XI – The Different Parts Into Which Surplus Value is Decomposed
The point of the Labour Theory of Value, as against the cost of production theory of value that Smith fell in to, and which is also the basis of marginalist theories, is that the value of a commodity is determined by the total labour-time required for its reproduction. This value, then, resolves into the funds required to ensure that reproduction. In this section, Marx deals with the way a part of this value, constituting the surplus value, is resolved into rent, interest, taxes and profit of enterprise.
However, as Marx sets out, in Capital III, Chapter 6 et al, and in Theories of Surplus Value, Chapter 22, another consequence of the Labour Theory of Value, as against the cost of production theory of value, is that changes in value of constant and variable capital, after the commodity has been sold, but prior to its components having been replaced, also impacts the way the surplus value resolves into these different funds. It leads to either a tie-up or a release of capital. For example, if a metre of linen has a value of 15 hours labour, comprising 5 hours for constant capital (materials, wear and tear of fixed capital), and 10 hours of new labour, which resolves into 5 hours for wages, and 5 hours surplus value, this 15 hours labour might have a monetary equivalent of £15. As Marx sets out in the chapters mentioned above, and in Capital III, Chapter 47, assuming no change in productivity, this £15 of value resolves again into £5 constant capital, £5 wages, leaving £5 of profit.
If, however, the prices of the components of constant capital rise to £8, the firm must still replace the consumed physical quantity of materials etc., if it is to continue production on the same scale. As Marx describes, capitals are forced to do so, at least, because it is this scale of production that brings them economies of scale, and market share. Moreover, they have large amounts of fixed capital, which must be used to its full capacity. The money the firm has from sale of the linen is £15, but, now, £8 goes to constant capital. It must employ the same amount of labour-power, meaning £5 for wages, which, now, means that it only has £2 left as profit, even though the amount of produced surplus value was £5.
If the value of constant capital fell to £3, the opposite would be true. The £15 of value would, now, resolve into £3 c, £5 for wages, leaving £7 as profit, even though only the same £5 of surplus value is produced. The former represents a tie-up of capital, and the latter a release of capital. The same is true with variable-capital. If the value of constant capital stays the same, but the value of labour-power rises from £5 to £7, although £5 of surplus value was produced, and contained in the £15 value of the linen, to reproduce this quantity of labour-power, again required to maintain the scale of production, the firm must, now, resolve £7, not £5 into wages. So, although £5 of surplus value was produced, only £3 can, now, be resolved into profit, because £2 of it, is now required to reproduce the consumed labour-power.
This tie-up and release of capital, the production of capital losses and gains that give the illusion of changes in profit, is what confused Ramsay, and continues to confuse those that basically operate a cost of production theory of value, as the basis of the use of historical pricing. The situation is, of course, different, where the value of the commodities comprising the productive-capital (c + v), changes before the end product is sold. In that case, this changed value impacts the value of the end product itself. A rise in the price of c, to £7 would raise the value of a metre of linen to £17. This would not change the amount of surplus value, or profit, which remains £5, but means that the rate of profit falls from 50% to 41.7%.
If the value of labour-power rises to £7, this does not change the value of the commodity, which remains £15. But, now, £5 goes to replace c, £7 to replace v, leaving only £3 as surplus-value/profit. In the former case, the rate and mass of surplus value did not change, but the rate of profit did. In this latter case, the rate of surplus value, and mass of surplus value falls, because the value of labour-power rises.
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