In relation to the capitalist who employs the machine Ricardo makes the same point as Marx makes in Capital I. This capitalist sells their output not at its individual value, but at its market value, determined by all those other producers that have not employed such a machine. The market value of the output is £5,500, and this producer is thereby enabled to make an excess profit of £500. In order to maintain a competitive advantage, they may sell their output for slightly less than £5,500, but the fact they make a surplus profit means that other producers will be encouraged to introduce such a machine. On that basis, the market value of the output will fall, and the surplus profit will disappear.
“Thus then is the public benefited by machinery: these mute agents are always the produce of much less labour than that which they displace, even when they are of the same money value” (l.c., pp. 38–40).” (p 551)
This is quite right, Marx comments, and, he continues, it shows why it is wrong to argue that those displaced by the machine can then be employed in the machine production. However, as I have shown elsewhere, and as Marx himself sets out, this is not the same thing as saying that these machines that displace existing labour, and raise productivity, do not, thereby, lead to the employment of labour and capital on an even larger scale. For example, the machine which releases labour and capital, say in the production of linen, does so because the labour required for the machine's production (including its components) is less than the labour it releases by its employment. It is tautologically true, therefore, that all of the labour released cannot then be employed on the machine's production. But, that does not mean that this labour/capital cannot be used in some other way. If 10 workers, or £500 of variable-capital is released, that £500 of capital could be used to employ additional yarn, so as to produce more linen. The demand for additional yarn will cause the spinner to need to buy additional cotton, and employ additional workers to spin it.
Moreover, as I have shown elsewhere, in the case of linen, this enters into the value of labour-power, as a wage good. If the machine results in the value of linen falling, the value of labour-power, and so wages fall. If all wages fall, a given amount of capital will then employ a greater quantity of labour-power. Moreover, the fall in wages means the rate and mass of surplus value rises, so that a higher rate of capital accumulation is possible, so that more workers are employed. The introduction of machines, which act to raise productivity, to increase the rate of surplus value, to reduce the value of constant capital, and so to release capital, and raise the rate of profit thereby acts to increase rather than decrease the overall employment of labour.
Marx also deals with this in Chapter XXI, examining the work of the first critics of the Ricardians from the perspective of the rising proletariat. Looking at the work of the anonymous author of the pamphlet “The Source and Remedy of the National Difficulties”, Marx notes, dealing with the idea that a growing surplus product that could not be sold would have to be paid back to workers as higher wages,
“As a result of the introduction of machinery, a mass of workers is constantly being thrown out of employment, a section of the population is thus made redundant; the surplus product therefore finds fresh labour for which it can be exchanged without any increase in population and without any need to extend the absolute working-time. Let us assume that 500 workers were employed previously, whereas now there are 300 workers, who perform relatively more surplus labour. The other 200 can be employed by the surplus product as soon as it has increased sufficiently. One portion of the old [variable] capital is converted into fixed capital, the other gives employment to fewer workers but extracts from them more surplus-value in relation to their number and in particular also more surplus product. The remaining 200 are material created for the purpose of capitalising additional surplus product.”
Marx corrects Ricardo's example, so as to include the constant capital consumed in its production. And, Marx also points out that machines themselves were produced by machines, so that even less could the view hold that the labour displaced by the machines could simply be used on the production of the machine. Some, however, have wrongly taken Marx’s arguments here to mean that machines must inevitably lead to less labour being employed in total, just as they have arrived at a theory of immiseration of workers. That is not what Marx says, here and elsewhere. Less labour is employed relatively, but more labour is employed absolutely. Wages fall relatively, i.e. as a proportion of output value, and also relative to surplus value, but rise absolutely, as workers living standards rise with the rise in productivity, and total output.
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