Friday, 3 January 2020

Theories of Surplus Value, Part III, Addenda - Part 24

Marx sets out the same analysis as contained in Capital III, where he asks the question why this division of profit between different capitalists – functioning capitalists v money-lending capitalists – should create a division between them compared to, say, the division of profit amongst a number of partners in a firm. In other words, if five partners in a firm put in £2,000 of capital each, they share the profits equally between them. If one capitalist puts in the whole £10,000 he would not expect to get just the same 20% share, considering the rest of the profit to belong to the now non-existent other four partners. 

“Consequently, in itself the mere division of profit between different capitalists who have different legal claims on the same capital and who are in one way or another joint owners of the same capital, does not by any means establish different categories for the separate portions. Why then should the accidental division between lender and borrower of capital do so?” (p 474) 

It makes no difference whether a capitalist operates with his own capital or capital borrowed from someone else. The profit is produced by the productive-capital not money-capital, and the rate of profit is the ratio of the profit to this productive-capital, not to the money-capital. Whether the capitalist uses his own capital rather than borrowed capital only affects the amount and rate of profit of enterprise, not the rate of profit. For example, if £1,000 is used to buy materials and labour-power to produce commodities, which sell for £1200, the profit is £200, and rate of profit is 20%. It doesn't matter whether the original £1,000 belonged to the productive-capitalist, or whether they borrowed it. The profit is produced by the £1,000 of productive-capital, not the £1,000 of money-capital, which first had to be metamorphosed into productive-capital before it any potential for profit was possible. The rate of profit is measured against this productive-capital. But, it clearly does make a difference to the profit of enterprise as to whether the money-capital was provided by the productive-capital or whether it was borrowed. If the rate of interest is 10%, then the capitalist who borrows the £1,000 must pay £100 in interest leaving them with £100 profit of enterprise. Their rate of profit remains 20%, but their profit of enterprise is now only 10%. 

The capitalist who provides their own capital, therefore, appropriates this additional £100 to themselves, rather than handing it over to the money-lender. That they may still count this £100 paid to themselves as interest rather than profit makes no difference, because the fact remains that they still have this £100 available for them to use for accumulation, whereas the capitalist who borrows £1,000 of capital does not. As Marx says, in Capital III, the importance is brought out when considering the rate of interest. If the rate of interest were zero, the position of the capitalist who borrows the £1,000 of capital is then the same as the capitalist who provides their own capital. All of the profit would come to them as profit of enterprise, and the rate of profit would equal the rate of profit of enterprise. 

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