“Torrens adheres to Ricardo insofar as he maintains that the value of a commodity is determined by the quantity of labour, but he declares that [it is] only the “quantity of accumulated labour” expended upon the production of commodities which determines their value. Here, however, Torrens lands himself in a fine mess.” (p 75)
The reason is that Torrens argues that the value of a commodity is determined by the value of the accumulated labour, i.e. the constant capital, plus wages – which really means the materialised labour in wage goods (variable-capital) – but all of these are themselves commodities. Marx gives the example of woollen cloth. If the value of woollen cloth is determined by the value of the wool, the loom and so on, and the wages of weavers, what about when that woollen cloth is a finished product, and is then used by the tailor, for whom it is, in turn, constant capital? It's not only then the value of the wool, the looms, and the wages that are materialised in the woollen cloth, but the whole of the immediate labour, paid and unpaid, which has itself become materialised rather than immediate labour. In fact, as Marx shows, it's not the wages that are materialised in the value of the cloth – the wages, i.e. the wage goods consumed by the worker, play no part in this labour process, they only take part in the production of the worker themselves – but only the immediate labour, i.e. it is something completely new. That is a difference between constant capital, whose value is transferred to the end product, and variable-capital, whose value is not.
“It is indeed a fine vicious circle to seek to determine the value of a commodity by the value of the capital, since the value of the capital is equal to the value of the commodities of which it is made up.” (p 75)
If the value of a commodity is determined by the value of the capital which produces it, either this value remains the same, at the end of the production process, or it increases. If the former is the case, then not only does the constant capital simply transfer its value to the end product, but the immediate labour must only create as much new value as is represented by the value of wages that have been paid. In a more crude version that would be the same as if variable-capital, like constant capital, simply transferred its value to the end product.
“If it represents more, the commodity contains more accumulated labour than the capital advanced did. Then profit arises precisely out of the surplus of accumulated labour contained in the commodity over that contained in the capital advanced. And the value of the commodity is determined, as previously, by the quantity of labour (accumulated plus immediate) contained in it (in the commodity the latter type of labour likewise constitutes accumulated, and no longer immediate, labour. It is immediate labour in the production process, and accumulated labour in the product).” (p 76)
If, in the first case, the new value created by by the immediate labour was less than the value of wages (variable-capital) then the value of the final product would be less than the value of the advanced capital. No capitalist engages in production, intentionally, on that basis, but occasionally it may be the case, for example, where there is a dramatic fall in productivity, such as with a crop failure. But, even if the new value created by the immediate labour is merely equal to the value of wages, the question then arises, where did the profit come from? How could the value of the end product become of greater value than the value of the capital that produced it?
“Where does the profit come from in this case? Where does the surplus-value, i.e., the excess of the value of the commodity over the value of the component parts of production, or over that of the capital outlay, arise? Not in the production process itself—so that merely its realisation takes place in the process of exchange, or in the circulation process—but in the exchange process, in the circulation process. We thus come back to Malthus and the crude mercantilist conception of “profit upon expropriation”.” (p 76-7)
And, its to this conclusion that Torrens is repeatedly driven. But, Torrens is not as consistent as Malthus. Malthus has to explain the ability to sell commodities above their value by some fund that mysteriously drops from the sky, but Torrens insists that “effectual demand”, comes solely from supply, thereby restating Say's Law that supply creates its own demand. However, in that case, its again impossible to see how any overall profit can arise from the sellers of commodities each mutually cheating one another. He writes,
““The effectual demand for any commodity is always determined, and under any given rate of profit, is constantly commensurate with the quantity of the ingredients of capital, or of the things required in its production, which consumers may be able and willing to offer in exchange for it” (Torrens, An Essay on the Production of Wealth, London, 1821, p. 344).
“… increased supply is the one and only cause of increased effectual demand” (op. cit., p. 348).” (p 77)
Malthus, who quotes this passage, in his “Definitions”, is right to protest against it, Marx says, and Torrens is indeed led into absurd conclusions. Torrens writes,
““Market price” (Malthus calls it “purchasing value”) “must always include the customary rate of profit for the time being; [but] natural price, consisting of the cost of production or, in other words, of the capital expended in raising or fabricating commodities, cannot include the rate of profit” ([Torrens], op. cit., p. 51).
“The farmer […] expends one hundred quarters of corn in cultivating his fields, and obtains in return one hundred and twenty quarters. In this case, twenty quarters, being the excess of produce above expenditure, constitute the farmer’s profit; but it would be absurd to call this excess, or profit, a part of the expenditure”… Likewise “the master manufacturer […] obtains in return a quantity of finished work. This finished work must possess a higher exchangeable value than the materials etc.” (loc. cit., pp. 51-53).
“Effectual demand consists in the power and inclination, on the part of consumers to give for commodities, either by immediate or circuitous barter, some greater portion of all the ingredients of capital than their production costs” (op. cit., p. 349).” (p 77-8)
This is wrong on a number of different levels. First of all, Torrens puts his example here in terms of use values, whilst drawing conclusions about exchange values. But, even in terms of use value, Torrens is wrong. It is as though, in his example, the additional 20 quarters somehow came out of nowhere. As Marx says,
“... if one merely considers the use-value and the process it goes through, that is, in reality, the vegetative or physiological process, as is the case here—it would be wrong to say, not indeed, with regard to the 20 quarters, but with regard to the elements which go to make them up, that they do not enter into the production process. If this were so, they could never emerge from it. In addition to the 100 quarters of corn—the seeds—various chemical ingredients supplied by the manure, salts contained in the soil, water, air, light, are all involved in the process which transforms 100 quarters of corn into 120. The transformation and absorption of the elements, the ingredients, the conditions—the expenditure of nature, which transforms 100 quarters into 120—takes place in the production process itself and the elements of these 20 quarters enter into this process itself as physiological “expenditure”, the result of which is the transformation of 100 quarters into 120.” (p 78)
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