Addenda. Revenue and its Sources. Vulgar Political Economy
[1.] The Development of Interest-Bearing Capital on the Basis of Capitalist Production. [Transformation of the Relations of the Capitalist Mode of Production into a Fetish. Interest-Bearing Capital as the Clearest Expression of This Fetish. The Vulgar Economists and the Vulgar Socialists Regarding Interest on Capital]
This goes along with Marx's analysis of revenue and its sources in Capital III, Chapter 51. Marx also, here, deals with the development of capital itself, as a commodity, whose use value – the ability to produce average profit – is sold, and whose price is the rate of interest. This fact, that capital that, in reality, is not capital, but only fictitious capital, becomes seen as capital par excellence, is reflected in the fact that it appears to expand directly in value, disconnected from the process of production, which is the real source of surplus value.
“The form of revenue and the sources of revenue are the most fetishistic expression of the relations of capitalist production. It is their form of existence as it appears on the surface, divorced from the hidden connections and the intermediate connecting links. Thus the land becomes the source of rent, capital the source of profit, and labour the source of wages. The distorted form in which the real inversion is expressed is naturally reproduced in the views of the agents of this mode of production. It is a kind of fiction without fantasy, a religion of the vulgar. In fact, the vulgar economists—by no means to be confused with the economic investigators we have been criticising—translate the concepts, motives, etc., of the representatives of the capitalist mode of production who are held in thrall to this system of production and in whose consciousness only its superficial appearance is reflected.” (p 453)
The earlier economists were constrained by the limits of the actual economic development they were analysing, and by the existing development of thought, arising from it. Mercantilists saw commodities coming into the country, being processed, and then going out of the country, as new commodities, sold at a higher price, so that gold and silver flowed into the country, to make up the difference. They saw the basis of profit and the wealth of nations deriving from this unequal exchange. They were wrong, but their error flowed from an honest investigation of the world they observed around them.
The Physiocrats examined a world in which feudal agriculture was becoming capitalist agriculture. They saw physical inputs at one end of the production process, and a greater quantity of those same use values coming out of that process. A quantity of seed corn is planted, and a larger quantity of corn is produced; breeding stock produce a larger quantity of livestock, and so on. So, the Physiocrats naturally identify value with use value, and surplus value with the surplus product. They identify that more fertile land produces a larger surplus product, and so identify the surplus value with being a free gift of nature, of the land. Hence the landowner obtains a rent based on his ownership of the land, equal to this surplus product. They were wrong, but their error arises from an honest investigation of the material world in which they lived.
Adam Smith was able to stand on the shoulders of the Physiocrats and take what was correct in their analysis – that surplus value arises in production – and to strip out the mysticism surrounding the land. Based on a greater level of development of industrial production, Smith is able to distinguish value from use value, and to identify value as labour, and so surplus value as surplus labour. The value of a product, and thence a commodity, is determined by the quantity of labour required for its production. Smith, like the Physiocrats, could see the physical inputs at one end, and so the labour required for their production is less than the physical outputs at the other end, and so the labour they represent. The difference is the quantity of surplus labour, and so surplus value.
Smith recognised that the basis of this is that, assuming no change in productivity, the labour required to produce the products needed by the labourer for their own reproduction, for a day, is less than the labour that the labourer can perform, in one day. They can undertake surplus labour, which thereby constitutes surplus value. Based also on the greater development of industrial production, Smith also recognised that the use values that come out of the production process are not the same use values that go into the process. It is then impossible to compare or measure the quantity of use values, in the form of, say, flax seed that goes into one end of the process, with the quantity of linen that comes out of the other, in the same way that it was possible to compare the amount of seed corn going in at one end, and the amount of corn coming out at the other. What it is possible to measure is the amount of labour-time that the flax seed represents, and the amount of labour that the workers wages etc. represent, as against the amount of labour that the linen represents.
But, Smith was also in error. He failed to distinguish labour from labour-power. So, when he comes to explain how the labourer, as a wage worker, is not paid an equivalent amount of value (labour-time) as he provides to the capitalist, he finds himself in an irreconcilable contradiction, and concludes that The Law of Value, only applies where the labourer is an independent producer, and does not have to pay rent to a landlord, or allow the capitalist to appropriate the surplus labour as profit. Smith was wrong, but his error flowed from an honest analysis of the world he lived in.
Ricardo stood on the shoulders of Smith. He rejected Smith's argument that The Law of Value did not operate under capitalism. Where Smith, on the back of that argument, adopted a cost of production theory of value, Ricardo continued to insist that the value of commodities was determined by the quantity of labour required for their production. But, Ricardo himself, on this basis, could not then explain the source of surplus value, instead starting from a recognition of the existence of an average rate of profit. Ricardo's error, which led to the dissolution of his school, was that he failed to distinguish between exchange-value and prices of production, which meant it was impossible for him to reconcile the idea that commodities sell at their exchange-value, determined by their value, and the existence of an average rate of profit. Because commodities are produced by capitals that have different organic compositions, and/or rates of turnover, some will contain proportionately more labour, i.e. surplus value. But that means they will have a higher rate of profit, and, if all commodities sell at prices that produce the average rate of profit, its then clear that these prices cannot be equal to their exchange-value.
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