. It thus consists simply of profit and rent, the latter, in turn, is only a separate portion of the profit, a portion accruing to a class other than the capitalist class.” (p 547)
Every previous mode of production has been geared to a maximisation of the gross product, because it is in this that the actual wealth of society was measured. In other words, a society was wealthy or poor according to how much of these products, and ranges of products, it was able to produce. A legacy of that remains in the writing of Adam Smith, who, as against Ricardo, remains focussed on the size of the gross product and gross revenue, as against the net product and net revenue. But, Ricardo is correct, because, for capitalism, it is the net revenue, not the gross revenue that is determinate. No individual capitalist engages in production, of any particular type of commodity, for the main purpose of producing that particular commodity, but only to produce profit. That they engage in the production of commodity A rather than commodity B is governed only by the fact that they can make more profit producing A rather than B.
And, for that very reason, no individual capitalist seeks to produce the absolute maximum quantity of any particular commodity they could produce, but only seeks to produce that quantity that will maximise their profit. If they end up producing more than that amount, it is only because the laws of capitalist production dictate that the unit cost of production falls, the larger the scale of production, and competition, therefore, drives each capital to produce at this higher level, so as to be more competitive than rival capitals, and so capture market share, whilst, thereby, driving the aggregate mass of production beyond the capacity of the market to absorb it, at prices that either maximise the realisable profit, or even reproduce the consumed capital. Hence overproduction. Where competition no longer operates to force individual capitals to expand their production so as to capture market share, for example, where monopolies arise, this potential for overproduction is removed, because each capital only expands its capital to the extent that in doing so, it expands its mass of profit. Overproduction for such capitals can then only arise as relative overproduction, as described by Marx, i.e. their output only constitutes overproduction, because demand for their output has itself fallen.
And, what applies for the individual capitalist applies to capitalism as a whole. Its production is not geared to what ensures the maximum output of commodities, and, thereby, social wealth, but only to what maximises the production of profit. But, for the same reasons, and as Marx sets out in Capital III, Chapter 15, what maximises the production of surplus value, simultaneously throws up barriers to the realisation of that surplus value, as profit. It drives production beyond the capacity of the market to absorb it, and leads to crises of overproduction.
“Labour itself, from this standpoint, is only productive in so far as it creates profit or surplus-product for capital. If the worker does not create profit, his labour is unproductive. The mass of productive labour employed is only of interest to capital in so far as through it—or in proportion to it—the mass of surplus-labour grows. Only to this extent is what we called necessary labour-time, necessary. In so far as it does not have this result, it is superfluous and to be suppressed.” (p 547)
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