The greater the amount of surplus labour/value, the greater the potential to a) expand population, and b) to expand the scale of production itself. If we consider, as Marx does, that profit is a historically limited form of this surplus value, then, profit cannot be greater than this surplus-value. It can be less, because, as Marx sets out in Capital III, the surplus value, having been produced, must be realised by the sale of commodities, and that is not guaranteed, but, even if they are sold, at their value, there are lots of costs involved in their circulation, and these costs all represent a deduction from the produced surplus value/profit.
But, then, we can see why this posed a problem for Ramsay, because, if profit equals surplus value, then, a rise in the price of corn, relative to the historic price paid for the seed – corn – appears to produce profit higher than the produced surplus-value. The surplus-value, in the example, was equal to £10,000 (10,000 tons). But, now, if the price of corn rises to £12 per ton, the 3,000 tons sells for £36,000, whilst its cost of production was still only equal to £20,000, a surplus-value of £10,000 now seems to be at odds with a “profit” of £16,000. Ramsay concluded that this additional £6,000 of profit was, thereby, attributable to the constant capital itself.
But, what is the reality? Firstly, as set out earlier, this additional £6,000 of profit is an illusion, and is really just a one-off capital gain. To continue production on the same scale, the farmer, or someone who buys the farm from them, must, now, use £12,000 of the proceeds of the sale of corn, just to replace the seed, whereas, before, it only cost £10,000. Secondly, in this example, wages are equated with corn, as though this is all the workers consume. So, to replace the variable-capital (1,000 tons of corn) the farmer must hand over the same 1,000 tons, but which, also, now, represents a value of £12,000, and not £10,000, as before. Finally, the farmer appropriates the remaining £12,000, but this only enables them to consume the same 1,000 tons of corn as before.
In effect, as I will show, its just money-illusion, with a 20% inflation. If they previously devoted half of their profit to capital accumulation (£2,500 to seed, £2,500 to labour-power), to do so, now, costs them £3,000 for seed and £3,000 for labour-power/wages. But, even this is not the full story.
In this scenario, there are only two commodities, corn and labour-power. If the value/price of corn has risen by 20%, this can only be because productivity has fallen, for example due to a poor harvest, (or else the value of money/or the standard of prices has fallen). In other words, output can no longer be 3,000 tons of corn. In place of money prices, it is best seen by using values, i.e. labour hours.
Assume that, initially, 1,000 tons of corn is equal to 1,000 hours of labour. In terms of values, then, we had 1,000 c + 1,000 v + 1,000 s. But, as a result of this poor harvest, and fall in productivity, the 1,000 hours of labour contained in the seed, plus the 2,000 hours of new labour performed to turn it into corn, no longer produces 3,000 tons of corn, but something less. For the unit value of corn to rise from £10 per ton to £12 per ton, the 3,000 hours of labour, represented by total output, must result in output of only 2500 tons, equal to £30,000. The unit value rises from 1 hour per ton to 1.2 hours per ton.
So, as Marx sets out, in Theories of Surplus Value, Chapter 22, although the unit price has risen by 20%, output falls by 16% (1/6). But, Marx notes, the farmer must still replace the consumed 1,000 tons of seed, and the 1,000 tones of corn that forms the variable capital, with these same physical quantities. Capital, as Marx notes, is a social relation, and that social relation only expands as a result of more labour being exploited. Consequently, the surplus product is reduced from 1,000 tons to just 500 tons. Previously, the surplus product represented a third of total output, and a half of the cost of production. Now, it represents only a fifth of total output, and a quarter of the cost of production.
Put another way, the 1,000 tons of surplus product could increase the size of the capital by 50%, whereas, now, it can expand by only 25%. What appeared, superficially, as an increase in the amount of profit, and rise in the rate of profit, measured against the historic cost of production, turns out to be an illusion, and the opposite. The additional money “profit” was simply a capital gain resulting from the rise in the unit value/price of corn. That same rise in unit value/price, resulting from a fall in productivity, actually causes a greater proportion of total output to be needed to reproduce the consumed constant and variable-capital. So, in reality, the mass of profit falls, because the rate of surplus-value falls. Previously, £10,000 advanced as wages produced £20,000 of new value, and so, £10,000 of surplus-value. But, now, the same 1,000 tons of corn (wages) has a value of £12,000. Previously, it represented 1,000 hours of labour, and now represents 1200 hours.
The labour still produces 2000 hours of new value, equal to £20,000, but, now, 1200 hours constitute necessary labour, and only 800 hours surplus labour. The rate of surplus value falls from 100% to 66.6%, and the mass of surplus value from £10,000 to £8,000. But, as Marx sets out, even if we disregard this fall in the rate of surplus value, and consequent reduction in the mass of surplus value, the rate of profit would still fall. Previously, surplus value represented 100% of the value of constant capital (seed). But, even assuming it remained at 1000 hours (£10,000) the seed, now, has a value of £12,000, so that the profit represents only 5/6 of its value.
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