Variable-Capital
Wages, like profits, interest and rent is revenue. But, wages represent the value of labour-power, the current cost of reproducing labour-power. If reproduction is to continue on the same scale, then assuming no change in the technical composition of capital, in the same way that the physical components of the constant capital must be reproduced “on a like for like basis”, so too must the labour-power required to process that constant capital be likewise reproduced. To process 100 kilos of cotton still requires 100 units of labour. For the capitalist who employs this labour, the variable-capital appears to them as capital they must advance, in the same way as the capital they advance for constant capital, even though, in reality, this variable-capital is only a return to the worker of a part of the new value they have already created by their labour.
The true nature of variable-capital, as Marx describes in Capital II, is not the money wages that are paid to the worker, but is the wage goods, i.e. the commodities required for the reproduction of the worker. The value of labour-power is determined by the value of these wage goods, the consumption of which brings about the reproduction of the worker, and, thereby of their labour-power. If the value of these wage goods falls, therefore, the value of labour-power falls, and so the variable-capital that the capitalist must advance for any quantity of labour also falls. In other words, if the value of wage goods falls in half, as a result of a rise in social productivity, instead of having to advance £100 of variable-capital to employ 100 units of labour, the capitalist only has to advance £50. As a result, once more £50 of capital is released. It again appears as though it is additional profit, although in reality it is only £50 of capital that has been converted into revenue.
But, this reduction in the value of variable-capital has another effect, as well as this release of capital. The 100 units of employed labour continues to produce £200 of new value. But, now, with only £50 of this new value required to reproduce labour-power, the actual mass of surplus value rises from £100 to £150. In other words, the rate of surplus value itself rises from 100% to 150%. The release of capital, whether it is a release of constant or variable-capital is a one-off event. It creates the illusion of additional profit. But, this reduction in the value of labour-power, and of the variable-capital, is a permanent effect on the mass of surplus value/profit. It also has two effects. Firstly, by raising the rate of surplus value, it brings about a corresponding rise in the rate of profit. In other words, even if the capital advanced remained £200, the surplus value has now risen to £150, so that the rate of profit would rise to 150/200 = 75%. But, the capital advanced itself is also reduced as a result of the reduction in the variable-capital. So, the actual rate of profit is now 150/150 = 100%.
As with the release of capital, in the other instances, the £50 of released variable-capital, can be either consumed unproductively, or it can be accumulated. If it is accumulated, it will now buy 33.33 additional kilos of cotton, and 33.33 additional units of labour. But, this additional 33.33 units of labour now produce, not £33.33 of surplus value, as previously, but £50 of additional surplus value, because the rate of surplus value has risen from 100% to 150%.
There can be a release of variable-capital by another means. The value of labour-power/wages may remain constant, but a rise in productivity may mean that less labour itself is required to process a given mass of material. The variable-capital laid out comprises the wage per worker x the number of workers employed. So, if wages remain constant, but fewer workers are employed, then the amount of variable-capital laid out falls. The main reason that this would happen is that some new labour-saving machine is introduced. Capital must now be advanced for the machine, but firms will only introduce such machines where their cost is less than the paid labour/wages they save from their introduction.
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