commodities a refutation of the principle of value? By no means. For since the prices of some commodities rise above value to the same extent that the prices of others fall below it, the total sum of prices remains equal to the total sum of values...the incongruity disappears in the last instance." This incongruity is a " disturbance "; and " in the exact sciences it is not the custom to regard a calculable disturbance as a refutation of a certain law."
26 Preface.
On comparing the relevant passages of chapter IX with these statements, it will be seen that Fireman has indeed placed his finger on the salient point. But the undeservedly cool reception given to his able article proves that Fireman still needed many interconnecting links, even after this discovery of his, before he would have been enabled to work out a full and comprehensible solution. Although many were interested in this problem, they were all afraid of burning their fingers with it. And this is due not only to the incomplete form in which Fireman left his discovery, but also to the undeniable faultiness of his conception of the Marxian analyses and his critique of them based on his misconception.
Whenever there is an opportunity to make himself ridiculous by attempting a difficult feat, professor Julius Wolf of Ziirich never fails to exhibit himself. He tells us (Conrad's JaJirhucher, neue Folge, II, pages 352 and following) that the entire problem is solved by the relative surplus-value. The production of relative surplus-value rests on the increase of the constant capital as compared to the variable capital. " A plus in constant capital has for its premise a plus in the productive power of the laborers. Since this plus in productive power (by way of cheapening the necessities of life) produces a plus in surplus-value, the direct relation between an increase of surplus-value and an increasing share of the constant capital in the total capital is revealed. A plus in constant capital indicates a plus in the productive power of labor. Therefore, if the variable capital remains the same and the constant capital increases, surplus-value must also increase, and we are in agreement with Marx. This was the problem which we were to solve."
Now Marx says the direct opposite in a hundred passages of the first volume. Furthermore, the assertion that, according to Marx, relative surplus-value increases in proportion ' Preface. 27 as the constant capital is augmented while the variable capital decreases, is so astounding that it defies all parliamentarian language. And finally Mr. Julius Wolf demonstrates in every line that he has neither relatively nor absolutely the least understanding of relative or absolute surplus-value. Truly he says that " at first glance one seems to be in a nest of incongruities," which, by the way, is the only true statement in his whole article. But what does that matter? Mr. Julius Wolf is so proud of his brilliant discovery that he cannot refrain from bestowing posthumous praise on Marx for it and advertising his own fathomless nonsense as a " renewed proof of the acuteness and farsightedness with which Marx has drawn up his critical system of capitalist economy."
But that is not the worst. Mr. Wolf says: " Ricardo likewise claimed that an equal investment of capital yielded equal surplus-values (profit), and that the same expenditure of labor created the same amount of surplus-value. And the question was: How does the one agree with the other? But Marx did not acknowledge this form of the problem. He has doubtless shown (in the third volume), that the second statement is not necessarily a consequence of the law of value, or that it even contradicts his law of value and must, therefore,...be directly repudiated." And thereupon Wolf seeks to find out whether Marx or I made a mistake. Of course, it does not occur to him that he is the one who is wandering in darkness.
It would be an insult to my readers, and a total disregard for the humor of the situation, were I to lose one word about this gem of a passage. I merely wish to add this: With the same boldness, which enabled him to foretell even then what Marx *' has doubtless shown " in the third volume, he avails himself of this opportunity to report an alleged gossip among the professors to the effect that Konrad Schmidt's above- 28 Preface.
28 Preface.
named work was " directly inspired by Engels." Mr. Julius Wolf! In the world in wliicli you live it may be customary for a man to challenge others publicly for the solution of some problem and to acquaint his private friends clandestinely with this solution. That you are capable of such a thing is not hard to believe. But that a man need not stoop to such mean tricks in the world in which I live, is shown by the present preface.
Marx had hardly died, when Mr. Achille T^oria hastily published an article about him in the Nuova Antologia (April, 1883). He starts out with a biography of Marx full of misinformation, and follows it up with a critique of Marx's public, political and literary activity. He misrepresents the materialist conception of history of Marx and twists it with an assurance which indicates a great purpose. And this purpose was later accomplished. In 188G, the same Mr. Loria published a book entitled La teoria economica delta costituzione politica (The Economic Foundations of Society), in which he announced to his admiring contemporaries that the materialist conception of history, so completely and purposely misrepresented by him in 1883, was his own discovery. True, the Marxian theory is reduced to a rather Philistine level in this book. And the historical illustrations and proofs abound in mistakes which would not be pardoned in a high school boy. But what does that matter? He thinks he has established his claim that the discovery that always and everywhere the political conditions and events are explained by corresponding economic conditions was not made by Marx in 1845, but by Mr. Loria in 1886. At least this is what he has tried to make his countrymen believe, and also some Frenchmen, for his book has been translated into French. And now he can pose in Italy as the author of a new and epoch-making Preface. 29 Preface. 29 theory of history, until the Italian socialists will find time to strip the illustre Loria of his stolen peacock feathers.
But this is only an insignificant sample of Mr. Loria's style of doing things. He assures us that all of Marx's theories rest on conscious sophistry (un consapido sofisma); that Marx was not above using false logic, even though he knew it to be so (sapendolitali), etc. And after thus biasing his readers by a whole series of such contemptible insinuations, in order that they may regard Marx as just such an unprincipled upstart as Loria, accomplishing his effects by the same shameless and foul means as this professor from Padua, he has a very important secret for the readers, and incidentally he touches upon the rate of profit.
Mr. Loria says: According to Marx, the amount of surplus-value (which Mr. Loria here mistakes for profit) produced in an industrial establishment under capitalism depends on the variable capital employed in it, since the constant capital does not yield any profit. But this is contrary to fact. Lor in practice the profit is not measured by the variable, but by the total capital. And Marx himself recognizes this (Vol. I, chapter XI) and admits that the facts seem to contradict his theory. But how does he get over this contradiction? He refers his readers to a subsequent volume which has not yet been published. Loria had previously told his readers with reference to this unpublished volume, that he did not believe that Marx had ever thought for a moment of writing it. And now he exclaims triumphantly: " Not without good reason did I contend that this second volume, which Marx always flings into the teeth of his adversaries without ever publishing it, might very well be a shrewd expedient, to which Marx always resorted whenever scientific arguments failed him (un ingegnoso spediente ideato dal 30 Preface.
Marx a sostituzione degli argomenti scientifid). And whoever is not convinced after this that Marx stood on the same level of scientific swindle with the illustre Loria, is past all redemption.
We have at least learned this much: According to Mr. Loria, the Marxian theory of surplus-value is absolutely irreconcilable with the fact of a general and equal rate of profit. But at last the second volume of Capital appeared. It contained my public challenge referring to this point. If Mr. Loria had been one of us diffident Germans, he would have felt a certain embarrassment. But he is a bold southerner, he comes from a hot climate and can claim that a cool nerve is a natural requirement for him. The question concerning the rate of profit has been publicly put. Mr. Loria has publicly declared that it is insoluble. And for this very reason he is now going to outshine himself by publicly solving it.
This miracle is accomplished in Conrad's Jahrhucher, N. F., vol. XX, pages 272 and following, in an article dealing with Konrad Schmidt's above-cited pamphlet. After Loria has learned from Schmidt how the commercial profit is made, he sees everything clearly. " Since a determination of value by means of labor-time gives an advantage to those capitalists who invest a greater portion of their capital in wages, the unproductive " (he means commercial) " capital can extort from these privileged capitalists a higher interest " (he means profit) " and thus bring about an equalization between the individual industrial capitalists.,.. For instance, if each of the industrial capitalists A, B, C, use 100 working days and 0, 100^ and 200 constant capital respectively in production, and if the wages for 100 working days amount to 50 working days, then every capitalist receives a surplusvalue of 50 working days, and the rate of profit is 100% Preface. 3 1 for the first 33.3% for the second, and 20% for the third capitalist. But if a fourth capitalist D accumulates an unproductive capital of 300, which extorts an interest " (profit) " equal in value to 40 working days from A, and an interest of 20 working days from B, then the rate of profit of the capitalists A and B will sink to 20% the same as that of C, and D with his capital of 300 will receive a profit of 60, or a rate of profit of 20%, the same as the other capitalists."
With such astonishing dexterity I'illustre Loria solves sleight of hand fashion the same question which he had declared insoluble ten years previously. Unfortunately he did not betray to us the secret of the way in which the owners of the '^ unproductive capital " obtain the power to extort from those industrials their extra-profit exceeding the average rate of profit and to keep it in their own pockets in the same way in which the land owner pockets the surplus-profit of the capitalist farmer as ground rent. For according to this the commercial capitalists would be levying upon the industrials a tribute analogous to ground rent and thereby bring about an equalization of the rate of profit. I^ow, tbe commercial capital is indeed a very essential factor in the equalization of the rate of profit, as nearly everybody knows. But only a literary adventurer, who in the bottom of his heart cares naught for political economy, can venture the assertion that commercial capital has the magic power to absorb all profits above the average rate of profit, even before this average rate has become established^ and to convert it into ground-rent for itself without even requiring any real estate for this purpose. Nor is the assertion less astonishing that commercial capital has the gift of discovering those industrials, whose surplus-value just covers the average rate of profit, and that it considers it an honor to mitigate the 32 Preface.
32 Preface.
fate of those luckless victims of the Marxian law of value by selling its products to them free of charge, without asking as much as a commission for it. What a mountebank a man must be in order to imagine that Marx had to have recourse to such miserable tricks!
But Mr. Loria does not shine in his full glory, until we compare him with his northern competitors, for instance with Mr. Julius Wolf, who was not born yesterday, either. What a small coyote Mr. Wolf seems to be, even in his big volume on Socialism and the Capitalist Order of Society, compared to that Italian! How clumsily, I am almost tempted to say modestly, does he stand forth beside the noble check of the maestro who pretends as a matter of course that Marx is just such a sophist, poor logician, liar and mountebank as ]\Ir. Loria himself, that Marx bamboozles the public with a promise of completing his theory in some future volume which he neither will nor can write, as he very well knows, whenever he gets into a tight place! Unlimited nerve coupled to the smoothness of an eel when slipping through impossible situations, a heroic imperviousness to kicks received by him, a hasty appropriation of the accomplishments of others, an importunate charlatanry of advertising, an organization of fame by the help of a clique of friends — who can equal him in all these?
Italy is the land of classic lore. Since the great time when the morning glow of the modern world rose over it, it produced magnificent characters of unequalled classic perfection, from Dante to Garibaldi. But the time of its degradation under the rule of strangers also bequeathed classic character-masks to it, among them two especially sharply chiseled types, that of Sganarelli and Dulcamara. The classic unity of both is embodied in our illustre Loria.
In conclusion I must take my readers across the Atlantic.
Preface. 33 Dr. (med.) George C. Stiebeling, of Xew York, also found a solution of the problem, and a very simple one at that. It was so simple that no one on either side of the ocean cared to take him seriously. This aroused his ire, and he complained about this outrage in an endless number of pamphlets and newspaper articles, on both sides of the great water. He was told in the Neue Zeit that his solution was based entirely on an error in his calculation. But this did not disturb him in the least. Marx had also made many errors of calculation, and yet he was right. Let us, then, take a closer look at Dr. Stiebeling's solution.
" Take two factories working with equal capitals for an equal length of time, but with different proportions of their constant and variable capitals. The total capital (c -|- v) will be regarded as equal to y, and the difference in the proportion of the constant to the variable capital equal to x. In the first factory, y is equal to c + v, in the second y is equal to (c — x) + (^ + x). The rate of surplus-value is therefore in the first factory equal to ^, and in the second factory equal to ^-t^- I designate as profit (p) the total surplus-value (m), by which the total capital y, or q -\- Vy is augmented in the given time, in other words, p is equal to m. Hence the rate of profit in the first factory is equal to y; or ~, and in the second factory likewise equal to -|-, or ^^_^-^'^^^^^^, that is to say, it is also equal to ~. The...problem solves itself in such a way that, on the basis of the law of value, equal capitals employing unequal quantities of living labor in equal lengths of time, a change in the rate of surplus-value brings about the equalization of an average rate of profit." (G. C. Stiebeling, The Law of Value and the Rate of Profit, I^ew York, John Heinrich.)
C 34 Preface.
C 34 Preface.
In spite of the beautiful clearness of the above calculation, we cannot refrain from asking Dr. Stiebeling this question: How does he know that the sum of surplus-values produced by the first factory is exactly equal to the sum of surplusvalues produced in the second factory? He states explicitly that c, V, y and x, that is to say, all the other factors in the calculation, are equal in both factories, but not a word about m. It follows by no means that these two quantities of surplus-value are equal simply because he designates them both by m. On the contrary, this is precisely what must be proved, especially since Dr. Stiebeling also identifies the profit p without further ceremony with the surplus-value m. Xow, only two possibilities present themselves. Either the m's are equal, both factories produce equal quantities of surplus-value, and therefore, since both capitals are equal, also equal quantities of profit. If so, then Dr. Stiebeling has taken for granted at the outset what he was called upon to prove. Or, one factory produces more surplus-value than the other, and in that case his entire calculation falls to the ground.
Mr. Stiebeling spared neither pains nor money in building upon this erroneous calculation of his mountains of other calculations and exhibiting them to the public. I can assure him, for his own peace of mind, that nearly all of his calculations are equally wrong, and whenever they are not, they prove something entirely different from what he set out to prove. He proves, for instance, by a comparison of the U. S. census figures for 1870 and 1880 that the rate of profit has actually fallen, but explains this fact wrongly, assuming that he has to correct Marx for working his theory with a never changing, stable, rate of profit. But the third part of the third volume of Capital shows that this '' stable rate of profit " in Marxian economics is purely a figment of Dr.
Preface. 35 Preface. 35 Stiebeling's brain, and that the falling rate of profit is due to causes which are just the reverse of those indicated by Dr. Stiebeling. ISTo doubt Dr. Stiebeling has the best intentions, but a man who undertakes to discuss scientific questions should learn above all to read the works of the author, whom he wishes to study, just as they have been written, and especially not to find anything in them which they do not contain. The outcome of the entire investigation, also in this question, shows once more that the Marxian school is the only one which has accomplished something in this line. When Fireman and Konrad Schmidt read this third volume, they will have good reasons for being well satisfied with the work done by each of them.
Fredeeick Engels. London, October 4, 1894.
VOLUME III.
THE PROCESS OF CAPITALIST PRODUCTION AS A WHOLE.
PART I.
THE CONVEESIOJ^ OF SURPLUS-VALUE INTO PROFIT AND OF THE RATE OF SURPLUS- VALUE INTO THE RATE OF PROFIT.
CHAPTER L COST PRICE AND PEOFIT.
IN the first volume we analyzed the phenomena presented hj the process of capUalist production., considered by itself as a mere productive process without regard to any secondary influences of conditions outside of it. But this process of production, in the strict meaning of the term, does not exhaust the life circle of capital. It is supplemented in the actual world by the process of circulation, which was the object of our analysis in the second volume. We found in the course of this last-named analysis, especially in part III, in which we studied the intervention of the process of circulation in the process of social reproduction, that the capitalist process of production, considered as a whole, is a combination of the processes of production and circulation. It cannot be the object of this third volume to indulge in general reflections relative to this combination. We are rather interested in lo 38 Capitalist Production.
eating the concrete forms growing out of the movements of capitalist production as a whole and setting them forth. In actual reality the capitals move and meet in such concrete forms that the form of the capital in the process of production and that of the capital in the process of circulation impress one onlv as special aspects of those concrete forms. The conformations of the capitals evolved in this third volume approach step by step that form which they assume on the surface of society, in their mutual interactions, in competition, and in the ordinary consciousness of the human agencies in this process.
The value of every commodity produced by capitalist methods is represented by the formula: C = c -}- ^ + s. If we subtract the surplus-value s from this value of the product, there remains only an equivalent for the value of the capital c + V expended for the elements used in the production of this commodity.
Take it that the production of a certain article requires the expenditure of a capital of 500 p.st., of which 20 p.st. are consumed by the wear and tear of instruments of production, 380 p.st. spent for materials of production, and 100 p.st, for labor-power. And let the rate of surplus-value be 100%. In that case the value of this product is equal to 400 c + 100 V + 100 s, or 600 p,st.
After deducting the surplus-value of 100 p.st., we have a remaining commodity-capital of 500 p.st,, which is only an ' equivalent for the consumed capital of 500 p.st. This portion of the value of the commodity, which makes good the price of the consumed means of production and the price of the employed labor-power, replaces only the amount paid by the capitalist himself for this commodity and represents, therefore, from his point of view the cost price of this commodity.
However, the cost of this commodity to the capitalist, and the actual cost of this commodity, are two vastly different amounts. That portion of the value of the commodity which consists of surplus-value does not cost the capitalist anything for the reason that it costs the laborer unpaid labor. But on Cost Price and Profit. 39 the basis of capitalist production, the laborer plays the role of an ingredient of productive capital as soon as he has been incorporated in the process of production. Under these circumstances the capitalist poses as the actual producer of the commodity. For this reason the cost price of the commodity to the capitalist necessarily appears to him as the actual cost of the commodity. If we designate the cost-price by k, we can transcribe the formula C ^ c + v + s into the formula C = k -|" s, that is to say, the value of a commodity is equal to the cost price plus the surplus-value.
In this way the classification of the various values making good the value of the capital consumed in the production of the commodity under the term of cost price expresses, on the one hand, the specific character of capitalist production. The capitalist cost of the commodity is measured by the expenditure of capital, while the actual cost of the commodity is measured by the expenditure of labor. The capitalist costprice of the commodity, then, is a quantity difiPerent from its value, or its actual cost-price. It is smaller than the value of the commodity. For since C = k -j- s, it is evident that k = C — s. On the other hand, the cost-price of a commodity is by no means a mere heading in capitalist bookkeeping. The actual existence of this portion of value continually exerts its practical influence in the actual production of the commodity, because it must be ever reconverted from its commodityform, by way of the process of circulation, into the form of productive capital, so that the cost-price of the commodity must always buy anew tte elements of production consumed in its creation.
However, the cost-price as a heading in bookkeeping has nothing to do with the formation of the value of a commodity, or with the process of self-expansion of capital. When I know that five-sixths of the value of a commodity worth 600 p.st, or 500 p.st., represent but an equivalent for the capital consumed in its production and suffice only for the purchase of new material elements of the same capital, I know nothing as yet of the way in which these five-sixths representing the costprice of the commodity are produced, nor do I know anything 40 Capitalist Production.
about the production of the last sixth which constitutes its surplus-value. K^evertheless we shall see in the course of our analysis that the cost-price plays in capitalist economics the false role of a category in the actual production of values.
Let us return to our example. Take it that the value produced by one laborer in an average social working day is represented by 6 shillings in money. In that case the advanced capital of 500 p.st. consisting of 400 c -|- 100 v represents the values produced in 1666f working days, of ten hours each. Of this amount 1333^ working days are crystallized in the value of the means of production amounting to 400 p.st. (400 c), and 333^ working days are crystallized in the value of labor-power amounting to 100 p.st. (100 v). Having assumed a rate of surplus-value of 100%, the production of the new commodity costs an expenditure of labor-power amounting to 100 V -|- 100 s, or 6665 working days of ten hours each.
We know^ then, as shown in volume I, chapter VII, that the value of the newly created product of 600 p.st. is composed, 1), of the reappearing value of the constant capital of 400 p.st. expended for means of production, and 2), of a newly produced value of 200 p.st. The cost-price of the commodity, or 500 p.st., comprises the reappearing 400 c and one-half of the newly produced value of 200 p.st., that is to say 100 V. In other words, it comprises two elements of the value of the commodity which are of widely different origin.
Owing to the appropriate character of the labor expended during 666f working days of ten hours each, the value of the means of production consumed in this process, to the amount of 400 p.st., is transferred to the product. This previously existing value thus reappears as an element of the value of the product, but is not created in the process of production of this commodity. It exists as an element of the value of this commodity only for the reason that it previously existed as an element of the invested capital. The expended constant capital, then, is replaced by that portion of the value of the commodity which this capital transfers to the commodity of its own accord in the labor-process. This element of the costprice, therefore, has an ambiguous meaning. On the one Cost Price and Profit. 41 hand it passes into the cost-price of the commodity, because it is an element of that portion of the value of the commodity •which replaces consumed capital. And on the other hand it forms an element of the value of the commodity only for the reason that it is the value of consumed capital, or because the means of production cost a certain sum.
It is different witb the other element of the cost-price. The 666f working days expended in the production of the commodity create a new value of 200 p.st. One portion of this new value replaces only the advanced variable capital of 100 p.st., which is the price of the labor-power employed. But this advanced capital-value does not participate in the creation of the new value. So far as the advance of capital is concerned, labor-power counts as a value. But in the process of production, labor-power performs the function of creating value. The place of the mere value of labor-power in the advance of capital is taken in the actual process of productive capital by living labor-power which creates value.
This difference of the various elements of the value of a commodity which constitute the cost-price becomes evident whenever a change takes place either in the amount of the value of the expended constant capital or in that of the expended variable capital. For instance, let the price of the same means of production, or of the constant portion of capital, rise from 400 p.st. to 600 p.st., or fall to 200 p.st. In the first case it is not only the cost-price of the commodity which rises from 500 p.st. to 600 c + 100 v, or 700 p.st., but also the value of the commodity which rises from 600 p.st. to 600 c + 100 V + 100 s, or 800 p.st. In the second case, it is not only the cost-price which falls from 500 p.st. to 200 c -\-100 V, or 300 p.st., but also the value of the commodity which falls from 600 p.st. to 200 c + 100 v -f 100 s, or 400 p.st. Because the expended constant capital transfers its own value to the product, therefore the value of the product rises or falls with the absolute magnitude of that capital-value, other circumstances remaining the same. But on the other hand let us assume that, other circumstances remaining the same, the price of the same amount of labor-power rises from 100 p.st.
42 Capitalist Production.
to 150 p.st, or falls from 100 p.st to 50 p.st. In the first case, the cost-price rises indeed from 500 p.st. to 400 c -|- 150 v, or 550 p.st., and in the second case it falls from 500 p.st. to 400 c + 50 V, or 450 p.st. But in either case, the value of the commodity remains unchanged at 600 p.st. In the first case it is 400 c + 1^0 v -f 50 s, in the second 400 c + 50 v + 150 s, but in either case it is 600 p.st. The advanced variable capital does not transfer its own value to the product. The place of its value is taken in the product by a new value created by labor. Therefore a change in the value of the absolute magnitude of the variable capital, to the extent that it expresses merely a change in the price of labor-power, does not alter the absolute magnitude of the value of the commodity in the least, because it does not alter anything in the absolute magnitude of the new value created by living labor. Such a change influences only the relative proportion of the magnitudes of the two elements of the new value, one of which forms surplus-value, and the other of which makes good the variable capital and passes into the cost-price of the commodity.
The two elements of the cost-price, in the present case 400 c -|- 100 V, have only this in common that they are both of them elements of the value of the commodity replacing advanced capital.
But this actual condition of things must necessarily look reversed from the point of view of capitalist production.
The capitalist mode of production is distinguished from a mode of production based on slavery by this fact among others that in the former the value, or the price, as the case may be, of labor-power assumes the form of the value, or price, of labor itself, that is to say, the form of wages. (Volume I, chapter XIX.) The variable portion of the advanced capital, therefore, presents itself as a capital advanced in ^vages, as a capital-value paying for the value, or price, of all labor expended in production. Take it, for instance, that an average social working day of ten hours is represented by 6 shillings of money. In that case the advance of a variable capital of 100 p.st. expresses in money Cost Price and Profit. 43 the value of a product created in 333^ ten-hour days. But this vahie, being an element of the advance of capital for the purchase of labor-power, is not an element of the productive capital in the actual performance of its function. Its place in the process of production is taken by living labor-power. If the degree of exploitation of this labor-power is 100%, as it is in our illustration, then it is expended during 666f ten-hour days, and thereby adds to the product a new value of 200 p.st. On the other hand, the variable capital of 100 p.st. figures in the advance of capital as a capital invested in wages, or as the price of labor performed in 666f tenhour days. Dividing 100 p.st. by 666f, we obtain 3 shillings as the price of a working day of ten hours, equal in value to the product of five hours' labor.
Now, if we compare the advance of capital on one side with the value of commodities on the other, we find the following condition of things: I. Capital advanced 500 p.st., consisting of 400 p.st. of capital expended in means of production (price of means of production) plus 100 p.st. of capital expended in wages (price of 666f working days, or wages for the same).
II. Value of commodities 600 p.st. of which 500 p.st. represent the cost-price (400 p.st. price of expended means of production plus 100 p.st. price of expended 666f working days) plus 100 p.st. surplus-value.