up the total product, shares in more or less labor (paid and unpaid), and shares therefore in the greater or smaller outlay for this labor, a larger or smaller portion of the wages. The total wages paid bv the capitalist remain the same, but the calculation for each individiial commodity is different. To that extent there would be a change in the cost-price of the commodities. But no matter whether the cost-price of the individual commodities rises or falls, either as a result of such changes of value in this same commodity, or of changes of value in its elements (or, perhaps, the cost-price of the total amount of commodities produced by a capital of a given magnitude), if the average profit is, say, 10%, it remains 10%. Still, 10%, from the point of view of the individual commodity, may represent very different amounts, according to the change of magnitude in the cost-price of the individual commodities called forth by such changes of value as we have assumed.^^ So far as the variable capital is concerned — and this is the more important, because it is the source of surplus-value, and because anything which conceals its relation to the accumulation of wealth by the capitalist serves to mystify the entire system — the matter assumes a coarser form. It appears to the capitalist in this light: A variable capital of 100 p.st. employs, perhaps, 100 laborers per w^eek. If these 100 laborers produce 200 pieces of commodities or 200 C, per week in a given working time, then 1 C — leaving aside the question of that portion of its cost-price which is added by the constant capital, costs 10 shillings, for 100 p.st. pay for 200 c, and therefore 1 C costs \^^ p.st. Xow take it that a change takes place in the productive power of labor. Perhaps it is doubled, so that the same number of laborers now produces twice 200 C in the same time in which they used to produce once 200 C. In that case 1 C costs 5 shillings (always speaking only of that portion of the cost-price which consists of wages), for since 100 p.st. now pay for 400 C, 1 C costs \^^ p.st. On the other hand, if the productive power were to decrease by one-half, then the same labor would produce » Corbett.
Market Prices and Market Values.. 203 only ^^-C. And since 100 p.st. pay for ^ C, 1 C would cost YW^ p.st., or 1 p.st. The changes in the labor-time required for the production of the commodities, and thus the changes in their values, thus appear with reference to the cost-price and the price of production as different allotments of the same wages to more or fewer commodities, according to the greater or smaller quantity of commodities produced in the same working time for the same wages. The capitalist, and consequently his political economist, see that the aliquot part of the paid labor falling to the share of each individual commodity changes with the productivity of labor, and that the value of these commodities also changes accordingly. But they do not see that the same is true of the unpaid labor contained in every individual connnodity, and they see it so much less since the average profit is but accidentally determined by the unpaid labor absorbed in the sphere of the individual capitalist. Only in this vagiie and meaningless form are we still reminded of the fact that the value of the commodities is determined bv the labor contained in them.
CHAPTEE X.
COMPENSATION OF THE AVERAGE RATE OF PROFIT BY COM-PETITION. MARKET PRICES AND MARKET VALUES. SUR-PLUS-PROFIT.
One portion of the spheres of production has an average composition of their capitals, that is to say, their capitals have exactly or approximately the composition of the average social capital.
In these spheres of production, the price of production of the produced commodities coincides exactly or approximately with their values as expressed in money. If there is no other way of reaching a mathematical limit, this would be the one. Competition distributes the social capital in such a way between the various spheres of production that the prices of production of each sphere are formed aft^r the model of the 204 Capitalist Production.
prices of production in these spheres of average composition, which is k -|- kjD', cost-price plus the average rate of profit multij)lied by the cost-price, l^ow, this average rate of profit is nothing else but the percentage of profit in that sphere of average composition, in which the profit is identical with the surplus-value. Hence the rate of profit is the same in all spheres of production, for it is apportioned according to that one of the average spheres of production in which the average composition of capitals prevails. Consequently the sum of the profits of all spheres of production must be equal to the sum of surplus-values, and the sum of the prices of production of the total social product equal to the sum of its values. But it is evident that the balance between the spheres of production of different composition must tend to equalise them with the spheres of average composition, no matter Avhether this average composition is exact or only approximate. Again, there are tendencies toward equalisation between the more or less similar sjDheres, and these tendencies seek to bring about the ideal average, which does not really exist, so that there is a trend toward crystallisation around the ideal.
In this way the tendency necessarily prevails to make of the prices of production merely changed forms of value, or to make of profits but mere portions of surplus-value, which are assigned, however, not in proportion to the surplus-value produced in each special sphere of production, but in proportion to the mass of capital employed in each sphere of production, so that equal masses of capital, whatever may be their composition, receive equal aliquot shares of the total surplusvalue produced by the total social capital.
In the case of capitals of average, or approximately average, composition, the price of production coincides exactly, or approximately with the value, and the profit with the surplusvalue produced by them. All other capitals, of whatever composition, tend toward this average under the pressure of competition. • But since the capitals of average composition are of the same, or approximately the same, structure as the average social capital, all capitals have the tendency, regardless of the surplus-value produced by them, to realise in the prices of I Market Prices and Market Values. 205 their coiimiodities the average profit, instead of their own surplus-value, in other words, to realise the prices of production.
On the other hand it may be said that whenever an average profit, and a general rate of profit, are brought about, no matter by what means, such an average profit cannot be anj^thing else but the profit on the average social capital, the sum of these average profits being equal to the sum of surplus-values produced by the average social capitals, and that the prices brought about by adding this average profit to the cost-prices cannot be anything else but the values transformed into prices of j^roduction. It would not alter matters, if certain capitals in certain spheres of production would not submit to the process of equalisation for some reason or other. In that case the average profit would be computed on that portion of the social capital which takes part in the process of equalisation. It is evident that the average profit cannot bo anything else but the total mass of surplus-values allotted to the various masses of capital in the different spheres of production in proportion to their magnitudes. The average profit is the total amount of realised unpaid labor, and this total mass of unpaid labor, the same as the paid, dead or living, labor, is materialised in the total mass of commodities and money falling to the share of the capitalists.
The real difficulty lies in the question: How is this equalisation of profits into an average rate of profit brought about, seeing that it is evidently a result, not a point of departure?
It is obvious that an estimate of the values of the commodities, for instance in money, can not be made until they have been exchanged. If we assume such an estimate, we must regard it as the outcome of an actual exchange of commodity-value for commodity-value. But how should such an exchange of commodities at their real values have come about?
Let us assume that all commodities in the different lines of production are sold at their real values. What would be the outcome? According to our foregoing analyses, the rates of profit in the various spheres of production would differ considerably. It is quite obvious that we are dealing with two different things, whether on the one hand commodities 2o6 Capitalist Production.
are sold at their values (that is to say, sold in proportion to the value contained in them, or exchanged with one another at the price of their values), or -whether, on the other hand, they are sold at such prices that their sale yields equal amounts cf profits on equal masses of the respective capitals advanced for their production.
Tf capitals employing unequal amounts of living labor are to produce unequal amounts of surplus-value, it must be assumed, at least to a certain degree, that the intensity of exploitation, or the rate of surplus-value, are the same, or that any existing differences in them are balanced by real or imaginary (conventional) elements of compensation. This would presuppose a competition among the laborers and an equilibration by means of their continual emigration from one sphere of production to another. Such a general rate of surplusvalue — as a tendency, like all other economic laws — has been assumed by us for the sake of theoretical simplification. But in reality it is an actual premise of the capitalist mode of production, although it is more or less obstructed by practical frictions causing more or less considerable differences locally, such as the settlement laws for English farm laborers. But in theory it is the custom to assume that the laws of capitalist production evolve in their pure form. In reality, however, there is always but an approximation. Still, this approximation is so much greater to the extent that the capitalist mode of production is normally developed, and to the extent that its adulteration and amalgamation with remains of former economic conditions is outgrown.
The whole difficulty arises from the fact that commodities are not exchanged simply as commodities, but as products of capitals, which claim equal shares of the total amount of surplus-value, if they are of equal magnitude, or shares proportional to their different magnitudes. And this claim is to be satisfied by the total price realised by a certain capital on the commodities produced by it within a certain space of time. This total price, again, is but the sum of the prices of the individual commodities produced by this capital.
The essential point will become most visible, when we look Market Prices a ml Market J\ilites\ 207 upon the matter in this way: Let us assume that the laborers themseh^es are in possession of their respective means of production and exchange their commodities with one another. In that case these commodities would not be products of capital. The value of the various instruments of labor and raw materials would differ according to the technical nature of the labors performed in the different lines of production. Furthermore, aside from the unequal value of the means of productirn employed by them, they would require different quantities of means of production for given quantities of labor, according to whether a certain commodity can be finished in one hour, another in one day, and so forth. Let us assume, also, that these laborers work on an average equal lengths of time, allowing for compensations due to different intensities of labor. In that case, two laborers, both working one day, would have in the connnodities produced by them, first, an equivalent for their outlay, the cost-prices of the means of production consumed by their labor. These would differ according to the technical nature of their lines of production. In the second place, both of them would have created equal amounts of new value, namely the working day added by them to the means of production. This would comprise their wages plus the surplus-value, the last representing surplus-labor exceeding their necessary wants, the product of which would belong to them.
If we were to use capitalist terms, we should say that both of them receive the same wages plus the same profit, or the same value exjDressed, say, by the product of a working day of ten hours. But in the first place, the values of their commodities would differ. The commodities of I, for instance, might contain more value for each portion of the consumed means of production than the commodities of 11. And, to introduce all possible differences, we may assume right now that the commodities of I absorb more living labor, and consequently require more labor-time for their production, than the commodities of 11. Then the value of the commodities of I and II, we repeat, differs considerably. So do the sums of the values of their commodities, which represent the product of the labor performed by laborers I and II in a certain 2o8 Capitalist Production.
time. The rates of profit would also differ considerably for I and II, assinning- that we call rate of profit, in this case, the proportion of the surplus-value to the total value of the invested means of production. The means of subsistence daily consumed by I and II during production, which take the i)lace of wages, will form that part of the invested capital which Ave would call variable capital under different circumstances. But the sui'plus-values would be the same for I and II, or, to express it more accurately, since both I and II receive the value of the product of one day's labor, both of them receive equal values after the value of the invested " constant " capital has been deducted, and we may regard one portion of this remaining value as an equivalent for the means of subsistence consumed during production, and the other as surplus-value.
If laborer I has higher expenses, they are made good by a greater portion of the value of his commodities replacing this " constant " part, and he has to reconvert a larger portion of the total value of his product into the material elements of this constant part, while laborer II, if he receives less for this purpose, has to reconvert so much less. Under these circumstances a difference in the rates of profit would be of no concern, just as it is immaterial for the wage-laborer to-day what rate of profit may express the amount of surplus-value filched from him, and just as in international commerce the difference in the various national rates of profit is immaterial for the exchange of their commodities.
The exchange of commodities at their values, or approximately at their values, requires, therefore, a much lower stage than their exchange at their prices of production, which requires a relatively high development of capitalist production.
Whatever may be the way in which the prices of the various commodities are first fixed or mutually regulated, the law of value always dominates their movements. If the labor time required for the production of these commodities is reduced, prices fall; if it is increased, prices rise, other circumstances remaining the same.
Aside from the fact that prices and their movements are Market Prices and Market Values. 209 dominated by the law of value^ it is quite appropriate, under these circumstances, to regard the value of commodities not only theoretically, but also historically, as existing prior to the prices of production. This applies to conditions, in which the laborer owns his means of production, and this is the condition of the land-owning farmer and of the craftsman in the old world as well as the new. This agrees also with the view formerly expressed by me that the development of product into commodities arises through the exchange between differ ent communes, not through that between the members of the same commune. ^^ It applies not only to this primitive condition, but also to subsequent conditions based on slavery or serfdom, and to the guild organisation of handicrafts, so long as the means of production installed in one line of production cannot be transferred to another line except under difficulties, so that the various lines of production maintain, to a certain degree, the same mutual relations as foreign countries or communistic groups.
In order that the prices at which commodities are exchanged with one anotlier may correspond approximately to their values, no other conditions are required but the following: 1) The exchange of the various commodities must no longer be accidental or occasional, 2) So far as the direct exchange of commodities is concerned, these commodities must be produced on both sides in sufficient quantities to meet mutual requirements, a thing easily learned by experience in trading, and therefore a natural outgrowth of continued trading, 3) So far as selling is concerned, there must be no accidental or artificial monopoly which may enable either of the contracting sides to sell commodities above their value or compel others to sell below value. An accidental monopoly is one which a buyer or seller acquires by an accidental proportion of supply to demand.
The assumption that the commodities of the various spheres of production are sold at their value implies, of course, only *T In 1 865, when Marx wrote these lines, they expressed as yet merely his " view." Today, since we have the extended researches into the nature of primitive societies made from Maurer to Morgan, these things are accepted facts which hardly anyone cares to deny. — F. E.
N 2IO Capitalist Production.
that their value is the center of gravity around which prices fluctuate, and around which their rise and fall tends to an equilihriuni. We shall also have to note a marlict value, which must he distinguished from the individual value of the commodities produced by the various producers. Of this more anon. The individual value of some of these commodities will be below the market-value, that is to say, they require less labor-time for their production than is expressed in the market-value, while that of others will be above the market-value. We shall have to regard the market-value on one side as tlie average value of the commodities produced in a certain sphere, and on the other side as the individual value of commodities produced under the average conditions of their respective sphere of production and constituting the bulk of the products of that sphere. It is only extraordinary combinations of circumstances under which commodities produced under the least or most favorable conditions regulate the market-value, which forms the center of fluctuation for the market-pi,[cto which are the same, however, for the same kind of commodities. If the ordinary demand is satisfied by the supply of commodities of average value, that is to say, of a value midway between the two extremes, then those commodities, w^hose individual value stands below the marketvalue, realise an extra surplus-value, or surplus-profit, while those, whose individual value stands above the market-vahie cannot realise a portion of the surplus-value contained in them.
It does not do any good to say that the sale of the commodities produced under the most unfavorable conditions proves that they are required for keeping up the supply. If the price in the assumed case were higher than the average market-value, the demand would be greater. At a certain price, any kind of commodities may occupy so much room on the market. This room does not remain the same in the case of a change of prices, unless a higher price is accompanied by a smaller quantity of commodities, and a lower price by a larger quantity of commodities. But if the demand is so strong that it does not let up when the price is regulated by Market Prices and Market Values. 211 the value of the commodities produced under the most unfav^orable conditions^ then these commodities determine the market-value. This is not possible unless the demand exceeds the ordinary, or the supply falls below it. Finally, if the mass of the produced commodities exceeds the quantity which is ordinarily disposed of at average market-values, then the commodities produced under the most favorable conditions regulate the market-value. These commodities may be sold exactly or approximately at their individual values, and in that case it may happen that the commodities produced under the least favorable conditions do not realise even their costprices, while those produced under average conditions realise only a portion of the surplus-vak.^e contained in them. The statements referring to market-value apply also to the price of production, if it takes the place of market-value. The price of production is regulated in each sphere, and this regulation depends on special circumstances. And this price of i)ro(luction is in its turn the center of gravity around which the daily market-prices fluctuate and tend to balance' "or o another within definite periods. (See Ricardo on the determination of the price of j^roduction by those who produce under the least favorable conditions.)
Xo matter what may be the way in which prices are regulated, the result always is the following: / 1) The law of value dominates the movements of prices, since a reduction or increase of the labor-time required for production causes the prices of production to fall or to rise. It is in this sense that Eicardo (who doubtless realised that his prices of production differed from the value of connnodities) says that " the inquiry to which he wishes to draw the reader's attention relates to the effect of the variations in the relative value of commodities, and not in their absolute value."
2) The average profit which determines the prices of production must always be approximately equal to that quantity of surplus-value, which falls to the share of a certain individual capital in its capacity as an aliquot part of the total social capital. Take it that the average rate of profit, and therefore the average profit, are expressed by an amount of 212 Capitalist Production.
money of a higher value than the money-value of the actual average surplus-value. So far as tlie capitalists are concerned i/i that case, it is immaterial whether they charge one ant'ther a profit of 10 or of 15%. The one of these percentages Iocs not cover any more actual commodity-value than the i)ther, since the overcharge in money is mutupl. But so far as-the laborer is concerned (the assumption being that he receives the normal wages, so that the raising of the average profit does not imply an actual deduction from his wages, in other words, does not express something entirely different from the normal surplus-value of the capitalist), the rise in the price of commodities due to a raising of the average profit must be accompanied by a corresponding rise of the moneyexpression for the variable capital. As a matter of fact, such a general nominal raising of the rate of profit and the average profit above the limit provided by the proportion of the actual surplus-value to the total invested capital is not possible without carrying in its wake an increase of wages, and also an increase in the prices of the commodities which constitute the constant capital. The same is true of the opposite case, that of a reduction of the rate of profit in this way. l^ow, since the total value of the commodities regulates the total surplusvalue, and this the level of the r.verage profit and the average rate of profit — always understanding this as a general law, as a principle regulating the fluctuations — it follows that the law of value regulates the prices of production.
Competition first brings about, in a certain individual sphere, the establishment of an equal market-value and market-price by averaging the various individual values of the commodities. The competition of the capitals in!he different spheres then results in the price of production which equalises the rates of profit between the different spheres. This last process requires a higher development of capitalist production than the previous process.
In order that commodities of the same sphere of production, the same kind, and approximately the same quality, may be sold at their value, the following two requirements must be fulfilled: Market Prices and Market Values. 213 1) The different individual values must have been avei--aged into one social value, the above-named market-value, and t\\W implies a competition between the producers of the same kind of commodities, and also the existence of a common market, on which thej oifer their articles for sale. In order that the market-price of identical commodities, which however are produced under different individual circumstances, may correspond to the market-value, may not differ from it by exceeding it or falling below it, it is necessary that the different sellers should exert sufficient presure upon one another to bring that quantity of commodities on the market which social requirements demand, in other words, that quantity of commodities whose market-value society can pay. If the quantity of products exceeds this demand, then the commodities must be sold below their marketvalue; vice versa, if the quantity of products is not large enough to meet this demand, or, what amounts to the same, if the pressure of competition among the sellers is not strong enough to bring this quantity of products to market, then the commodities are sold above their market-value. If the market-value is changed, then there will also be a change in the conditions under which the total quantity of commodities can be sold. If the market-value falls, then the average social demand increases (always referring to the solvent demand) and can absorb a larger quantity of commodities within certain limits. If the market-value rises, then the solvent social demand for commodities is reduced and smaller quantities of them are absorbed. Hence if supply and demand regulate the market-price, or rather the deviations of marketprices from market-values, it is true, on the other hand, that the market-value regulates the proportions of supply and demand, or the center around which supply and demand cause the market-prices to fluctuate.
If we look closer at the matter, we find that the conditions determining the value of some individual commodity become effective, in this instance, as conditions determining the value of the total quantities of a certain kind. For, generally speaking, capitalist production is from the outset a mass-production.
214 Capitalist Production.
And even other, less developed, modes of production carrj small quantities of j)roducts, the result of the work of many small producers, to market as co-operative products, at least in the main lines of production, concentrating and accumulating them for sale in the hands of relatively few merchants. Such commodities are regarded as co-oi3erative products of an entire line of production, or of a greater or smaller part of this line.
We remark by the way that the " social demand," in other words, that which regulates the principle of demand, is essentially conditioned on tlie nuitual relations of the different economic classes and their relative economic positions, that is to say, first, on the proportion of the total surplus-value to the wages, and secondly, on the proportion of the various parts into which surplus-value is divided (profit, interest, groundrent, taxes, etc.). And this shows once more that absolutely nothing can be explained by the relation of supply and demand, nnless the basis has first been ascertained, on which this relation rests.