Ricardo, like Smith, resolves the value of commodities, and, therefore, of the gross product, solely into revenues. Like Smith, therefore, he fails to take into account the value of the constant capital, i.e. the value of materials, and wear and tear of fixed capital. So, for Ricardo, gross output replaces the value of wages and surplus value (profit and rent). The net product is then equal to this surplus value, or surplus product.
“Ricardo’s subsequent treatment is of interest, partly because of some of the observations he makes in passing, partly because, mutatis mutandis, it is of practical importance for large-scale agriculture, particularly sheep-rearing, and shows the limitations of capitalist production. Not only is its determining purpose not production for the producers (workmen), but its exclusive aim is net revenue (profit and rent), even if this is achieved at the cost of the volume of production—at the cost of the volume of commodities produced.” (p 565)
Marx quotes Ricardo's recognition of his previous error. He notes that the net product can rise, even as the gross product falls.
“... and therefore it follows, if I am right, that the same cause which may increase the net revenue of the country, may at the same time render the population redundant, and deteriorate the condition of the labourer” (l.c., p. 469).” (p 565)
The redundant population, here, of course, that arises, as a result of the capitalist drive for profit, does not simply disappear, but also weighs down on the rest of the workforce.
The total product of society represents a common fund out of which the consumption of workers, capitalists and landlords is drawn. A large part of the commodities consumed by the capitalists and landlords forms no part of the consumption of workers. On the other hand, nearly all of the commodities consumed by workers, are also consumed by capitalists and landlords, if not by themselves directly then by their retainers. Marx sets this out in Capital II, If society's actual gross product is considered, it consists not just of this consumable product (revenue), but also of that product required to replace the constant capital (materials and wear and tear of fixed capital) on a like for like basis (capital). The capital component of this gross product forms a revenue for no one. It simply reproduces itself. In Marx's schemas it is represented by Department I (c). The revenue component, however, as indicated above, divides itself into two parts – Department II(a) and II(b). Department II(a) is that part of the total product which represents the consumption of necessaries by both the workers and capitalists/landlords, and Department II(b) represents that part of the total product that consists of the luxury goods consumed only by the capitalists and landlords.
This also illustrates the error of those theories in which the wage fund is some kind of fixed amount. There are not separate funds for wages, rent and interest that are fixed. If wages rise, profits and rent will fall, and workers will draw more from the total product of society, whilst capitalists and landlords will draw less, and vice versa. The products that constitute the constant capital must be replaced on a like for like basis, for reproduction to continue on the same scale, but, as seen earlier, if the labour-time required for the reproduction of those commodities falls, as a result of a rise in social productivity, that means that more social labour time is released for the production of revenue, i.e. of consumption goods, and so of the surplus product. It means that the potential for accumulation, and the rate of profit rises, and vice versa.
“One cannot suppose that there are two essentially distinct fixed funds in existence. The important point is, what relative portion each of these groups draws from the common fund. The aim of capitalist production is to obtain as large an amount of surplus-product or surplus-value as possible with a given amount of wealth. This aim is achieved by constant capital growing more rapidly in proportion to variable capital or by setting in motion the greatest possible constant capital with the least possible variable capital. In much more general terms than Ricardo conceives here, the same cause effects an increase in the fund out of which capitalists and landlords draw their revenue, by a decrease in the fund out of which the workers draw theirs.
It does not follow from this that the fund from which the workers draw their revenue is diminished absolutely; only that it is diminished relatively, in proportion to their total output. And that is the only important factor in the determination of the portion which they appropriate out of the wealth they themselves created.” (p 565-6)
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