Theories of Surplus Value, Part III, Chapter 22 - Part 9

Illustrating that Ramsay had arrived at the correct conclusion about the average rate of profit, as set out above, in relation to the total capital advanced, and not just that laid-out, and consumed in production, Marx quotes Ramsay's comment, 

““… value must be in proportion not merely to the capital truly consumed, but to that also which continues unaltered, in a word, to the total capital employed” (op. cit., p. 74).” (p 334) 

As Marx notes, what Ramsay should refer to, here, is price of production, rather than value, so that the profit added to the cost of production is proportional to the total advanced capital, not to the cost of production, or laid out capital. This latter relation, p/k, is the profit margin, or rate of profit that Marx refers to in his Law of The Tendency For The Rate of Profit To Fall. 

Marx summarises Ramsay's conclusions from his analysis of what he calls fixed and circulating capital, i.e. constant and variable capital. They are similar to those drawn by Marx, in his own analysis. As society develops, the proportion of constant capital rises relative to variable-capital. That is because rising social productivity by definition means that a given mass of labour processes an increasing mass of raw material. So, the demand for labour declines relatively, even as it rises absolutely. 

“In manufacture, the “evils” which the development of the productive forces generate for the workers are temporary, but reappear constantly. In agriculture, they are continuous, especially in connection with the conversion of arable land into pasture. The general result is: with the advance of society, i.e., with the development of capital, here with that of national wealth, the condition of the workers is affected less and less by this development, in other words, it worsens relatively in the same ratio as the general wealth increases, i.e., as capital is accumulated, or, what amounts to the same thing, as the scale of reproduction increases.” (p 335) 

As Marx says, the contrast with Adam Smith, here, is apparent. Smith believed that, as capital accumulated, the demand for labour would rise faster than its supply. The natural price of labour would then rise, and the natural price of capital fall. This is the basis of Smith's law of the tendency for the rate of profit to fall. 

“In his time, the demand for labour did in fact grow at least in the same proportion in which capital was accumulated, because manufacture still predominated at that time and large-scale industry was only in its infancy.” (p 335) 

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