What Marx should have said is that the price of production of the output is £8,250. That is a total capital of £20,000 is advanced. It comprises £7,000 original fixed capital, £7,500 machine and £5,500 variable-capital. The average rate of profit is 10%, giving £2,000 profit as before. The price of production is then £5,500 wages + £750 wear and tear = £6,250 cost of production + £2,000 average profit = £8,250. This compares with a price of production of this volume of output previously of £15,000, so the price per unit must fall significantly.
The implication of this, as these items are necessaries, consumed by the workers who produce them, is that the value of labour-power/wages fall accordingly.
“The lower price would be advantageous to the farmer in so far as he himself consumes food and necessaries as revenue. It would also be advantageous to him in so far as it enables him to reduce the wages of the workers he employs thus releasing a portion of his variable capital. It is this portion, which to a certain degree could employ new labour, but only because the real wage of the workers who have been retained had fallen. A small number of those who have been discharged could thus—at the cost of those who had been retained—be re-employed. The fact however that the product would be just as great as before, would not help the dismissed workers.” (p 567)
What Marx does not seem to take into account here, as I've set out elsewhere, is that the result of the lower wages is not only to make it possible to employ more workers with the same variable-capital, but that even with the same number of workers, the rate of surplus value, and mass of surplus value rises, so that with the surplus value being accumulated, a greater number of workers can then be employed. By using Ricardo's assumption of a fixed 10% rate of profit, Marx misses this necessary consequence. Marx's use of the term "real wage", here is also confusing. The workers real wage as conventionally understood, of what amount of wage goods the nominal wage buys, would not have changed. The employed, workers could still buy the same quantity of their agricultural products as before, required for the physical reproduction of their labour-power. The point being that, as the unit value of these wage goods has fallen, they require a lower money wage to be able to do so. It is the money wage, or nominal wage that has fallen, not the real wage, and it is that which is the basis of the rise in the rate of surplus value.
And, in fact, even assuming that £2,000 of profit is consumed unproductively by the capitalist, as Marx says here, the fall in the value of necessaries would mean that these necessaries have a value less than £2,000, so the capitalist would be able to accumulate capital where previously they didn't. If previously, 15,000 units of output were produced with a unit value of £1, the capitalist bought 2,000 units with their £2,000 of profit. The value per unit now falls to £0.47, and so, 2000 units now only costs the capitalist £947.
Moreover, at £0.47 per unit for wage goods, the £5500 of variable capital would buy 11,702 units. If each worker continues to consume 100 units, this employs 117 workers, with a consequent rise in the mass of surplus value. Alternatively, if only the 55 workers are employed, this costs only £2585, so that the amount laid out as variable-capital falls, by £3000, and the surplus value rises correspondingly by £3,000 to £3,846. The combined effect of a) a rising mass of profit, b) a lower value of labour-power, and c) a greater proportion of profit available for accumulation, means that the potential for the accumulation of variable-capital and employment of workers is much greater than Marx suggests here. Moreover, if this is considered more widely, the effect of the fall in the value of labour-power that results, affects all capitals, so that they all obtain more surplus value, whilst the fall in wages also enables them to employ more labour-power.
Moreover, at £0.47 per unit for wage goods, the £5500 of variable capital would buy 11,702 units. If each worker continues to consume 100 units, this employs 117 workers, with a consequent rise in the mass of surplus value. Alternatively, if only the 55 workers are employed, this costs only £2585, so that the amount laid out as variable-capital falls, by £3000, and the surplus value rises correspondingly by £3,000 to £3,846. The combined effect of a) a rising mass of profit, b) a lower value of labour-power, and c) a greater proportion of profit available for accumulation, means that the potential for the accumulation of variable-capital and employment of workers is much greater than Marx suggests here. Moreover, if this is considered more widely, the effect of the fall in the value of labour-power that results, affects all capitals, so that they all obtain more surplus value, whilst the fall in wages also enables them to employ more labour-power.
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