Take for illustration's sake a certain population of working people, for instance, two millions. Assume, furthermore, that the length and intensity of the average working day, and the level of wages, and thereby the proportion between necessary and surplus-labor, are given. In that case the aggregate labor of these two millions, and their surplus-labor expressed in surplus-value, represent always the same magnitude of values. But with the growth of the mass of the constant (fixed and circulating) capital, which this labor manipulates, the proportion of this produced quantity of values declines as compared to the value of this total capital. And the value of this capital grows with its mass, although not in the same proportion. This proportion, and consequently the rate of profit, falls in spite of the fact that the same mass of living labor is controlled as before, and the same amount of surpluslabor absorbed by the capital. This proportion changes, not because the mass of living labor decreases, but because the mass of the materialised labor set in motion by living labor increases. It is a T^plativ^jjpprpncie; rinf nn nl^grtlntp nnr>^ and has really nothing to do with the absolute magnitude of the labor and surplus-labor set in motion. The fall of the rate of profit is not due to an absolute, but only to a relative decrease of the variable part of the total capital, that is, its decrease as compared with the constant part.
The same thing which applies to any given mass of labor and surplus-labor, applies also to a growing number of laborers, and thus under the above assumptions, to any growing mass of the controlled labor in general and to its unpaid part, the surplus-labor, in particular. If the laboring population increases from two million to three million, if, furthermore, the variable capital invested in wages also rises to three million from its former amount of two million, while the cf>nstant capital rises from four million to fifteen million, then the mass of surplus-labor, and of surplus-value, under the above assumption of a constant w^orking day and a constant rate of surplus-value, rises by 50%, that is, from two million to The Theory of the Lazu. 255 three million. jSTevertheless, in spite of this growth in the absolute mass of surplus-labor and surplus-value by 50%, the proportion of the variable to the constant capital would fall from 2: 4 to 3:15, and the proportion of the surplus-value to the total capital, expressed in millions, would be While the mass of surplus-value has increased by one-half, the rate of profit h^s fallen by one-half. However, the profit is only_thp puTpl'T^^^^^^w^ calculated on the total socialcapital,' so that its absolute magnitude, socially considered, is the same as the absolute magnitude ot.the surplus-value. In this case, the absolute magnitude of the profit would have grown by 50%, in spite of its enormous relative decrease compared to the advanced total capital, or in spite of the enormous fall of the average rate of profit. We see, then, that in spite of the progressive fall of the rate of profit, there may be an absolute increase of the number of laborers employed by capital, an absolute increase of the labor set in motion by it, an absolute increase of the mass of surplus-labor absorbed, a resulting absolute increase of the produced surplus-value, and consequently an absolute increase in the mass of the produced profit. And this increase may be progressive. And it may not only be so. On the basis of capitalist production, it must be so, aside from temporary fluctuations.
The capitalist process of production is essentially a process of accumulation. We have shown that the mass^j^f values, wliicli must be simply reproduced and maintained, increases progressiv'ely with-H-ie-drevelopment of capitalist production to the extent that the productivity of labor grows, even if the employed labor-power should remain constant. But the deveTopmeiil of social productivity carries with it a still greater increase of the produced use-values, of which the means of production form a part. And the additional labor^jwlLQse ap-]2TOpriation reconverts this additional value_int,o capital, does not depend ^n the value, but_.mL-ili£LJiiaas, of these_means of production (including the jneans of subsistence), because the laBorer^mthe productive process is not operating with the 256 Capitalist Production.
exchange-value, but with the use-value of the means of ]-)yoduction. Accumulation itself, however, and the concentration of capital that goes with it, is a material means of increasing the productive power. Now, this growth of the means of production includes the increase of the laboring population, the creation of a laboring population which corresponds to the surplus-capital or even exceeds its general requirements, leading to an overpopulation of working people. A momentary excess of the surplus-capital over the laboring population controlled by it would have a twofold effect. It would, on the one hand, mitigate the conditions, which decimate the offspring of the laboring class and would facilitate marriages among them, by raising wages.
This would tend to increase the laboring population. On the other hand, it would employ the methods by which relative surplus-value is created (introduction and improvement of machinery) and thereby create still more rapidly an artificial relative overpopulation, wdiich in its turn would be a hothouse for the actual propagation of its numbers, since under capitalist production poverty propagates its kind. The nature of the cajDitalist process of accumulation, which process is but an element in the capitalist process of production, implies as a matter of course that the increased niass of means of jrroduxition^, whi€iuis_J;a_bie_converted into capital, must always find on hand a corresponding increase, or even an excess, of laboring people for_exploitation. The progress of the process of production and accumulation must, therefore, be accompanied by a gi'owth of tlie mass of available and appropriated surplus-labor, and consequently by a growth -£»f--Uie__absolute Qiaas__of_profit__appropriated by the social ^capital. But the same law^s of production and accumulation increase the volume and value of the constant capital in a more rapid progression than those of the variable capital invested in living labor. The same laws, then, produce for the social capital an increase in the absolute mass of profit and a falling rate of profit.
We leave out of consideration the fact that the same amount of values represents a progressively increasing mass of use-_ values and enjoyments to the extent that the capitalist process I The Theory of the Law. 257 of production carries with it a development of the productive power of social labor, a multiplication of the lines of production, and an increase of products.
The development of capitalist production and accumulation lifts the processes of labor to a higher scale and gives them greater dimensions, which implj larger investments of capital for each individual establishment. A growing concentration of capitals (accompanied by a growing number of capitalists, though not to the same extent) is therefore one of the material requirements of capitalist production as well as one of the results produced by it. Hand in hand with it, and mutually interacting, goes a progressive expxQpriation of the more or less direct producers. It is, then, a matter of course foFtHe capitalists that they should control increasing armies of laborers (no matter how much the variable capital may relativeTy" decrease in comparison to the constant capital), and that the mass of surplus-value, and of profit, appropriated by them, should grow simultaneously with the fall of the rate of profit, and in spite of it. The same causes which concentrate masses of laborers under the control of capitalists, are precisely those which also swell the mass of fixed capital, aiixiliary_.and_ raw materials inlr~grmving proportion as conipared to the mass of the employed living labor.
It requires but a passing notice at this point, that, given a certain laboring population, the mass of surplus-value, and therefore the absolute mass of profit, must grow if the rate of surplus-value increases by a prolongation or intensification of the working day, or by a lowering of the value of wages through a development of the productive power of labor, and must do so in spite of the relative decrease of the variable capital compared to the constant.
The same development of the productive power of social labor, the same laws, which express themselves in a relative fall of the variable as compared to the total capital and in a correspondingly hastened accumulation, while this accumulation in its turn becomes the starting point of a further development of the productive power and of a further relative fall of the variable capital, this same development manifests Q 258 Capitalist Production.
itself, aside from temporary fluctuations, by a growing increase of the employed total labor-power, a growing increase of tbe absolute mass of surplus-value, and consequently of profits.
jSIow, in what form must this two-faced law with the same causes for a decrease of the rate of profits and a simultaneous increase of the absolute mass of profits show itself? A law based on the fact that under certain conditions the appropriated mass of surplus-labor, and consequently of surplus-value, increases, and that, so far as the total capital is concerned, or the individual capital as an aliquot part of the total capital, profit and surplus-value are identical magnitudes?
Take that aliquot part of capital w^hich is the basis of our calculation of the rate of profit, for instance 100. These 100 illustrate the average composition of the total capital, say 80 c -f- 20 V. We have seen in the second part of this volume, that the average rate of profit is determined, not by the particular composition of individual capital, but by the average composition of social capital. If the variable capital decreases as compared to the constant, or to the total capital, then the rate of profit, or the relative magnitude of surplusvalue calculated on the total capital, falls even though the intensity of exploitation were to remain the same, or even to increase. But it is not this relative magnitude alone which falls. The magnitude of the surplus-value or profit absorbed by the total capital of 100 also falls absolutely. At a rate of surplus-value of 100%, a capital of 60 -\- 40 produces a mass of surplus-value and profit amounting to 40; a capital of YO c + 30 V a mass of profit of 30; a capital of 80 c -j- 20 v produces only 20 of profit. This fall refers to the mass of surplus-value, and thus of profit, and is due to the fact that the total capital of 100, with the same intensity of labor exploitation, employs less living labor, sets in motion less laborpower, and therefore produces less surplus-value. Taking any aliquot part of the social capital, that is, of capital of average composition, as a standard by which to measure surplus-value — and this is done in all calculations of profit — a relative fall of surplus-value is identical with its absolute J The Theory of the Lazu. 259 fall. -The rate of profit sinks in the above cases from 40% to 30% and 20%, because the mass of surplus-value, and of profit, produced by the same capital falls absolutely from 40 to 30 and 20. Since the magnitude of the value of capital, by which the surplus-value is measured, is given as 100, a fall in the proportion of surplus-value to this given magnitude can be only another expression for the fact that surplus-value and pro^t^ decrease absolutely. This is, of course, a tautology. But we have demonstrated that the nature of the capitalist process of production brings about this decrease.
On the other hand, the same causes which bring about an absolute decrease of surplus-value and profit on a given capital, and consequently in the percentage of the rate of profit, produce an increase of the absolute mass of surplus-value and profit appropriated by the total capital (that is, by the capitalists as a whole). How can this be explained, and what is the only way in which this can be explained, or what are the conditions on which this apparent contradiction is based?
While any aliquot part, any 100 of the social capital, any 100 of average social composition, is a given magnitude, for which a fall in the rate of profit implies a fall in the absolute magnitude of profit, just because the capital which serves as a standard of measurement is a constant magnitude, the magnitude of the social capital, on the other hand, as well as that of the capital in the hands of individual capitalists, is variable^ and in keeping with our assumptions it must vary inversely to the decrease of its variable portion.
In our former illustration, when the percentage of composition was 60 c -|- 40 v, the corresponding surplus-value and profit was 40, and the rate of profit 40%. Take it that the total capital in this stage of composition was one million. In that case the total surplus-value, and total profit, amounted to 400,000. Now, if the composition changes later to 80 c -[-20 V, while the degree of labor exploitation remains the same, then the surplus-value and profit for each 100 is 20. But as we have demonstrated that the absolute mass of surplus-value and profit increases in spite of the fall of the rate of profit, in spite of the decrease in the production of surplus-value by 26o Capitalist Production.
a capital of 100, that it grows, say, from 400,000 to 440,000, there is no other way in which this could be brought about than by a growtli of the total capital to 2,200,000 to the extent that this new composition developed. The mass of the total capital set in motion has risen by 220%, while the rate of profit has fallen by 50%. If the total capital had only been doubled, it could have produced no more surplus-value and profit with a rate of profit of 20% than the old capital of 1,000,000 at a rate of 40%. If it had grown to less than twice its old size, it would have produced less surplus-value or profit than the old capital of 1,000,000, which, with its former composition, would have had to grow from 1,000,000 to no more than 1,100,000, in order to raise its surplus-value We meet here once more the previously analysed law, that the relative decrease of the variable capital, or the develoj>^ ment of tlie productive "p6"sver of labor, requires an increasing mass of total ' nital for the purpose of setting in motion the same quautitj i " labor-power and absorbing the same quantity of surplu ' ' /. Consequently the possibility of a relative surplus of laboring peojjle develops to the extent that capitalist production advances, not because the productive power of social labor decreases, but because it increases. Relative overpopulation does not arise out of an absolute disproportion between labor and means of subsistence, or of means for the production of these means of existence, but out of a disproportion due to the capitalist exploitation of labor, a disproportion between the growing increase of capital and its relatively decreasing demand for an increase of population.
A fall in the rate of profit by 50% means its fall by onehalf. If the mass of profit is to remain the same, the capital must be doubled. In order that the mass of profit made at a declining rate of profit may remain the same as before, the multiplier indicating the growth of the total capital must U© equal to the divisor indicating the fall of the rate of profit. If the rate of profit falls from 40 to 20, the total capital must rise at the rate of 20 to 40, in order that the result may remain the same. If the rate of profit had fallen from 40 to 8^ i i The Theory of the Laiv. 261 the capital would have to increase at the rate of 8 to 40, or five times its value. A capital of 1,000,000 at a rate of 40% produces 400,000, and a capital of 5,000,000 at a rate of 8% likewise produces 400,000. This applies, so long as the result is to remain the same. But if the result is to he higher, then the capital must grow at a faster rate than the rate of profit falls. In other words, in order that the variable portion of the total capital may not only remain the same, but may also increase absohitely, although its percentage in the total capital falls, the ~total capital must grow at a higher rate than the percentage of the variable capital falls. It must grow at such a rate that it requires in its new composition not merely the same old variable capital, but mor€ than it^or the purchase of labor-power. If the variable portion oTacapital of 100 falls from 40 to 20, the total capital must rise higher than 200, in order to be able to employ a larger variable capital than 40.
Even if the mass of the exploited laboriijf: )population were to remain constant, and only the length • ' intensity of the working day to increase, the mass of invested capital would have to increase, since it must rise for the mere purpose of employing the same mass of labor under the old conditions of exploitation as soon as the composition of capital varies.
Tn short, the same development of the social productivity oLkbor expresses itself in the course of capitalist production on the one hand in a tendency to a progressive fall of the rate of profit, and on the other hand in a progressive increase of the absolute mass of the appropriated surplus-value, or profit; so that on the whole a relative decrease of variable capital and profit is accompanied by an absolute increase of both. This twofold effect, as we have seen, can express itself only in a growth of the total capital at a ratio more rapid than that ex2)res?CM_l by th^ fall in the rate of profit. In order that an absolutely increased variable capital may be employed in a capital of higher composition, that is, a capital in which the constant capital has relatively increased still more than the variable, the total capital must not only grow in proportion 262 Capitalist Production.
to its higher composition, but even still more rapidly. It follows, then, that an ever larger quantity of capital is required in order to employ the same, and still more an increased amount of labor-power, to tlie extent that the capitalist mode of production develojDS. The increasing productivity of labor thus creates necessarily and permanently an apparent overpopulation of laboring people. If the variable capital forms only one-sixth of the total capital instead of onehalf, as before, then the total capital must be trebled in order,to employ the same amount of labor-power. And if the labor-power to be employed is doubled, then the total capital must be multiplied by six.
Political economy has so far been unable to explain the law of the falling tendency of the rate of profit. So it pointed as a consolation to the increasing mass of profit, tlie increase in the absolute magnitude of profit for the individual capitalist as well as for the social capital, but even this consolation was based on mere commonplaces and probabilities.
It is simply a tautology to say that the mass of profit is determined by two factors, namely first the rate of profit, and secondly by the mass of capital invested at this rate. It is therefore but a corollary of this tautology to say that there is a possibility for the increase of the mass of profit even though the rate of profit may fall at the same time. This does not help us to get one step farther, since there is also a possibility that the capital may increase without resulting in an increase of the mass of profit, and that it may even increase while the mass of profit is already falling. For 100 at 25% make 25, while 400 at 5% make only 20.^^ But if the same ^ " We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land and the rise of wages, yet the aggregate amount of profits would increase. Thus, supposing that, with repeated accumulations of 100,000 p. St., the rate of profits should fall from 20 to 19, to 18, to 17%, a constantly diminishing rate; we should expect that the whole amount of profits received by those successive owners of capital would be always progressive; that it would be greater when the capital was 200,000 p. St., than when 100,000 p.st.; still greater when 300,000 p. St.; and so on, increasing, though at a diminishing rate, with every increase of capital. This progression, however, is only true for a certain time; thus 19% on 200,000 p.st. is more than 20 on 100,000 p.st.; again 18% on 300,000 p.st. is more than 19% on 200,000 p.st.; but after capital has accumulated to a large amount, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus, suppose the ac The Theory of the Law. 263' causes, which bring about a fall in the rate of profit, promote the accumulatioii^that is, the formation of additional capital, and if each additional capital employs additional labor and produces additional surplus-value; when, on the other hand, the" mere fall in the rate of profit implies the fact that the constant capital, and with it the total old capital, have increased, then this process ceases to be mysterious. We shall see^TaTe'r, to what falsifications of calculations some people have recourse in order to deny the possibility of an increase in the mass of profits while the rate of profits is simultaneously decreasing.
We have shown that the same causes, which bring about a tendency of the average rate of profits to fall, necessitate also an accelerated accumulation of capital and consequently an ^increase in the absolute magnUude, or total mass^ j)f.llifi surplusjabor (surplus-value, profit) appropriated by it. Just as everything is reversed in competition, and thus in the consciousness of its agents, so is also this law, this internal and necessary connection between two apparent contradictions. It is evident, within the proportions indicated above, that a capitalist disposing of a large capital will receive a larger mass of profits than a small capitalist making apparently high profits. A superficial observation of competition shows furthermore that under certain circumstances, when the greater capitalist Avishes to make more room for himself on the market by pushing aside the smaller ones, as happens in times of commercial crises, he makes a practical use of this, that is, he lowers his rate of profit intentionally in order to crowd the smaller ones off the field. Particularly merchant's capital, as we shall show at length later on, shows symptoms, which seem to attribute the fall in profits to an expansion of the business, cumulation should be 1,000,000 p.st., and the profits 7%, the whole amount of profits will be 70,000 p.st.; now if an addition of 100,000 p.st. capital be made to the million, and profits should fall to 6%, 66,000 p.st. or a diminution of 4,000 p.st. will be received by the owners of the stock, although the whole amount of stock will be increased from 1,000,000 p.st. to 1,100,000 p.st." — Ricardo, Political Economy, chapter \^II (in Works, McCulloch Edition, 1852, page 68). — The fact is, that the assumption has here been made that the capital increases from 1,000,000 to 1,100,000, that is, by 10%, while the rate of profit falls from 7 to 6%, or 14 2/7%. Hence those tears!
264 Capitalist Production.
and thus of capital. We shall later on give a scientific expression for this false conception. Similar superficial observations result from the comparison of rates of profit made in some particular lines of business, according to whether they are subject to free competition or to monopoly. The utterly shallow conception existing in the heads of the agents of competition is found in our Koscher, namely the idea that a reduction of the rate of profits is " more prudent and humane." The fall in the rate of profit is in this case attributed to an increase of capital, it appears as a consequence of this increase, and of the resultant calculation of the capitalist that the mass of profits to be pocketed by him will be greater at a smaller rate of profits. This entire conception (with the exception of that of Adam Smith, which we shall mention later) rests on the utter misapprehension of what the average rate of profit represents and on the crude idea that prices are indeed determined by adding a more or less arbitrary amount pf profit to the actual value of the commodities. Crude as these ideas are, they arise necessarily out of the inverted aspect which the immanent laws of capitalist production represent under competition.
The law that the fall in the rate of profit due to the development of the productive powers is accompanied by an increase in the mass of profit expresses itself furthermore in the fact that a fall in the price of commodities produced by capital is accompanied by a relative increase of the masses of profit contained in them and realised by their sale.
Since the development of the productive powers and the higher composition of capital corresponding to it set in motion an ever increasing quantity of means of production with an ever decreasing quantity of labor, every aliquot part of the total product, every single commodity, or every particular quantity of commodities in the total mass of products absorbs less living labor, and also contains less materialised labor, both as to the wear and tear of fixed capital and to the raw and auxiliary materials consumed. Every single commodity, then, contains a smaller amount of labor materialised in means of production and of labor newly added during production.
The Theory of the Lazv. 265 Hence tlie;^rice_.of..„ the individual commodity falls. The mass of profits contained in the individual commodities may nevertheless increase, if the rate of the ahsolute or relative surplus-value grows. The commodity then ^contains ^less newly added laboiy-but its unpaid portion grows over its paid portion. How^ever, this is the case only within certain limits. In the course of the development of production, with the enormously growing absolute decrease of the amount of living labor newly embodied in the individual commodities, the mass of unpaid labor contained in them will likewise decrease absolutely^ however much it may have grown as compared to their paid portion. The mass of profit on each individual commodity will decrease considerably with the development of the productive power of labor, in spite of the increase of the rate of sui-plus-value. And this reduction, the same as the fall in the rate of profits, is only delayed by the cheapening of the elements of constant capital and the other circumstances mentioned in the first part of this volume, which increase the rate of profit at a stable, or even falling, rate of surplus-value. '"~~— -~ To say that the price of the individual commodities falls, which together make up the total product of the capital, is simply to say that a certain cjiiantity of labor is realised in a larger quantity of commodities, so that each individual commodity contains less labor than before. This is the case even if the price of one of the parts of constant capital, such as raw material, etc., should rise. With the exception of a few cases (for instance, if the productive power of labor cheapens all the elements of constant and variable capital uniformly) the rate of profit will fall in spite of the increased rate of surplus-value, 1), because even a larger unpaid portion of the smaller total amount of newly added labor is smaller than a smaller aliquot portion of unpaid labor was in the former large amount of total labor, and 2), because the higher composition of the capital is expressed through the individual commodity by the fact that that portion of its value, in which newly added labor is materialised, decreases as compared to that portion of its value, which represents raw material, aux- 266 Capitalist Production.
iliary material^ and wear and tear of fixed capital. This change in the proportions of the various component parts of the price of the individual commodities, the decrease of that portion of their price, in which newly added labor is materialised, and the increase of that portion, in which formerly materialised labor is represented, is that form which expresses through the price of the individual commodities the decrease of the variable capital as compared to the constant capital. To the extent that this decrease is absolute for a certain amount of capital, for instance 100, it is also absolute for every individual commodity as an aliquot part of the reproduced capital. However, the rate of profit, if calculated merely on the elements of the price of the individual commodity, would be different from what it actually is. The reason for this is as follows: [The rate of profit is calculated on the total capital invested, but only for a definite time, in fact, for one year. The rate of profit is the proportion of the surplus-value, or profit, made and realised on the total capital and calculated in percentages. It is, therefore, not necessarily equal to a rate of profit, whose jcalculation was not based on one year, but on the period of turn-over of the invested capital. These two things do not coincide, unless the capital is turned over exactly in one year.
On the other hand, the profit made in the course of one year is merely the sum of the profits on the commodities produced and sold during the same year. ISTow, if we calculate the profit on the cost-price of the commodities, we obtain a rate of profit = -^, in which p stands for the profit realised during one year, and k for the sum of the cost-prices of the commodities produced and sold during that year. It is e^ddent that this rate of profit -^ will not coincide with the actual rate of profit —, or mass of profit divided by the total capital, unless k = C, that is, unless the capital is turned over in exactly one year.
Let us take three different conditions of some industrial capital.
The Theory of the Law. '^67 I. — A capital of 8,000 p.st. produces and sells annually 5,000 pieces of commodities, at 30 sh, per piece, making an annual turn-over of 7,500 p.st. It makes a profit of 10 sh. on each piece, or 2,500 p.st. per year. Every piece, then, contains 20 sh. of capital advance, and 10 sh. of profit, so that the rate of profit per piece is 5-^ = 50%. The turnedover sum of 7,500 p.st. contains 5,000 p.st. of advanced capital and 2,500 p.st. of profits. Eate of profit for one turnover, -^, likewise 50%. But the rate of profit calculated on the total capital is the rate of profit -J- =|f|^ = 31|%.