Saturday, 24 November 2018

Theories of Surplus Value, Part III, Chapter 19 - Part 20

Profits are, of course, labourunpaid labour – and so accumulated profits are accumulated labour. In Capital III, Marx examined the nature of these revenues such as wages, profit and rent, and their sources, indicating that the actual source of these revenues is labour. Illustrating the problems of the bourgeois apologists, in connecting these revenues to their supposed sources, Marx quotes Cazenove

““The expression Labour and Profits is liable to this objection, that the two are not correlative terms,—labour being an agent and profits a result; the one a cause, the other a consequence. On this account Mr. Senior has substituted for it the expression Labour and Abstinence… It must be acknowledged, indeed, that it is not the abstinence, but the use of the capital productively, which is the cause of profits” (according to Senior: “He who converts his revenue into capital, abstains from the enjoyment which its expenditure would afford him”).” (p 30) 

Malthus' definition of the value of a commodity, therefore, comes down to the labour contained in it, plus the labour not contained in it, but which must be paid for! In a very confused way, this might be considered a definition of the price of production, but not of the value. Even as a definition of a price of production it is not correct, because for those commodities whose price of production is lower than their value by definition it means that it is less than the labour contained in them. It is still more than the paid labour contained in them, but the total labour includes the unpaid labour. By contrast, those commodities that have a higher price of production than their exchange value contain more unpaid labour than is actually used in their production. 

Malthus says against Ricardo, 

“Ricardo’s “proposition, that as the value of wages rises profits proportionably fall, cannot be true, except on the assumption that commodities, which have the same quantity of labour worked up in them, are always of the same value, an assumption which probably will not be found to be true in one case out of five hundred; and […] from that […] necessary state of things, which, in the progress of civilisation and improvement, tends continually to increase the quantity of fixed capital employed, and to render more various and unequal the times of the returns of the circulating capital” (Definitions etc., pp. 31-32). “ (p 31) 

Malthus hits here on the problem of Ricardo's theory, in relation to the organic composition of capital. In Capital III, Chapter 12, Marx also picks up on this point, and shows the effect of a general rise in wages on capitals of different compositions. A general rise in wages causes a general fall in profit, and the rate of profit. But, as the price of production is the cost of production plus average profit, this has divergent effects on capitals of varying compositions, or different rates of turnover. For capitals with a high organic composition, or low rate of turnover, and so price of production higher than exchange-value, the effect is to cause the price of production to fall, because the rise in wages causes its cost of production to rise by less than the fall in its share of profit. By contrast, capitals with a low organic composition, or high rate of turnover, see their cost of production rise by more than their share of surplus value falls. So, their price of production rises. Only those capitals with the average composition and average rate of turnover see no change in their price of production. 

Malthus also says, 

““…that natural […] state of things, falsifies Ricardo’s measure of value because this state “… in the progress of civilisation and improvement, tends continually to increase the quantity of fixed capital employed, and to render more various and unequal the times of the returns of the circulating capital”.) 

“Mr. Ricardo […] himself admits of considerable exceptions to his rule; but if we examine the classes which come under his exceptions, that is, where the quantities of fixed capital employed are different and of different degrees of duration, and where the periods of the returns of the circulating capital employed are not the same, we shall find that they are so numerous, that the rule may be considered as the exception, and the exceptions the rule” (op. cit., p. 50).” (p 31) 

Here he seizes upon the other weakness of Ricardo's theory, but in respect of the same feature. In other words, the other factor, besides the organic composition, which determines the price of production, is the rate of turnover of capital. Those capitals with higher than average rates of turnover have higher annual rates of profit, and so capital moves to those spheres, which depresses prices and profits. Here, the price of production is then below the exchange value, and vice versa for those capitals with a lower than average rate of turnover. 

It is Ricardo's failure to distinguish between exchange-value and price of production which allows Malthus to attack his theory of value on this basis. 

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