Theories of Surplus Value, Part III, Chapter 20 - Part 134

What Mill has succeeded in doing here, then, is the opposite of what he intended. He intended to show that a rise or fall in the rate of profit is a consequence of a fall or rise in wages. But, here, wages have risen, as a consequence of the rise in the value of labour-power, resulting from the higher value of corn, whilst the rate of profit has risen from 50% to 80%. The reason the rate of profit has risen is that, whilst the fall in productivity causes the rate of surplus-value to fall from 100% to 80%, the same fall in productivity means that proportionately more labour is employed, in total. 

On the basis of the previous level of productivity, where 60 workers produce 120 kilos, only 90 workers are required to produce 180 kilos. Now, as a result of the fall in productivity, 100 workers are required. Although each of these workers produce less surplus value, in total, they produce a greater mass of surplus value than the 60 workers produced. The 60 workers produced 60 kilos of surplus product, whereas the 100 workers produce 80 kilos of surplus product. Moreover, the surplus product of the 60 workers has a value of 30 days (60 x 0.5), whereas the surplus product of the 100 workers has a value of 56 days (100 x 0.56). 

This illustrates one of the main points of Marx's argument, which is that the rate of profit is a function, not of the rate of surplus value, but of the mass of surplus value. The mass of surplus value is itself a function not just of the rate of surplus value, but also of the mass of labour employed. The mass of surplus value rises, here, because the mass of labour employed rises by a greater proportion than the fall in the rate of surplus value. 

Secondly, unlike the rate of surplus value, which is a relation of the surplus value only to the variable-capital, the rate of profit is a relation of the mass of surplus value to the total capital, both variable-capital and constant capital. The rate of profit, here, rises because the mass of surplus value rises from 60 kilos to 80 kilos, whilst the total capital advanced falls from 120 kilos (60 c = 60 v) to 100 kilos. The capitalist described by Mill, who produces without constant capital, requires 100 days labour to produce 180 kilos of corn. By contrast, the capitalist who uses constant capital, requires only 90 days of labour – 30 days in the value of their constant capital (60 kilos), and 60 days of new labour, (30 days [60 kilos] wages, 30 days [60 kilos] profit). If this capitalist were to utilise 100 days of labour, therefore, they would use an additional 10 days of labour divided 3⅓ for constant capital, and 6⅔ new labour (divided 3⅓ for wages, and 3⅓ for profit). 

Marx sets this out in a table.

	Constant Capital	Wages	Total Product	Surplus Value	Rate of Surplus Value	Rate of Profit
Product (Kilos)	66 ⅔	66⅔ kilos	200	66⅔	100 %	50%
Value (Days Labour)	33 ⅓	(Wages for 66⅔ days) = 33⅓	100	33⅓	100%	50%

This capitalist then continues to have a rate of profit of 50%, whilst their rate of surplus value remains 100%. The mass of profit for the capitalist is also still less, because they still employ less value creating living labour. However, this capitalist produces 200 kilos of corn with 100 days of labour, i.e. with a value of ½ day per kilo, whereas the other capitalist only produces 180 kilos of corn with 100 days of labour, so that the value per kilo is 0.56 days labour. 

“... and the first capitalist would drive the second out of business. The latter would have to give up his discovery and accommodate himself to using seed and fixed capital in corn production, as before.” (p 205) 

This result is, of course, a consequence of Mill's false assumptions and failure to apply his argument consistently. Had he, as Marx says, argued that setting constant capital to zero meant assigning the value of new production equally between wages and profit, i.e. 90 kilos wages, and 90 kilos profit, so that the additional 60 kilos was the product of 30 workers, rather than 40 workers, the value per kilo would would have been unchanged, so that the rate of surplus value would have remained unchanged. But, that would have undermined the other point of Mill's argument. 

“But Mill wanted on the contrary to prove that the rise in the rate of profit was due to a reduction in the production cost of wages according to the Ricardian law. We have seen that this rise took place despite the increase in the production cost of wages, that, consequently, the Ricardian law is false if profit and surplus-value are directly identified with one another, and the rate of profit is understood as the ratio of surplus-value or gross profit (which is equal to the surplus-value) to the total value of the capital advanced.” (p 207)

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