[b) Apparent Variation in the Rate of Profit Where the Production of Constant Capital Is Combined with Its Working Up by a single Capitalist]
Having analysed Mill's example from the perspective of two different capitals – one which uses constant capital, and enjoys higher labour productivity, and one which does not, and suffers lower labour productivity – Marx now analyses Mill's example from the standpoint that Mill had intended, whereby one single capital is vertically integrated, so that it produces its own means of production, as well as its final output.
“This will at the same time clarify the real meaning of his talk about the profits advanced by the capitalist.
Despite any kind of “discovery” and any possible “conjunction”, the example cannot be left in the form in which Mill puts it forward, because it contains absolute contradictions and absurdities and the various presuppositions he makes cancel one another out.” (p 213)
The total final output consists of 180 kilos of corn. The composition of this is a third each for constant capital, wages and profit. That means the rate of surplus value is 100%. Of the 60 kilos of corn equivalent that comprises the constant capital (seeds, tools etc.), Mill removes the requirement for any constant capital in its own production, and and has it produced solely by labour, the value of it resolving, thereby, solely into wages and profit.
However, instead of applying the 100% rate of surplus value to this division, so that it divides into 30 kilos for wages, and 30 kilos for profit, Mill uses, as the basis for the division, not the rate of surplus value, but the rate of profit. The rate of profit on the final output was 50%, because in addition to the 60 kilos of capital as wages, a further 60 kilos was advanced as constant capital. If we make the assumption here that the commodities sell at exchange-values rather than prices of production, then Mill makes the error of assuming that the profit is derived as some kind of profit upon alienation, that the capitalist obtains this 50% rate of profit, irrespective of the surplus value produced. It assumes thereby that the surplus-value/profit is somehow produced as much by the constant capital as by the variable-capital. Mill's use of the 50% rate of profit, in the case of the production of the constant capital is invalid precisely because he assumes that no constant capital is used in its production, and so no element of constant capital enters into the value of this output, or has to be reproduced out of it.
If he applied the 100% rate of surplus value to this production, he would conclude that its value divides 30 kilos for wages and 30 kilos for profit. That is the equivalent of 30 workers employed for a day, paid 1 kilo of corn as wages, and producing 1 kilo each as profit. It is the equivalent of 30 days labour. But, Mill instead argues, on the basis of a 50% rate of profit, that, to produce the 60 kilos of constant capital, requires 40 workers working for a day, each paid a kilo of corn as wages, and producing half a kilo as profit. It is the equivalent, therefore, of 40 day's labour, which means that, on this basis, the productivity of this labour is lower. On the basis of Mill's assumption of a single vertically integrated producer, therefore, we would have 40 days labour to produce constant capital (60 kilos) and 60 days labour processing this constant capital into the final output of 180 kilos.
The 180 kilos of final output is then the equivalent of 100 days labour. In terms of the capital advanced, 40 kilos are advanced to the 40 workers producing constant capital, and 60 kilos to the 60 workers that process the constant capital. So, 100 kilos are advanced as capital, leaving 80 kilos surplus, which gives a rate of profit of 80%, as opposed to the initial 50%. As Marx illustrates, the conclusions that flow from Mill's assumptions, here, are absurd and contradictory. The assumption, in terms of value theory, is that the labour being used, as a metric of value, is abstract labour. The adoption of an assumption of a 100% rate of surplus value, in the one case, and only a 50% rate of surplus value in the other is, thereby, invalid. Competition would tend to cause an equalisation of the rate of surplus value.
“Thus one must assume, firstly, that in the 180 quarters only 90 working-days are embodied and in the 60 quarters, that is, the value of the constant capital, only 30 working-days.” (p 213)
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