Marx then sets about demolishing this confused argument. Having mocked the idea that corn can be produced without seeds etc., Marx notes,
“This absurd presupposition contains nothing but the assumption that a product can be produced without constant capital, that is, simply by means of newly applied labour. In this case, what he set out to prove has of course been proved, namely, that profit and surplus-value are identical, and consequently that the rate of profit depends solely on the ratio of surplus labour to necessary labour. The difficulty arose precisely from the fact that the rate of surplus-value and the rate of profit are two different things because there exists a ratio of surplus-value to the constant part of capital—and this ratio we call the rate of profit. Thus if we assume constant capital to be zero, we solve the difficulty arising from the existence of constant capital by abstracting from the existence of this constant capital. Or we solve the difficulty by assuming that it does not exist.” (p 196)
Marx sets out the actual situation contained in Mill's example, in the way I have done above. In other words, in the production of the 180 kilos of grain there is 60 kilos of grain equivalent of constant capital, and added to it is 120 kilos of grain attributable to added labour, 60 kilos is paid back to workers as wages, and 60 kilos is appropriated as profits. But, if we examine the 60 kilos that represents the constant capital, it is actually comprised of 20 kilos constant capital, 20 kilos wages, and 20 kilos profit. Marx draws out the distinction between the value of labour-power, as represented by wages, and the value created by labour, by also examining the facts of the example in terms of the respective values, as determined by labour-time. So, for example, he says,
“It is assumed in this example that the labour which is added to the constant capital amounts to 120 quarters and that, since every quarter represents the wages of a working-day (or of a year’s labour, which is merely a working-day of 365 working-days), the 180 quarters contain only 60 working-days, 30 of which account for the wages of the workers and 30 constitute profit. We thus assume in fact that one working-day is embodied in 2 quarters and that consequently the 60 working-days of the 60 workmen are embodied in 120 quarters, 60 of which constitute their wages and 60 constitute the profit. In other words, the worker works one half of the working-day for himself, to make up his wages, and one half for the capitalist, thus producing the capitalist’s surplus-value. The rate of surplus-value is therefore 100 per cent and not 50 per cent.” (p 197)
As Marx says, if as Mill assumes, the constant capital was set to zero, then the only capital advanced would be the 60 kilos paid out as wages, with a value of 30 days labour, whilst the output attributable to that labour would be 120 kilos, equal to 60 days labour. The rate of surplus value here is 100%, and only because no constant capital is advanced does this equate also to a rate of profit of 100%. Put another way, the value of 2 kilos of corn is 1 working-day. That is the value that labour creates, i.e. 120 kilos = 60 working days. But, the workers are paid 1 kilo per day, so that, in that same 60 days, they are paid 60 kilos as wages, with a value of 30 days labour, and this is the value of their labour-power. Herein lies the importance of the distinction between labour and labour-power, and the basis therein of the source of surplus value.
If we examine the 60 kilos that represents the constant capital, these too must have a value equal to 30 days, i.e. 2 kilos = 1 day's labour. As previously described, this constant capital must itself (assuming the same organic composition of capital) be comprised of 20 kilos constant capital, 20 kilos wages, and 20 kilos profit. Put another way, this is equal to 10 days constant capital, and 20 days new value created by labour, divided into 10 days paid as wages, and 10 days profit. So, here again, the 10 days profit represents a 100% rate of surplus value, and a 50% rate of profit. If Mill is consistent, and sets the constant capital to zero, he would conclude that, either, the value of this output is equal to 20 days labour, or 40 kilos, or else that the 60 kilos is divided into 30 kilos for wages, and 30 kilos profit, again, thereby, providing a 100% rate of profit. But, he doesn't. He claims that the 60 kilos of constant capital is the product not of 30 workers, but of 40 workers. Again, here, the wages of the 30 workers, equal to 30 kilos, has a value of 15 days labour, i.e. 2 kilos = 1 day's labour.
“We have here, therefore, a doubly false manoeuvre on the part of Mr. Mill.” (p 199)
With the first 180 kilos of corn, Mill's problem was that surplus value and profit do not coincide. The rate of surplus value is 100%, but rate of profit only 50%, because Mill has to account for the value of the constant capital. Mill deals with this by simply assuming away the problem, and setting the value of constant capital to zero.
“With regard to the 60 quarters which constituted constant capital, Mr. Mill disposes of this difficulty by assuming that, in this case, the whole product is divided between capitalist and worker, i.e., that no constant capital is required to produce the constant capital, that is, the 60 quarters consisting of seed and tools. The circumstance which had to be explained in the case of capital I, is assumed to have disappeared in the case of capital II, and in this way the problem ceases to exist.” (p 199)
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