As Marx points out, if labour only resulted in reproducing the constant capital and variable capital, i.e. the consumed materials, worn out machinery etc., and the wage goods required for the reproduction of the workers, then no surplus value would have been created, which means no profit and no capital.
“But that nature has nothing whatever to do with it and that the race of labourers perpetuates itself despite this surplus and that the surplus assumes the form of profit and on this basis, the race of capitalists perpetuates itself has been admitted by Ramsay himself since he declares that “circulating capital”, by which he means wages, wage-labour, is not an essential condition of production, but is due merely to the “deplorable poverty of the mass of the people”. He does not draw the conclusion that it is capitalist production which “perpetuates” this “deplorable poverty”, although he admits it when he says that it “perpetuates the race of labourers” and leaves them only as much as is necessary for that perpetuation.” (p 331-2)
As Marx has already noted, all surplus value ultimately depends on relative surplus value, i.e. social productivity must be high enough that, in Man's relation with Nature, he is able to produce more use values in a day than is required for his own reproduction. The more social productivity rises, the greater the potential for such relative surplus value. Ramsay, unlike Ricardo, however, also recognises the possibility of absolute surplus value, resulting from a lengthening of the working-day.
Marx sets out briefly Ramsay's understanding of the average rate of profit, and the formation of prices of production.
“The rise in prices in some branches of industry resulting from increases in wages “… by no means exempted the master-capitalists from suffering in their profits, nor even at all diminished their total loss, but only served to distribute it more equally among the different orders composing that body” (op. cit., p. 163).
And if the capitalist whose wine is the product of 100 men (Ramsay’s example) sells it for the same price as a capitalist whose commodity is the product of 150 men, in order that “… the employment [of capital] in question should not be less lucrative than others” [p. 43], then it is clear that thereby the surplus-value embodied in the wine and in the other commodity is not increased, but only distributed equally between different orders of capitalists.” (p 332)
In fact, as Marx sets out in his further elaboration of the transformation of exchange-values into prices of production, things are not entirely that simple, because the output of one sphere of production is simultaneously the input of some other sphere, so that in transforming the exchange-value of the former into a price of production, that simultaneously affects the cost of production of the latter. As Marx then shows, if say the organic composition of capital in those spheres which produce wage goods is higher than average, or the rate of turnover of capital in these spheres is lower than average, the price of production of wage goods will be higher than their exchange-value, so wages will rise, and surplus value will fall, as described earlier.
“We have seen how a deviation in prices of production from values arises from: 1) adding the average profit instead of the surplus-value contained in a commodity to its cost-price; 2) the price of production, which so deviates from the value of a commodity, entering into the cost-price of other commodities as one of its elements, so that the cost-price of a commodity may already contain a deviation from value in those means of production consumed by it, quite aside from a deviation of its own which may arise through a difference between the average profit and the surplus-value.
It is therefore possible that even the cost-price of commodities produced by capitals of average composition may differ from the sum of the values of the elements which make up this component of their price of production. Suppose, the average composition is 80 c + 20 v. Now, it is possible that in the actual capitals of this composition 80 c may be greater or smaller than the value of c, i.e., the constant capital, because this c may be made up of commodities whose price of production differs from their value. In the same way, 20 v might diverge from its value if the consumption of the wage includes commodities whose price of production diverges from their value; in which case the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value.”
(Capital III, Chapter 12)
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