Theories of Surplus Value, Part III, Chapter 22 - Part 7

Indirectly, the question of fixed capital, relative to circulating capital, may, however, be significant, for the reasons Marx sets out elsewhere. In determining the average rate of profit, what is being measured and compared is the annual rate of profit, in each sphere. The annual rate of profit is calculated on the total capital advanced (fixed and circulating), for one turnover period. If the rate of turnover is the same in each sphere then those spheres that have a high proportion of fixed to circulating capital, will have a lower annual rate of profit. For example:-

Sphere 1

Fixed Capital	Materials	Wages	Surplus Value	Annual Rate of Profit %
10,000	1,000	1,000	1,000	8.33

Sphere 2

Fixed Capital	Materials	Wages	Surplus Value	Annual Rate of Profit %
1,000	1,000	1,000	1,000	33.3

However, because the rate of turnover is a function partly of productivity, and productivity is a function of fixed capital, the rate of turnover in Sphere 1 is likely to be higher. Suppose the capital in Sphere 1 turns over 10 times during the year, rather than once. Then:-

Fixed Capital	Materials	Wages	Surplus Value	Annual Rate of Profit %
10,000	1,000	1,000	10,000	83.3

Surplus value is £10,000, here, because the variable-capital of £1,000, advanced for a turnover period produces, £1,000 of surplus value, as before, but now there are ten such turnover periods in the year, thereby producing £10,000 of surplus value in the year.

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