Bailey, on the one hand, defines a rise in the value of labour as a rise in the portion of the total product that goes to workers.
“Now it is an increase in the portion of the product assigned to the labourer which constitutes a rise in the value of his labour…”” (p 153)
he argues this on the basis that the value of labour is measured in terms of use values exchanged with it.
““… but it is an increase in the proportion assigned to the capitalist which constitutes a rise in […] profits,”” (p 153)
Here, he determines value not in terms of use values, but in terms of the quantity of labour they represent. And, by using two completely different definitions, and measurements of value, Bailey, thereby, concludes that there is no contradiction in his claim that the value of both labour and profits can rise simultaneously.
“This absurd argument against Ricardo is quite futile since he merely declares that the value of the two portions must rise and fall in inverse proportion to one another. It merely amounts to a repetition by Bailey of his proposition that value is the quantity of articles exchanged for an article. In dealing with profit he was bound to find himself in an embarrassing position. For here, the value of capital is compared with the value of the product. Here he seeks refuge in taking value to mean the value of an article estimated in labour (in the Malthusian manner.)” (p 153-4)
On Bailey's definition of value, not only is value simply exchange-value, and exchange-value only market price/historic price, but, on this basis, there are only ever historic prices. He writes,
““Value is a relation between contemporary commodities, because such only admit of being exchanged for each other; and if we compare the value of a commodity at one time with its value at another, it is only a comparison of the relation in which it stood at these different times to some other commodity” (op. cit., p. 72).” (p 154)
This is the same temporal definition of value, as used by the Temporal Single System Interpretation, as against the definition of value, used by Marx, of the current reproduction cost, determined by the average socially necessary labour-time currently required for reproduction, which varies according to changes in social productivity. But, on this temporal basis, as Marx says, value can never rise or fall, because, in order to determine such movement, it is necessary to compare its value at one time compared to another. Indeed, unless that is done, it's impossible to determine whether capital has self-expanded, or not, and by how much. This is something that Marx explores further in the next few chapters in looking at the confusion suffered by Ramsay, as a result of his use of historic prices. It means that changes in the value of the commodities that comprise the constant capital, can appear to create additional profit, thereby undermining the labour theory of value. In fact, all such changes amount to are capital gains rather than profits, or else a release of capital as revenue.
It is something that confuses speculators, who also confuse capital gain with profit. If the price of cotton is €10 for 100 kilos, and €10 of labour-power turns it into 100 kilos of yarn, with a value of €30, €10 of surplus value is produced. The capital has self-expanded by €10. However, if the value of cotton rises to €20, which is passed on into the price of the yarn, which now sells at €40, it may appear that, in relation to the historic cost of the capital, a profit of €20 is produced, i.e. the historic cost of the capital was €10 for cotton and €10 for labour-power, and the yarn now sells for €40, giving a €20 profit. In that case, the capital would have self expanded by €20, even though, it has only actually self-expanded by €10, the amount of surplus value produced. The additional €10, is not profit, but is only a capital gain, resulting from the change in the price of the cotton, held in stock, from €10 to €20.
As Marx demonstrates, in fact, on the basis that capitalist production is continuous and ongoing, this additional profit is a mirage, because, although, the yarn is sold for €40, in order to reproduce the consumed capital on a like for like basis, now, €20 out of this €40 must be paid to replace the 100 kilos of cotton, with the same €10 going to reproduce the consumed labour-power, so that the actual profit, remains only €10 of surplus value, the amount by which the capital has actually self-expanded. On the basis of a temporal definition of prices, and use of historic prices, we would have to conclude, as indeed Ramsay does, that labour is not the only source for the self-expansion of capital, and so the labour theory of value is thereby destroyed.
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