By relapsing into this Mercantilist explanation of profit as profit on alienation, Mill, in attempting to defend Ricardo, without dealing with the contradictions in Ricardo's theory, is thereby led to abandon Ricardo's actual theory. Mill is led to abandon Ricardo's teaching that the value of commodities is determined by the quantity of labour required for their production, and that profit is only a part of the value of the commodity. It is a part of the value created by labour, which the capitalist appropriates, in selling the commodity, but for which the capitalist has not paid in the wages of the worker.
“Mill makes the capitalist pay the worker for the whole of his working-day and still derive a profit.” (p 201)
Marx illustrates the fallacies of Mill's argument by examining it in terms of two different firms. One firm produces corn using constant capital, in the form of seeds, and tools etc., as well as labour. The second represents Mill's assumption that, as a result of some invention, production can take place without constant capital, and using only labour. What Mill should have said is that the capital that produces without constant capital sees its output fall to 120 kilos, equal to the new value created by labour. It divides into 60 kilos (30 days) paid as wages, and 60 kilos (30 days) profit. So, the value per kilo is 0.5 days, and likewise, wages per worker are equal to 0.5 days. So, here, the value per kilo is unchanged from where, constant capital is used, i.e. c 60 + v 60 + s 60 = 180 kilos = 30 days + 30 days + 30 days = 90 days = 2 kilos per day = 1 kilo per 0.5 days.
What changes is that, whilst output falls, the rate of profit rises from 50% to 100%, because constant capital, which contributes nothing to surplus value has been set to zero. In other words, if there is no constant capital, Mill should see that what determines the surplus value is then the rate of surplus value, which is 100%. But, Mill does not argue this way. He insists that output remains at 180 kilos. However, on the basis of his previous argument that the rate of profit is 50%, he says that this additional 60 kilos of output is the product of 40 workers, or 40 days labour, whereas the other 120 kilos was the product of only 60 days labour. The value of the latter 120 kilos is then ½ day per kilo, whereas the value of the 60 kilos is ⅔ day per kilo. He thereby arrives at two different values, simultaneously for corn.
But, as shown earlier this is wrong. Either Mill must argue that this 60 kilos, equivalent to the constant capital, comprises 20 kilos c + 20 kilos v + 20 kilos s, so that its value is 10 days c + 10 days v + 10 days s = 30 days, again giving a value of ½ day per kilo, or he must again resolve the value of these 60 kilos only into labour, which, with a 100% rate of surplus value, means 30 kilos (15 days) v + 30 kilos (15 days) s, so that again the value is 30 days, giving a value again of ½ day per kilo.
However, proceeding on the basis of Mill's arguments and assumptions, that the previously consumed constant capital can be substituted by labour, Mill assumes that the 180 kilos can be produced by 100 workers = 100 days of labour. That means that the value per kilo rises from ½ day to 100/180 = 0.56 days. So, the consequence of Mill's invention, that removes the need for constant capital, is to cause the value of corn to rise! The consequence of this rise in the value of corn is that, because the workers must consume the same quantity of corn, i.e. they must consume the same quantity of use value, to reproduce their labour-power, i.e. 1 kilo per day, the value of labour-power rises. The 1 kilo per day that the 100 workers consume = 100 kilos, now represents a higher proportion of current production than was previously the case. Previously, 60 workers were paid 60 kilos of corn as wages, and added 120 kilos of new production, giving a rate of surplus value of 100%. Now 100 workers are paid 100 kilos of corn, as wages, but create only 180 kilos of new production, so that the surplus product is only 80 kilos, giving a rate of surplus value of only 80%. The rate of profit is also 80%, because there is no constant capital.
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