Marx expands on his analysis of Mill's example to illustrate its fallacy. The end capitalist, in Mill's example, initially uses 60 kilos of constant capital. As Marx says, logically, on the basis of the example, this 60 kilos of constant capital should have been produced by a capital proportionally comprised of 20 kilos c, 20 kilos v and 20 kilos s. Mill, instead divides it into 40 kilos v and 20 kilos s, consistent with his assumption of a 50% rate of profit, as opposed to his assumption of a 100% rate of surplus value. Marx says, let's take this one step further, and assume that these workers work for free, so that the whole value of this constant capital resolves into the profit of the capitalist.
“Let us therefore assume that the 60 quarters contain only the profit of capitalist II, the producer of constant capital for capitalist I, since capitalist II has the product of 30 working-days to sell without having paid a single farthing to the 30 workers, each of whom worked one day. Would it then be correct to say that these 60 quarters, which can be entirely resolved into profit, enter into the production cost of wages on the part of capitalist I, in “conjunction” with the labour-time worked by these workers?” (p 209)
Capitalist I, here, produces 180 kilos of corn, and the 60 kilos of constant capital (seeds, tools etc.) are essential means of production, required for the production of the 180 kilos. Out of this 180 kilos, 60 kilos must be set aside to replace, in kind, the constant capital, i.e. to pay to Capitalist II. The other 120 kilos is then new production, attributable to the labour employed by Capitalist I. To produce this 120 kilos, 60 days of new labour had to be expended on its production, and the workers who expended this labour required 60 kilos of corn to reproduce their labour-power.
“If they had been able to produce the 120 quarters without the 60, then their product, the product of the 60 working-days, would have been the same, but the total product would have been smaller, precisely because the 60 pre-existing quarters would not have been reproduced. The capitalist’s rate of profit would have been greater because his production costs would not have included the expenditure on, or the cost of, the means of production which enable him to make a surplus-value of 60 quarters. The absolute amount of profit would have been the same—60 quarters. These 60 quarters, however, would have required an outlay of only 60 quarters. Now they require an outlay of 120. This outlay on constant capital therefore enters into the production costs of the capitalist, but not into the production costs of wages.” (p 209)
If 120 kilos are produced as a result of only 60 days immediate labour, the value per kilo is ½ day. If 180 kilos are produced, by using 30 days congealed labour (constant capital) plus 60 days immediate labour, the value per kilo is still ½ day. In both cases, the worker requires 1 kilo per day, with a value of ½ day. But, for the capitalist, the cost of producing 60 kilos (30 days profit), in the first case, is only 60 kilos (30 days), whereas, in the second case, it is 120 kilos (60 days).
Marx then introduces a third firm, Capital III, as a producer of these 60 kilos of constant capital. As a result of some new technique, or other advantage, it is able to produce these 60 kilos with just 15 days labour, rather than the 30 days required by Capital II. As a result, Capital III is able to displace Capital II, as a provider of constant capital to Capital I. Capital I is thereby enabled to produce the 180 kilos using only 15 kilos for constant capital, and 30 kilos for wages, so that its cost of production falls from 60 kilos to 45 kilos. The workers employed by Capital I still require 60 days to transform the 60 kilos (15 days) into 180 kilos. They still require 60 kilos (30 days) as wages, producing a surplus product/value of 60 kilos (30 days).
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