Marx then sets out where McCulloch's argument, in the “Notes”, differ from his argument in the “Principles”, and the problems that it encounters along with McCulloch's proposed solutions to these problems.
“In the Principles he makes a distinction between “real value” and “relative value” and says that both are equal “under ordinary circumstances” but “in point of fact” they cannot be equal if there is to be a profit. He therefore says merely that the “fact” contradicts the “principle”.” (p 175)
The reason for the divergence, as stated earlier, is explained on the basis of the relation between supply and demand for labour.
“In the “notes” he distinguishes three sorts of value: “real value”, the “relative value” of a commodity in its exchange with other commodities, and the relative value of a commodity exchanged with labour.” (p 175)
The relative value of a commodity here is its exchange value. It is the rate at which it will exchange for other commodities. It is what Marx describes in his value form analysis, as the relative form of value. In other words, the real value of the commodity is not expressed in its immediate form, as a quantity of labour-time, but is expressed in its indirect form as a quantity of some other use value. But, McCulloch also describes the relative value of a commodity as exchanged with labour. As described earlier, for McCulloch, this cannot be an exchange of equivalents, because, if it was, then no profit is possible, and the capitalist only has a motive to make such an exchange on the basis of obtaining a profit.
“Problem: The Ricardian definition of value conflicts with the exchange of commodities with labour.” (p 175)
McCulloch's solution is to declare that in this particular exchange, the law of value does not exist, because, if it did, profit would not be possible. Reality conflicts with the principle.
“Solution: The law of value (in this case) is profit. “In point of fact” Mac only reiterates what the opponents of the Ricardian theory say, namely, that there would be no profit if the law of value applied to exchange between capital and labour. Consequently, they say, the Ricardian theory of value is invalid. He [McCulloch] says that in this case, which he must explain by the Ricardian law, the law does not exist and that in this case “value” “means” something else.” (p 175)
But, McCulloch could have explained profit on the basis of the Ricardian Law, if he understood it properly. Ricardo can explain that commodity A, with a value of 10 hours, exchanges for commodity B, with a value of 10 hours. He can also explain that both commodities contain a quantity of surplus value, which is realised as profit, in the process of sale. If A comprises 8 hours of value that the capitalist has paid for, as materials and other means of production, along with wages, it also, thereby, contains 2 hours of surplus value, comprising the surplus labour performed by the worker. Commodity B may also contain 8 hours of value, paid for by the capitalist, and 2 hours of surplus labour. But, it might likewise have a value of 10 hours made up of only 7 hours of paid labour, and 3 hours of surplus labour.
Ricardo has no problem, on the basis of his theory of value, of explaining that the commodities exchange at their values, and yet produce realised profits, because they themselves already contain surplus value that is merely realised in the act of exchange. Ricardo's problem resides in the fact that, unlike Smith, he does not enquire into the source of the surplus value, and so cannot provide any objective basis for it being £2 rather than £20 etc. His further problem is then that if these commodities do exchange at their exchange value, the rates of profit are not equal. For example, £2 profit on £8 of capital is 25%, but £3 on £7 of capital is 42.86%.
“From this it is obvious how little he understands of the Ricardian law. Otherwise he would have had to say that profit arising in exchange between commodities which are exchanged in proportion to the labour-time [embodied in them], is due to the fact that “unpaid” labour is contained in the commodities. In other words, the unequal exchange between capital and labour explains the exchange of commodities at their value and the profit which is realised in the course of this exchange. Instead of this he says: Commodities which contain the same amount of labour-time command the same amount of surplus labour, which is not contained in them.” (p 186)
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