“Variable capital regarded as means of subsistence is, therefore, just as “passive” an element as both the other parts of capital which Cherbuliez describes as “passive”. (p 371)
In other words, Cherbuliez describes fixed and circulating constant capital as passive. They create no new value. And, that is true of the means of subsistence. It is not the means of subsistence that creates new value, or surplus value, but only the labour bought with them.
“The same distortion of views prevents him from elaborating the rate of profit out of the relationship of this active element to the passive element, and from showing that it declines as society advances. Cherbuliez in fact reaches no other conclusion but that the means of subsistence decline as a consequence of the development of productivity while the working population grows, that is, as a result of the redundant population, wages are consequently pushed down below their value.” (371)
Cherbuliez nowhere bases his analysis on the exchange of equal values, and so he arrives at an explanation of profit as essentially a deduction from wages, though he nowhere spells that out. As Marx says, it may be the case that, in practice, in some instances, wages may fall below the value of labour-power, and individual capitalists may obtain profits from a deduction from wages, just as, sometimes, rents are a deduction from normal profits, or wages, rather than from surplus profits,
“but it can never serve as the foundation for the elaboration of the category of profit.” (p 371)
Marx reformulates Cherbuliez' propositions, so as to analyse his argument.
““The value of the total amount of products, less the value of the total amount of capital used up in its production, provides us with the total amount of profit gained during a definite period of time.”
This is the primary (usual) form in which profit appears and it is likewise the form in which it appears in the consciousness of capitalists. In other words, [profit is] the excess of the value of the product gained during a definite period of time over the value of the capital expended. Or the excess of the value of the product over the cost-price of the product.” (p 371-2)
The concept of “definite period of time”, here, is important for the reason, set out earlier, of distinguishing the rate of profit from the annual rate of profit. But, Cherbuliez does not deal with the circulation process of capital, so that the rate of turnover does not arise in his theory. So, his first proposition is merely the normal definition of profit, and hence rate of profit as profit margin. Yet, Cherbuliez does recognise that there is a difference between the capital advanced and the capital laid-out, or “used up”.
“The second proposition:
“The growth in the total amount of products is proportionate to the capital employed and not to the capital used up.”
Paraphrased again, it would read thus:
“the growth in the value of the total amount of products is proportionate to the capital advanced” (whether used up or not).” (p 372)
As Marx points out, even when reformulated, this statement that the total value of products is proportionate to the capital advanced, is only correct if its first assumed that the average rate of profit exists, and that commodities sell at prices of production, rather than exchange values. If commodities sell at exchange values, then the total value of products is proportionate to the variable-capital not the total capital, because it is the size of the variable-capital that determines the mass of surplus value produced, and embodied in the value of the commodity.
“The only purpose of this is the surreptitious introduction of the completely unproven and, in the way it is formulated, quite false proposition (for it already presupposes equalisation to the general rate of profit) that the amount of profit depends on the amount of capital employed. But an apparent causal nexus is to be introduced because “the growth in the total amount of products is proportionate to the capital employed and not to the capital used up”.” (p 372)
In other words, Cherbuliez appears to recognise that the price of commodities comprise the cost of production plus the average profit, and that this average profit is calculated on the basis of the advanced rather than laid-out capital, i.e. it is the annual rate of profit, not the rate of profit/profit margin that is determinant. However, he nowhere sets out an explanation for the formation of an average rate of profit, so as to justify this conclusion. Marx reformulates Cherbuliez' statement as follows:
““The growth in the value of the total amount of products is proportionate to the capital employed and not to the capital used up.”” (p 372)
The term “employed” here means advanced. In other words, a machine with a value of £1,000 represents capital employed, but only the wear and tear of the machine, say £100, is capital that is used up. The £100 enters the value of the output, as part of its cost of production, but the £1,000 does not. However, in terms of calculating the average profit to be included in the price of production of the output, it is the £1,000 that is its basis, not the £100. Marx illustrates the importance of this later, in relation to the effect on the rate of profit itself, as fixed capital becomes devalued, as a result of such wear and tear, in addition to the separate issue of depreciation.
But, Cherbuliez is confused about how this distinction between the advanced capital, and the used up capital results in a higher value of the output.
“Here, evidently, surplus-value is to be evolved on the basis of the fact that the excess of the capital employed over that used up creates the excess value of the products. But the capital which is not used up (machinery, etc.) retains its value (for the fact that it is not used up means precisely that its value has not been used up); it retains the same value after the conclusion of the production process as it had before this process started. If any change in value has taken place, it can only have happened in that part of the capital which has been used up, and which therefore entered into the process of the formation of value.” (p 372)
In other words, the greater value of the advanced capital cannot explain a greater value of output, because it is only the value of the used up capital that is transferred to the value of output. The greater value of advanced capital does not change the value of output, but only the price of production of output, and it does so only on the basis of affecting the amount of average profit to be added to the cost of production of each sphere of production. On the basis of exchange-value rather than price of production, its more likely that it is where the advanced capital is smaller, and the used up capital greater, that the value is higher. Where the advanced capital is higher that will tend to reflect a greater quantity of machinery, with higher productivity, a lower proportion of labour, and so a smaller proportion also of surplus value. Where the used up capital is higher, in proportion to the advanced capital, the opposite would be the case.
“In point of fact it is also wrong to say that, for example, a capital of which a third is not used up and two-thirds are used up in production, would inevitably yield a higher profit than one in which two-thirds are not used up and one-third is used up, provided the rate of exploitation is the same (and disregarding the equalisation of the rate of profit). For obviously, the second capital contains more machinery, etc., and other elements of constant capital, while the first capital contains less of these elements and sets more living labour in motion, and therefore produces more surplus labour as well.” (p 372-3)
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