[b) Distortion of the Concept of Labour Through Its Extension to Processes of Nature. Confusion of Exchange-Value and Use-Value]
“After Mr. Mac has thus abandoned the basis of Ricardian political economy, he proceeds even further and destroys the basis of this basis.” (p 176)
The Ricardian system had two problems to resolve. The first was to reconcile the exchange of capital and labour with the law of value. That could only be achieved by recognising that what the worker sells to capital is not labour, but labour-power. The second problem was to reconcile the exchange of commodities according to the law of value with the existence of an average rate of profit. That can only be resolved by accepting that, under capitalism, commodities do not exchange at their exchange-values, but at prices of production. Only at the level of the total social capital is the total of exchange-values equal to the total of these prices of production.
“The difficulty arose because capitals of equal magnitude, but of unequal composition—it is immaterial whether the unequal composition is due to the capitals containing unequal proportions of constant and variable capital, or of fixed and circulating capital, or to the unequal period of circulation of the capitals—set in motion unequal quantities of immediate labour, and therefore unequal quantities of unpaid labour; consequently they cannot appropriate equal quantities of surplus-value or surplus product in the process of production. Hence they cannot yield equal profit if profit is nothing but the surplus-value calculated on the value of the whole capital advanced. If, however, the surplus-value were something different from (unpaid) labour, then labour could after all not be the “foundation and measure” of the value of commodities.” (p 177)
This also illustrates the fallacy of the Temporal Single System Interpretation, and the use of historic prices as the basis of calculating the Marxian rate of profit, or here, the annual rate of profit. Firstly, as Marx describes, elsewhere, money-capital can create no surplus value. It is only productive-capital that produces surplus value, i.e. the variable-component of that productive-capital. Secondly, money-capital is neither constant nor variable, and so has no organic composition. Nor is money-capital fixed or circulating, because as Marx describes at length in Capital II, the terms fixed and circulating capital can only be applied to productive-capital. Money-capital, like commodity-capital, is rather capital in circulation. The self-expansion of capital occurs only during the circuit of the productive-capital, being merely realised in the circulation phase. The rate of profit is, on Marx's basis, the proportional self-expansion of the productive-capital, thereby establishing the objective basis for the accumulation of capital, and so the expansion of productive-capital so as to produce additional quantities of surplus value.
Ricardo himself recognised these problems, but tried to explain them on the basis of exceptions to the law of value. That opened the door for Malthus to use these exceptions as a means of attacking the labour theory of value as a whole, by arguing that far from being exceptions they constituted the rule. Torrens also attacked Ricardo, pointing out that capitals of equal size set to work different quantities of labour, and yet produced output of the same value, so that the value of this output could not be determined by the quantity of labour. This same argument was put forward by Bailey, and it forms the basis of the critique made by neoclassical economists.
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