Marx provides a lengthy quote from Jones in which he sets out an argument as to why it is always more profitable to invest in additional labour-saving equipment than in additional labour. The excerpt demonstrates the problems that arise from the failure of the Ricardians to understand the source of surplus value, the difference between exchange-value and price of production, and the difference between the rate of profit/profit margin as against the annual rate of profit, as determined by differences in the rate of turnover of capital.
Jones says, assume that £100 of capital – variable-capital – is employed to provide the wages of three workers. Like Ricardo, Jones does not enquire into the source of surplus value, and so can provide no explanation for the existence of an average rate of profit. He simply assumes the existence of an average rate of profit of 10%. If the workers produce output with an exchange-value of £110, therefore, he says, they will thereby have produced enough value to reproduce their wage, along with the average profit of £10, which goes to the farmer.
If a further £100 employs an additional three workers, then likewise, if they produce an output with an exchange-value of £220, they will have reproduced the value of their wages, along with £20 of profit. In both cases, the profit:wages ratio is 1:10. Jones assumes, then, that instead this second £100 is invested in fixed constant capital. He calls constant capital auxiliary capital, identifying it, correctly, as the product of past labour. He assumes that it lasts for five years, thereby transferring £20 of exchange-value, each year, in wear and tear, to the value of output. The additional value of output then need only be £10 average profit on this additional £100 of advanced capital, plus £20 for the value of wear and tear of that capital. So, instead of an additional £110 of value being created, if three more workers had been employed, only £30 of additional value need be produced. Jones goes on to argue that, now the profit has risen to £20, whilst wages remain at £100, profit has doubled, relative to wages. The more the constant capital rises, relative to wages, therefore, Jones concludes, the greater will be the ratio of profit to wages, which facilitate an even greater accumulation of fixed capital, and an expansion of the number of people who can, thereby, exist as capitalists rather than workers.
If we examine Jones' argument, what we have is this. With the investment of the £100 in fixed capital, the organic composition of the capital rises, i.e. c:v rises. In the case of an individual capital, it may well be the case, as Jones assumes here, that, because the capital sells its output at the price of production, which includes the average profit, the situation he describes follows. Similarly, as described by Marx earlier, a country that has a greater proportion of fixed capital behind its workers will enjoy a higher level of productivity so that its labour appears as complex labour, compared to the labour of other countries. It will sell its output at global market prices, thereby enjoying surplus profits, due to its lower individual value of production. As Marx sets out, in Capital I, it was the fact that British textile mills had a much greater proportion of fixed capital, compared to European producers, which meant that, although British wages were 50% higher than in Europe, British textiles were cheaper, and British rates of profit were higher than those of its competitors.
Its this that Jones sees and relates to, also, when he says,
““It appears from various returns made at different times to the Board of Agriculture, that the whole capital agriculturally employed in England, is to that applied to the support of labourers, as 5 to 1; that is, there are four times as much auxiliary capital used, as there is of capital applied to the maintenance of the labour used directly in tillage. In France, […] more than twice” (p. 223).” (p 410)
But, because Jones, like Ricardo, does not enquire into, or have any explanation of, the source of surplus value, he can have no understanding that a relative diminution of labour, i.e. a rise in the organic composition of capital, must also, thereby, result in a proportionate reduction in surplus value, to the extent that this is not simultaneously offset by a rise in the rate of surplus value.
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