Marx also distinguishes between surplus value and profit, but also between capital as a social relation and capital as commonly misconceived as the commodities that comprise it. Surplus value is produced by labour, and in capitalist production is a function of the variable-capital. But profit is itself a function of capital, irrespective of whether it is constant or variable, fixed or circulating, or indeed capital in production or capital in circulation. A merchant capital produces no surplus value, but they will not advance their capital unless they obtain the average rate of profit for doing so.
Mill is wrong then when he says,
““Capital, strictly speaking, has no productive power. The only productive power is that of labour; assisted, no doubt, by tools, and acting upon raw materials” (op. cit., p. 90).” (p 236)
Its true that the constant capital, whether in the shape of buildings, machines or materials produces no surplus value, but, as capital, they certainly do produce profit for their owner, who expects to obtain the average profit for having advanced them. Moreover, as Marx has set out elsewhere, in Capital I, all exploiting classes' function in history is to be productive of surplus value, and of surplus product, in the sense that they act as a whip on the back of the producers to overproduce, to produce beyond what is necessary merely for the reproduction of their labour-power. The historic mission of all ruling classes is to turn what is merely a potential surplus product/value into an actual surplus product/value by pumping the surplus labour from the producers, and thereby making possible the accumulation of social wealth, and the development of the productive forces.
Mill's comment is useful, however, in opposition to those bourgeois economists who argue that capital itself has the power to produce new value.
“Of course, here too the matter is only stated correctly insofar as the production of value is considered. After all, nature also produces insofar as it is only a question of use-values.
“…productive power of capital […] can only mean the quantity of real productive power which the capitalist, by means of his capital, can command” (loc. cit., p. 91).
Here capital is conceived correctly as a production relation.” (p 236)
Mill attempted to reconcile the irreconcilable by trying to prove the Ricardian law that the rate of profit falls because of a rise in wages, itself driven by rising food prices, as less fertile land is brought into cultivation, to feed an expanding workforce. On the one hand, Mill has to accept that the rate of profit is calculated on the total capital, not just wages, but, throughout, he continues to equate the rate of profit with the rate of surplus value, and thereby to equate profit and surplus value.
[8. Conclusion]
“This whole account of the Ricardian school shows that it declines at two points.
1) Exchange between capital and labour corresponding to the law of value.
2) Elaboration of the general rate of profit. Identification of surplus-value and profit. Failure to understand the relation between values and cost-prices.” (p 237)
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