XII – General Relation of Profit, Wages and Prices
If we assume that productivity remains constant, so that the value of constant capital does not change, its value is both preserved in, and reproduced from the end product. In that case, as Marx does in Capital I, its value can be set to zero, so that we can focus the analysis only on the new value created by by current labour, its division into wages and profit, and the effect on values and prices.
“Deduct from the value of a commodity the value replacing the value of the raw materials and other means of production used upon it, that is to say, deduct the value representing the past labour contained in it, and the remainder of its value will resolve into the quantity of labour added by the working man last employed. If that working man works twelve hours daily, if twelve hours of average labour crystallize themselves in an amount of gold equal to six shillings, this additional value of six shillings is the only value his labour will have created. This given value, determined by the time of his labour, is the only fund from which both he and the capitalist have to draw their respective shares or dividends, the only value to be divided into wages and profits. It is evident that this value itself will not be altered by the variable proportions in which it may be divided amongst the two parties. There will also be nothing changed if in the place of one working man you put the whole working population, twelve million working days, for example, instead of one.” (p 71-2)
Its important to note, here, in an age when orthodox economics is dominated by marginalist theories, that when Marx talks about “the quantity of labour added by the working man last employed” he does not mean this literally, in the sense that marginal cost theories talk about the last unit employed. By “last employed” he means only “current labour”, the labour used to process the materials into the end product, as distinct from the “past labour”, i.e. the congealed labour contained in the value of the constant capital. Last employed, here, means the current labour of the collective labourer.
If the share of wages in the new value rises, the share of profits falls. We are talking, here, of proportions, not portions. If the sum to be divided is 100, it may divide 60 wages and 40 profit, but, if the sum to be divided is 200, it may divide 80 wages, and 120 profit. The proportion going to wages will have fallen to 40%, but the size of its portion still rises to 80. A rise in productivity, which reduces the value of commodities may mean that nominal wages remain constant, whilst real wages rise, i.e. the same amount of money wages buys more wage goods, whilst relative wages will fall.
What is important, here, is not the size of the portion, but the proportional relation. If relative wages rise, relative profits fall, and vice versa. Similarly, if 1 million workers are employed rather than one, the total amount of wages and profit will be 1 million times greater, because 1 million times more new value is created, as is its division into wages and profits. It is not this size that is important, here, but the division between wages and profits.
“A general rise of wages would, therefore, result in a fall of the general rate of profit, but not affect values.” (p 73)
That, of course, does mean that the value/price of all commodities would remain constant. That value depends on productivity, and productivity constantly changes. In general, taken over a year, or several years, it rises, reducing the unit value of commodities. That is because higher levels of production bring economies of scale, greater division of labour, more use of fixed capital, improved transport and communications, etc. For some commodities, in the short-run, the opposite may occur, raising their value, and, depending on the function of these commodities – for example energy and materials – their higher value may pass into the value of other commodities, for which they are inputs/raw material. However, similarly, the lower value of all other commodities, resulting from higher social productivity, will pass on into all other commodities for which they are inputs.
“The number or mass of commodities produced in a given time of labour, or by a given quantity of labour, depends upon the productive power of the labour employed, and not upon its extent or length.” (p 73)
Spinning labour of 12 hours, depending on its productivity, might produce 12 pounds of yarn, or only 2 pounds. If 12 hours labour is equal to six shillings (£0.30), then, in the first case, 12 pounds of yarn has a value of £0.30 (£0.025 per pound), and in the second case, just 2 pounds of yarn has a value of £0.30 (£0.15 per pound).
If relative wages remain constant, in the first case, the worker receives the equivalent of 6 pounds of yarn, whereas, in the second case, only 1 pound. In other words, in terms of real wages, the workers wage is higher in the first case, compared to the latter case. Yet, the price of the commodity is low, in the first case, compared to the second. But, even if, in the first case, relative wages also rose, so that relative profits fell, this would not change the value/price of yarn, which would still be much less than in the second case, where relative wages were lower.
“This would be so because the price of the pound of yarn is regulated by the total amount of labour worked up in it, and not by the proportional division of that total amount into paid and unpaid labour. The fact I have mentioned before that high-price labour may produce cheap, and low-priced labour may produce dear commodities, loses, therefore, its paradoxical appearance. It is only the expression of the general law that the value of a commodity is regulated by the quantity of labour worked up in it, and the quantity of labour worked up in it depends altogether upon the productive powers of labour employed, and will therefore, vary with every variation in the productivity of labour.” (p 74)
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