2) The fact that the additional living labor contained in the individual commodities, which together make np the product of capital, stands in a decreasing proportion to the materials and instruments of labor consumed by them; the fact, that an ever decreasing quantity of additional living labor is materialised in them, because their production requires less labor to the extent that the productive power of society is developed, — this fact does not touch the proportion, according to which the living labor contained in the commodities is divided into paid and unpaid labor. On the other hand, although the total quantity of additional living labor contained in them decreases, the unpaid portion increases over the paid portion, either by an absolute, or by a proportional reduction of the paid portion; for the same mode of production, which reduces the total quantity of the additional living labor in the commodities, is accompanied by a rise of the absolute and relative surplus-value. The falling tendency of the rate of profit is accompanied by a rising tendency of the rate of surplus-value, that is, in the rate of exploitation. Xothing is more absurd, for this reason, than to explain a fall in the rate of profit by a rise in the rate of wages, although there may be exceptional cases where this may apply.
Statistics do not become available for actual analyses of the rates of wages in different epochs and countries, until the conditions, which shape the rate of profit, are thoroughly understood. The rate of profit does not fall, because labor becomes less productive, but because it becomes more productive. Both phenomena, the rise in the rate of surplus-value and the fall in the rate of profit, are but specific forms through which the productivity of labor seeks a capitalistic expression, VI. The Increase of Stock Capital. The foregoing five points may be supplemented by the following, which, however, cannot be more fully detailed for the present. A portion of capital serves only as interest-bearing capital, and is so calculated, to the extent that capitalist production makes progress and hastens accumulation. This term interest-bearing capital is not applied here to capital loaned 282 Capitalist Production.
by a capitalist who is satisfied with interest on it, while the industrial capitalist borrowing it pockets the investor's profit. This has no bearing upon the level of the average rate of profit, for this rate is concerned only with profit as composed of interest + profit of all sorts + ground rent, and the proportional division into these particular categories is immaterial for it. We speak here of interest-bearing capital in the sense that these capitals, although invested in large productive enterprises, yield only large or small amounts of interest, socalled dividends, after all costs have been paid. This is typical of railroads, for instance. These dividends do not help to level the average rate of profit, because they represent a lower than the average rate of profit. If they did help in this, then the average rate of profit would fall much lower. The- ' oretically such capitals may be included in the calculation, and in that case the result will be a lower rate of profit than that which actually seems to exist and determine the actions of the capitalists, since the constant capital is the largest as compared to the variable capital precisely in these enterprises.
CHAPTER XV.
UNRAVELING THE INTERNAL CONTRADICTIONS OF THE LAW.
I. General Bemarks. We have seen in the first part of this volume, that the rate of profit expresses the rate of surplus-value always lower than it actually is. We have now seen, that even a rising rate of surplus-value has a tendency to express itself in a falling rate of profit. The rate of profit would be equal to the rate of surplus-value only if c = O, that is, if the entire invested capital were paid out in wages. A falling rate of profit does not express a falling rate of surplus-value, unless the proportion of the value of the constant capital to the quantity of labor-power set in motion by it remains unchanged, or the amount of labor-power has increased relatively over the value of the constant capital.
Internal Cuiitradictions. 283 Ricardo, under pretense of analysing the rate of profit, actually analyses only the rate of surplus-value, and he does so on the assumption that the working day is intensively and extensively a constant magnitude.
A fall in the rate of profit and a hastening of accumulation are in so far only different expressions of the same process as both of them indicate the development of the productive power. Accumulation in its turn hastens' the fall of the rate of profit, inasmuch as it implies the concentration of labor on a large scale and thereby a higher composition of capital. On the other hand, a fall in the rate of profit hastens the concentration of capital and its centralisation through the expropriation of the smaller capitalists, the expropriation of the last survivers of the direct producers who still have anything to give up. This accelerates on one hand the accumulation, so far as mass is concerned, although the rate of accumulation falls with the rate of profit.
On the other hand, so far as the rate of self-expansion of the total capital, the rate of profit, is the incentive of capitalist production (just as this self-expansion of capital is its only purpose, its fall checks the formation of new independent capitals and thus seems to threaten the development of the process of capitalist production. It promotes overproduction, speculation, crises, surplus-capital along with surplus-population. Those economists who, like Kicardo, regard the capitalist mode of production as absolute, feel nevertheless, that this mode of production creates its own limits, and therefore they attribute this limit, not to production, but to nature (in itheir theory of rent). But the main point in their horror over the falling rate of profit is the feeling, that capitalist production meets in the development of productive forces a barrier, which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the finiteness and the historical, merely transitory character of capitalist pro* duction. It demonstrates tliat this is not an absolute mode for the production of wealth, but rather comes in conflict with the further development of wealth at a certain stage.
It is true that Eicardo and his school considered only the 284 Capitalist Production.
industrial profit, which includes interest. But the rate of ground-rent has likewise a tendency to fall, although its absolute mass increases, and it may also increase proportionately more than the industrial profit. (See Ed. West, who developed the law of ground-rent before Ricardo.) If we consider the total social capital C, and use p" to indicate the industrial profit remaining after the deduction of interest and ground rent, i to indicate interest, and r to indicate groundrent, then ■§-=-£- =^-^=?+-C+C"- ^^® ^^^^'^ ^^^^ ^^^^*' ^^'^"^^ s, the total amount of surplus-value, is continually increasing in the course of capitalist development, nevertheless -^ is just as steadily declining, because C grows still more rapidly than s. Therefore it is no contradiction, tliat p'', i, and r, should be steadily increasing, each by itself, while -^ = -^ as well as ^j -^, and -^, each by itself, should ever decline, or that p" should increase relatively more than i, or r more than p'', or, perhaps, more than p'' and i. With a rise in the total surplus-value or profit s =, p, but a simultaneous fall in the rate of profit ■^=-^j the proportional magnitude of the parts p'', i, and r, which make up s = p, may change at will within the limits set by the total amount of s, without thereby affecting the magnitude of s or -^.
The mutual variation of p", i and r is but a varying distribution of s among different classes. Consequently ^, ^, and -^j the rate of industrial profit, the rate of interest, and the rate of ground-rent to the total capital, may rise relatively to one another, while -^, the average rate of profit, is falling. The only condition is that the sum of all three cannot exceed ■^. If the rate of profit falls from 50% to 25%, because the composition of a certain capital with a rate of surplus-value of 100% has changed from 50 c -|- 50 v to 75 c -|- 25 V, then a capital of 1,000 will yield a profit of 500 in the first case, and a capital of 4,000 will yield a profit of 1,000 in the second case. We see that s or p have doubled, while p' has fallen by one-half. And if that 50% was formerly divided into 20 profit, 10 interest, 20 rent, then ^ = Internal Contradictions. 285 20 fc, 4- =10%, and -^ = 207©- If conditions remained the same after the change from 50% to 25 7©, then ^ would be 1070, -^ would be 5%, and -^ = lOT?. If, however, £; should fall to S% and -^ to 47o, then -J- would rise to 187o. The proportional magnitude of r would have risen as against p'' and i, but nevertheless p', the rate of profit, would have remained the same. Under both assumptions, the sum of p''', i, and r would have increased, because it would have been produced by a capital of four times the size of the former. By the way, Ricardo's assumption that the industrial profit (plus interest) originally pockets the entire profit, is historically and logically false. It is rather the progress of capitalist production which, 1), places the Avhole profit at first hand at the disposal of the industrial and commercial capitalists for further distribution, and, 2), reduces rent to the excess over the profit. On this capitalist basis, rent further increases, so far as it is a portion of profit (that is, of the surplus-value produced by the total capital), while the specific portion of the product, which the capitalist pockets, does not.
The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the laboring population, when the rate of surplus-value, that is, the intensity of exploitation, is given; and no other limit but the intensity of exploitation, when the laboring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-product, which is that aliquot portion of the produced commodities, in which unpaid labor is materialised. It must never be forgotten, that the production of this surplus-value — and the reconversion of a portion of it into capital, or accumulation, forms an indispensable part of this production of surplus-value — is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoy- 286 Capitalist Production.
ment for capitalists. This would Le overlooking the specific character of capitalist production, which reveals itself in its innermost essence.
The creation of this surplus-value is the object of the direct process of production, and this process has no other limits but those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplusvalue has been produced. But this production of surplusvalue is but the first act of the capitalist process of production, it merely terminates the act of direct production. Capital has absorbed so much unpaid labor. With the development of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. ISTow comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are below the prices of production, the laborer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital.
The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power nor oy the absolute consuming power, but by the consuming power jased on antagonistic conditions of distribution, which reiuces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus-value on an enlarged scale. This is a Internal Contradictions. 287 law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This internal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the condition of consumption rest. On this self contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplusvalue is produced and those under which it is realised.
If a certain rate of profit is given, the mass of profit depends on the magnitude of the advanced capital. Accumulation is then determined by that portion of this mass, which is reconverted into capital. This portion, in its turn, being equal to the profit minus the revenue consumed by the capitalists, will depend not merely on the value of this mass, but also on the cheapness of the commodities which the capitalist can buy with it, commodities which pass partly into his individual consumption, partly into his constant caj^ital. (Wages are here assumed to be a given quantity.)
The mass of capital which the laborer sets in motion, whose value he preserves by his labor and reproduces in his product, is quite different from the value which he adds to it. If the mass of the capital equals 1,000, and the added labor 100, then the reproduced capital equals 1,100. If the mass equals 100 and the added labor 20, then the reproduced capital equals 120. In the first case the rate of profit is 10%, in the second 20%. And yet more can be accumulated out of 288 Capitalist Production.
100 tlian out of 20. And thus the river of capital rolls on (aside from its depreciation by an increase of the productive power), or its accumulation does, not in proportion to the level of the rate of profit, but in proportion to the impetus which it already has. A high rate of profit, so far as it is based on a high rate of surplus-value, is possible when the working day is very long, although labor may not be highly productive. This is possible, because the wants of the laborers are very insignificant, and therefore the average wages very low, although labor itself unproductive. The low level of wages will have for its counterpart a lack of energy among laborers. Capital then accumulates slowly, in spite of the high rate of profits. Population stagnates and the working time, which the product costs, is long, while the wages paid to the laborer are small.
The rate of profit sinks, not because the laborer is less exploited, but because less labor is employed in proportion to the employed capital in general.
If a falling rate of profit goes hand in hand with an increase in the mass of profits, as we have shown, then a larger portion of the annual product of labor is appropriated by the capitalist under the name of capital (as a substitute for consumed capital) and a relatively smaller portion under the name of profit. Hence the phantastic idea of the priest Chalmers, that the capitalists pocket so much more profits, the smaller the quantity of the annual product expended by them as capital. The state church then comes to their assistance in order to help them to consume the greater part of tlie surplus-product instead of capitalising it. The preacher confounds cause with effect. By the way, the mass of profits increases also at a small rate with the magnitude of the invested capital. However, this requires at the same time a concentration of capital, since the conditions of production then demand the employment of capital on a large scale. It likewise requires its centralisation, that is, a devouring of small capitalists by the great capitalists and decapitalisation of the former. It is but a second instance of separating the producers from their requirements of production, for these small Internal Contradictions. 289 capitalists still belong to the producers, since their own labor plajs a role in this problem. Generally speaking, the labor of a capitalist stands in an inverse proportioti to the size cf his capital, that is, to his degree as a capitalist. This divorce of requirements of production here, and producers there, is inseparable from the nature of capital. It begins with the inauguration of primitive accumulation. (Vol. I, chap. XXVI), becomes a permanent process in the accumulation and concentration of capital, and expresses itself finally as a centralisation of already existing capitals in a few hands and a decapitalisation of many (a change in the method of expropriation). This process would soon bring about the collapse of capitalist production, if it were not for counteracting tendencies, which continually have a decentralising effect by the side of the centripetal ones.
II. Conflict between the Expansion of Production and the Creation of Values.
The development of the productive power of labor shows itself in two ways: First, in the magnitude of the already produced productive powers, in the volume of values and masses of requirements of production, under which new production is carried on, and in the absolute magnitude of the already accumulated productive capital: secondly, in the relative smallness of the capital invested in wages as compared to the total capital, that is, in the relatively small quantity of living labor required for the reproduction and self-expansion of a given capital as compared to mass production. It is at the same time conditioned on the concentration of capital.
So far as the employed labor-power is concerned, the development of the productive powers shows itself once more in two ways: First, in the increase of surplus-labor, that is, the reduction of the necessary labor time required for the reproduction of labor-power; secondly, in the decrease of the quantity of labor-power (the number of laborers) employed in general for the purpose of setting in motion a given capital.
Both movements do not only go hand in hand, but are mutually conditioned on one another. They are different phejgo Capitalist Production.
nomeiia, through which the same law expresses itself. However, they affect the rate of profit in opposite ways. The total mass of profits is equal to the total mass of surplus-values, the rate of profit = f =advanced'"to7ai'capitrr ^^o^^'. surplusvalue, as a totals is determined first by its rate_, secondly by the mass of labor simultaneously employed at this rate, or what amounts to the same, by the magnitude of the variable capital. One of these factors, the rate of surplus-value, rises in one direction, tlie other factor, the number of laborers, falls in the opposite direction (relatively or absolutely). To the extent that the development of the productive power reduces the paid portion of the employed labor, it raises the surplusvalue by raising its rate; but to the extent that it reduces the total mass of labor employed by a certain capital, it reduces the factor of numbers with which the rate of surplus-value is multiplied in order to calculate its mass. Two laborers, each working 12 hours daily, cannot produce the same mass of surplusvalue as 24: laborers each working only 2 hours, even if they could live on r.lr and did not have to work for themselves at all. In this respect, then, the compensation of the reduction in the number of laborers by means of an intensification of exploitation has certain impassible limits. It may, for this reason, check the fall of the rate of profit, but cannot prevent it entirely.
With the development of the capitalist mode of production, the rate of profit therefore falls, while its mass increases with the growing mass of the employed capital. Given the rate, the absolute increase in the mass of capital depends on its existing magnitude. But on the other hand, if this magnitude is given, the proportion of its growth, the rate of its increment, depends on the rate of profit. The increase in the productive power (which, we repeat, always goes hand in hand with a depreciation of the productive capital) cannot directly increase the value of the existing capital, unless it increases, by raising the rate of profit, that portion of the value of the annual product which is reconverted into capital. So far as the productive power is concerned (since it has no direct bearing upon the value of the existing capital), it can Internal Contradictions. 2gi accomplish this only by raising the relative surplus-value, or reducing the value of the constant capital, so that those commodities which enter either into the reproduction of laborpower or into the elements of constant capital are cheapened. Both of these things imply a depreciation of the existing capital, and both of them go hand in hand with a relative reduction of the variable as compared to the constant capital. Both things imply a fall in the rate of profit, and both of them check it. Furthermore, so far as an increased rate of profit causes a greater demand for labor, it tends to increase the working population and thus the material, whose exploitation gives to capital its real nature of capital.
Indirectly, however, the development of the productive power of labor contributes to the increase of the value of the existing capital, by increasing the mass and variety of usevalues, in which the same exchange value presents itself and which form the material substance, the objective elements, of capital, the material objects of which the constant capital is directly composed and the variable cajiital at least indirectly. With the same capital and the same labor more things are produced, which may be converted into capital, aside from their exchange value. Things which may serve for the absorption of additional labor, and consequently of additional surplus-labor, and which therefore may become additional capital. The amount of labor, which a certain capital may command, does not depend on its value, but on the mass of raw and auxiliary materials, of machinery and elements of fixed capital, of necessities of life, of which it is composed, whatever may be their value. As the mass of the employed labor, and thus of surplus-labor, increases, so does the value of the reproduced capital and the surplus-value newly added to it grow.
These two elements playing their role in the process of accumulation should not, however, be observed in their quiet existence side by side, as Kicardo does. They imply a contradiction, which expresses itself in antagonistic tendencies and phenomena. These antagonistic agencies oppose each other simultaneously.
292 Capitalist Production.
Together with the incentives for an actual increase of the laboring population, which originates in the augmentation of that portion of the total social product which serves as capital, there are the effects of other agencies, which create merely a relative over-population.
Together with the fall of the rate of profit gi-ows the mass of capitals, and hand in hand with it goes a depreciation of the existing capitals, which checks this fall and gives an accelerating push to the accumulation of capital-values.
Together with the development of the productive power grows the higher composition of capital, the relative decrease of the variable as compared to the constant capital.
These different influences make themselves felt, now more side bj side in space, now more successively in time. Periodically the conflict of antagonistic agencies seeks vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions, Avhich restore the disturbed equilibrium for a while.
The contradiction, generally speaking, consists in this that the capitalist mode of production has a tendency to develop the productive forces absolutely, regardless of value and of the surplus-value contained in it and regardless of the social conditions under which capitalist production takes place; while it has on the other hand for its aim the preservation of the value of the existing capital and its self-expansion to tlie highest limit (that is, an ever accelerated growth of this value). Its specific character is directed at the existing value of capital as a means of increasing this value to the utmost. The methods by which it aims to accomplish this comprise a fall of the rate of profit, a depreciation of the existing capital, and a development of the productive forces of labor at the expense of the already created productive forces.
The periodical depreciation of the existing capital, which is one of the immanent means of capitalist production by which the fall in the rate of profit is checked and the accumulation of capital-value through the formation of new capital promoted, disturbs the existing conditions, witliin which the process of circulation and reproduction of capital take?
Internal Contradictions. 293 place, and is therefore accom23anied bj sudden stagnations and crises in the process of production.
The relative decrease of variable capital as compared to the constant, which goes hand in hand with the development of the productive forces, gives an impulse to the growth of the laboring population, while it continually creates an artificial over-population. The accumulation of capital, so far as its value is concerned, is checked bj the falling rate of profit, in order to hasten still more the accumulation of its use-value, and this, in its turn, adds new speed to the accumulation of its value.
Capitalist production is continually engaged in the attempt to overcome these immanent barriers, but it overcomes them only by means which again place the same barriers in its way in a more formidable size.
The real harrier of capitalist production is capital itself. It is the fact that capital and its self-expansion appear as the starting and closing point, as the motive and aim of production; that production is merely production for capital, and not vice versa, the means of production mere means for an ever expanding system of the life process for the benefit of the society of producers. The barriers, within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move, these barriers come continually in collision with the methods of production, which capital must employ for its purposes, and which steer straight toward an unrestricted extension of production, toward production for its o\\Ti self, toward an unconditional development of the productive forces of society. The means, this unconditional development of the productive forces of society, comes continually into conflict with the limited end, the self-expansion of the existing capital. Thus, while the capitalist mode of production is one of the historical means by which the material forces of production are developed and the world-market required for them created, it is at the same time in continual conflict with this historical task and the conditions of social production corresponding to it.
294 Capitalist Production.
III. Surplus of Capital and Surplus of Population. With the fall of the rate of profit grows the lowest limit of capital required in the hands of the individual capitalist for the productive employment of labor, required both for the exploitation of labor and for bringing the consumed labor time within the limits of the labor time necessary for the production of the commodities, the limits of the average social labor time required for the production of the commodities. Simultaneously with it grows the concentration, because there comes a certain limit where large capital with a small rate of profit accumulates faster than small capital with a large rate of profit. This increasing concentration in its turn brings about a new fall in the rate of profit at a certain climax.
The mass of the small divided capitals is thereby pushed into adventurous channels, speculation, fraudulent credit, fraudulent stocks, crises. The so-called plethora of capital refers always essentially to a plethora of that class of capital which finds no compensation in its mass for the fall in the rate of profit — and this applies always to the newly formed sprouts of capital — or to a plethora of capitals incapable of self-dependent action and placed at the disposal of the managers of large lines of industry in the form of credit. This plethora of capital proceeds from the same causes which call forth a relative over-population. It is therefore a phenomenon supplementing this last one, although they are found at opposite poles, unemployed capital on the one hand, and unemployed laboring population on the other.