We have seen in the first part of this book that the rate of profit
expresses the rate of surplus-value always lower than it actually is. We have
just 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 equal the rate of
surplus-value only if c = 0, i.e. , if the total 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 labour-power which sets it in motion remains unchanged or the amount
of labour-power increases in relation to the value of the constant capital.
On the plea of analysing the rate of profit, Ricardo actually analyses the
rate of surplus-value alone, and this only on the assumption that the
working-day is intensively and extensively a constant magnitude.
A fall in the rate of profit and accelerated accumulation are different
expressions of the same process only in so far as both reflect the development
of productiveness. Accumulation, in turn, hastens the fall of the rate of
profit, inasmuch as it implies concentration of labour on a large scale, and
thus a higher composition of capital. On the other hand, a fall in the rate of
profit again hastens the concentration of capital and its centralisation through
expropriation of minor capitalists, the few direct producers who still have
anything left to be expropriated. This accelerates accumulation with regard to
mass, although the rate of accumulation falls with the rate of profit.
On the other hand, the rate of self-expansion of the total capital, or the
rate of profit, being the goad of capitalist production (just as self-expansion
of capital is its only purpose), its fall checks the formation of new
independent capitals and thus appears as a threat to the development of the
capitalist production process. It breeds over-production, speculation, crises,
and surplus-capital alongside surplus-population. Those economists, therefore,
who, like Ricardo, regard the capitalist mode of production as absolute, feel at
this point that it creates a barrier itself, and for this reason attribute the
barrier to Nature (in the theory of rent), not to production. But the main thing
about their horror of the falling rate of profit is the feeling that capitalist
production meets in the development of its productive forces a barrier which has
nothing to do with the production of wealth as such; and this peculiar barrier
testifies to the limitations and to the merely historical, transitory character
of the capitalist mode of production; testifies that for the production of
wealth, it is not an absolute mode, moreover, that at a certain stage it rather
conflicts with its further development.
True, Ricardo and his school considered only industrial profit, which
includes interest. But the rate of ground-rent likewise has a tendency to fall,
although its absolute mass increases, and may also increase proportionately more
than industrial profit. (E. West, [
Essay on the Application of Capital to
Land, London, 1815
. — Ed] who developed the law of ground-rent
before Ricardo.) If we consider the total social capital C, and use
p
1 for the industrial profit that remains after deducting
interest and ground-rent, i for interest, and r for ground-rent, then s/C = p/C
= p
1 + i + r/C = p
1/C + i/C + r/C. We
have seen that while s, the total amount of surplus-value, is continually
increasing in the course of capitalist development, s/C is just as steadily
declining, because C grows still more rapidly than s. Therefore it is by no
means a contradiction for p
1, i, and r to be steadily
increasing, each individually, while s/C = p/C, as well as p
1/C, i/C, and r/C, should each by itself be steadily shrinking,
or that p
1 should increase in relation to i, or r in
relation to p
1 or to p
1 and i. With a
rising total surplus-value or profit s = p, and a simultaneously falling rate of
profit s/C = p/C, the proportions of the parts p
1, 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 s/C.
The mutual variation of p
1, i, and r is merely a varying
distribution of s among different classes. Consequently, p
1/C, i/C, or r/C, the rate of individual industrial profit, the
rate of interest, and the ratio of ground-rent to the total capital, may rise in
relation to one another, while s/C, the general rate of profit, falls. The only
condition is that the sum of all three = s/C. If the rate of profit falls from
50% to 25%, because the composition of a certain capital with, say, a rate of
surplus-value = 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 in the second
a Capital of 4,000 will yield a profit of 1,000. 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, and 20 rent, then p
1/C = 20%,
i/C = 10%, and r/C = 20%. If the proportions had remained the same after the
change from 50% to 25%, then p
1/C = 10%, i/C = 5%, and r/C =
10%. If, however, p
1/C should fall to 8% and i/C to 4%, then
r/C would rise to 13%. The relative magnitude of r would have risen as against
p
1 and i, while p would have remained the same. Under both
assumptions, the sum of p
1, i, and r would have increased,
because produced by a capital four times as large. Furthermore, Ricardo's
assumption that originally industrial profit (plus interest) contains the entire
surplus-value is historically and logically false. It is rather the progress of
capitalist production which 1) gives the whole profit directly to the industrial
and commercial capitalists for further distribution, and 2) reduces rent to the
excess over the profit. On this capitalist basis, again, the rent grows, being a
portion of profit (
i.e. , of the surplus-value viewed as the product of
the total capital), but not that specific portion of the product, which the
capitalist pockets.
Given the necessary means of production,
i.e. , a sufficient
accumulation of capital, the creation of surplus-value is only limited by the
labouring population if the rate of surplus-value,
i.e. , the intensity
of exploitation, is given; and no other limit but the intensity of exploitation
if the labouring population is given. And the capitalist process of production
consists essentially of the production of surplus-value, represented in the
surplus-product or that aliquot portion of the produced commodities
materialising unpaid labour. It must never be forgotten that the production of
this surplus-value — and the reconversion of a portion of it into capital, or
the accumulation, forms an integrate part of this production of surplus-value —
is the immediate purpose and compelling motive of capitalist production. It will
never do, therefore, to represent capitalist production as something which it is
not, namely as production whose immediate purpose is enjoyment or the
manufacture of the means of enjoyment for the capitalist. This would be
overlooking its specific character, which is revealed in all its inner
essence.
The creation of this surplus-value makes up the direct process of production,
which, as we have said, has no other limits but those mentioned above. As soon
as all the surplus-labour it was possible to squeeze out has been embodied in
commodities, surplus-value has been produced. But this production of
surplus-value completes but the first act of the capitalist process of
production — the direct production process. Capital has absorbed so and so much
unpaid labour. With the development of the process, which expresses itself in a
drop in the rate of profit, the mass of surplus-value thus produced swells to
immense dimensions. Now comes the second act of the process. The entire mass of
commodities,
i.e. , the total product, including the portion which
replaces the constant and variable capital, and that representing surplus-value,
must be sold. If this is not done, or done only in part, or only at prices below
the prices of production, the labourer has been indeed exploited, but his
exploitation is not realised as such for the capitalist, and this can be bound
up with a total or partial failure to realise the surplus-value pressed out of
him, indeed even with the partial or total loss of the capital. The conditions
of direct exploitation, and those of realising it, are not identical. They
diverge not only in place and time, but also logically. The first are only
limited by the productive power of society, the latter by the proportional
relation of the various branches of production and the consumer power of
society. But this last-named is not determined either by the absolute productive
power, or by the absolute consumer power, but by the consumer power based on
antagonistic conditions of distribution, which reduce the consumption of the
bulk of society to a minimum varying within more or less narrow limits. It is
furthermore restricted by the tendency to accumulate, the drive to expand
capital and produce surplus-value on an extended scale. This is law for
capitalist production, imposed by incessant revolutions in the methods of
production themselves, by the depreciation of existing capital always bound up
with them, by the general competitive struggle and the need to improve
production and expand its scale merely as a means of self-preservation and under
penalty of ruin. 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 working independently of the producer, and become ever
more uncontrollable. This internal contradiction seeks to resolve itself through
expansion of the outlying field of production. But the more productiveness
develops, the more it finds itself at variance with the narrow basis on which
the conditions of consumption rest. It is no contradiction at all on this
self-contradictory basis that there should be an excess of capital
simultaneously with a growing surplus of population. For while a combination of
these two would, indeed, increase the mass of produced surplus-value, it would
at the same time intensify the contradiction between the conditions under which
this surplus-value is produced and those under which it is realised.
If a certain rate of profit is given, the mass of profit will always depend
on the magnitude of the advanced capital. The accumulation, however, is then
determined by that portion of this mass which is reconverted into capital. As
for this portion, being equal to the profit minus the revenue consumed by the
capitalists, it 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 consumption, his revenue, and partly into
his constant capital. (Wages are here assumed to be given.)
The mass of capital set in motion by the labourer, whose value he preserves
by his labour and reproduces in his product, is quite different from the value
which he adds to it. If the mass of the capital = 1,000 and the added labour =
100, the reproduced capital = 1,100. If the mass = 100 and the added labour =
20, the reproduced capital = 120. In the first case the rate of profit = 10%, in
the second = 20%. And yet more can be accumulated out of 100 than out of 20. And
thus the river of capital rolls on (aside from its depreciation through increase
of the productiveness), or its accumulation does, not in proportion to the rate
of profit, but in proportion to the impetus it already possesses. So far as it
is based on a high rate of surplus-value, a high rate of profit is possible when
the working-day is very long, although labour is not highly productive. It is
possible, because the wants of the labourers are very small, hence average wages
very low, although the labour itself is unproductive. The low wages will
correspond to the labourers' lack of energy. Capital then accumulates slowly, in
spite of the high rate of profit. Population is stagnant and the working-time
which the product costs, is great, while the wages paid to the labourer etare
small.
The rate of profit does not sink because the labourer is exploited any less,
but because generally less labour is employed in proportion to the employed
capital.
If, as shown, a falling rate of profit is bound up with an increase in the
mass of profit, a larger portion of the annual product of labour is appropriated
by the capitalist under the category of capital (as a replacement for consumed
capital) and a relatively smaller portion under the category of profit. Hence
the fantastic idea of priest Chalmers, [Th. Chalmers,
On Political Economy
in Connexion with the Moral State and Moral Prospects of Society, Second
edition, Glasgow, 1832, p.
88. — Ed] that the less of the annual
product is expended by capitalists as capital, the greater the profits they
pocket. In which case the state church comes to their assistance, to care for
the consumption of the greater part of the surplus-product, rather than having
it used as capital. The preacher confounds cause with effect. Furthermore, the
mass of profit increases in spite of its slower rate with the growth of the
invested capital. However, this requires a simultaneous concentration of
capital, since the conditions of production then demand employment of capital on
a larger scale. It also requires its centralisation,
i.e. , the
swallowing up of the small capitalists by the big and their deprivation of
capital. It is again but an instance of separating — raised to the second power
— the conditions of production from the producers to whose number these small
capitalists still belong, since their own labour continues to play a role in
their case. The labour of a capitalist stands altogether in inverse proportion
to the size of his capital,
i.e. , to the degree in which he is a
capitalist. It is this same severance of the conditions of production, on the
one hand, from the producers, on the other, that forms the conception of
capital. It begins with primitive accumulation (Buch I, Kap. XXIV [English
edition: Part
VIII. — Ed.]), appears as a permanent process in the
accumulation and concentration of capital, and expresses itself finally as
centralisation of existing capitals in a few hands and a deprivation of many of
their capital (to which expropriation is now changed). This process would soon
bring about the collapse of capitalist production if it were not for
counteracting tendencies, which have a continuous decentralising effect
alongside the centripetal one.
II. Conflict Between Expansion Of Production And Production Of
Surplus-Value
The development of the social productiveness of labour is manifested in two
ways: first, in the magnitude of the already produced productive forces, the
value and mass of the conditions 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 portion of total capital
laid out in wages,
i.e. , in the relatively small quantity of living
labour required for the reproduction and self-expansion of a given capital, for
mass production. This also implies concentration of capital.
In relation to employed labour-power the development of the productivity
again reveals itself in two ways: First, in the increase of surplus-labour,
i.e. , the reduction of the necessary labour-time required for the
reproduction of labour-power. Secondly, in the decrease of the quantity of
labour-power (the number of labourers) generally employed to set in motion a
given capital.
The two movements not only go hand in hand, but mutually influence one
another and are phenomena in which the same law expresses itself. Yet they
affect the rate of profit in opposite ways. The total mass of profit is equal to
the total mass of surplus-value, the rate of profit = s/C =
surplus-value/advanced total capital. The surplus-value, however, as a total, is
determined first by its rate, and second by the mass of labour 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, and
the other, the number of labourers, falls (relatively or absolutely). Inasmuch
as the development of the productive forces reduces the paid portion of employed
labour, it raises the surplus-value, because it raises its rate; but inasmuch as
it reduces the total mass of labour employed by a given capital, it reduces the
factor of the number by which the rate of surplus-value is multiplied to obtain
its mass. Two labourers, each working 12 hours daily, cannot produce the same
mass of surplus-value as 24 who work only 2 hours, even if they could live on
air and hence did not have to work for themselves at all. In this respect, then,
the compensation of the reduced number of labourers by intensifying the degree
of exploitation has certain insurmountable limits. It may, for this reason, well
check the fall in the rate of profit, but cannot prevent it altogether.
With the development of the capitalist mode of production, therefore, the
rate of profit falls, while its mass increases with the growing mass of the
capital employed. 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,
i.e. , the rate of its increment,
depends on the rate of profit. The increase in the productiveness (which,
moreover, we repeat, always goes hand in hand with a depreciation of the
available capital) can directly only increase the value of the existing capital
if by raising the rate of profit it increases that portion of the value of the
annual product which is reconverted into capital. As concerns the productivity
of labour, this can only occur (since this productivity has nothing direct to do
with the
value of the existing capital) by raising the relative
surplus-value, or reducing the value of the constant capital, so that the
commodities which enter either the reproduction of labour-power, or the elements
of constant capital, are cheapened. Both imply a depreciation of the existing
capital, and both go hand in hand with a reduction of the variable capital in
relation to the constant. Both cause a fall in the rate of profit, and both slow
it down. Furthermore, inasmuch as an increased rate of profit causes a greater
demand for labour, it tends to increase the working population and thus the
material, whose exploitation makes real capital out of capital.
Indirectly, however, the development of the productivity of labour
contributes to the increase of the value of the existing capital by increasing
the mass and variety of use-values in which the same exchange-value is
represented and which form the material substance,
i.e. , the material
elements of capital, the material objects making up the constant capital
directly, and the variable capital at least indirectly. More products which may
be converted into capital, whatever their exchange-value, are created with the
same capital and the same labour. These products may serve to absorb additional
labour, hence also additional surplus-labour, and therefore create additional
capital. The amount of labour which a capital can command does not depend on its
value, but on the mass of raw and auxiliary materials, machinery and elements of
fixed capital and necessities of life, all of which it comprises, whatever their
value may be. As the mass of the labour employed, and thus of surplus-labour
increases, there is also a growth in the value of the reproduced capital and in
the surplus-value newly added to it.
These two elements embraced by the process of accumulation, however, are not
to be regarded merely as existing side by side in repose, as Ricardo does. They
contain a contradiction which manifests itself in contradictory tendencies and
phenomena. These antagonistic agencies counteract each other simultaneously.
Alongside the stimulants of an actual increase of the labouring population,
which spring from the increase of the portion of the total social product
serving as capital, there are agencies which create a merely relative
over-population.
Alongside the fall in the rate of profit mass of capitals grows, and hand in
hand with this there occurs a depreciation of existing capitals which checks the
fall and gives an accelerating motion to the accumulation of capital-values.
Alongside the development of productivity there develops a higher composition
of capital,
i.e., the relative decrease of the ratio of variable to
constant capital.
These different influences may at one time operate predominantly side by side
in space, and at another succeed each other in time. From time to time the
conflict of antagonistic agencies finds vent in crises. The crises are always
but momentary and forcible solutions of the existing contradictions. They are
violent eruptions which for a time restore the disturbed equilibrium.
The contradiction, to put it in a very general way, consists in that the
capitalist mode of production involves a tendency towards absolute development
of the productive forces, regardless of the value and surplus-value it contains,
and regardless of the social conditions under which capitalist production takes
place; while, on the other hand, its aim is to preserve the value of the
existing capital and promote its self-expansion to the highest limit
(
i.e., to promote an ever more rapid growth of this value). The
specific feature about it is that it uses the existing value of capital as a
means of increasing this value to the utmost. The methods by which it
accomplishes this include the fall of the rate of profit, depreciation of
existing capital, and development of the productive forces of labour at the
expense of already created productive forces.
The periodical depreciation of existing capital — one of the means immanent
in capitalist production to check the fall of the rate of profit and hasten
accumulation of capital-value through formation of new capital — disturbs the
given conditions, within which the process of circulation and reproduction of
capital takes place, and is therefore accompanied by sudden stoppages and crises
in the production process.
The decrease of variable in relation to constant capital, which goes hand in
hand with the development of the productive forces, stimulates the growth of the
labouring population, while continually creating an artificial over-population.
The accumulation of capital in terms of value is slowed down by the falling rate
of profit, to hasten still more the accumulation of use-values, while this, in
its turn, adds new momentum to accumulation in terms of value.
Capitalist production seeks continually to overcome these immanent barriers,
but overcomes them only by means which again place these barriers in its way and
on a more formidable scale.
The
real barrier of capitalist production is
capital
itself. It is that capital and its self-expansion appear as the starting
and the closing point, the motive and the purpose of production; that production
is only production for
capital and not vice versa, the means of
production are not mere means for a constant expansion of the living process of
the
society of producers. The limits 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 limits come
continually into conflict with the methods of production employed by capital for
its purposes, which drive towards unlimited extension of production, towards
production as an end in itself, towards unconditional development of the social
productivity of labour. The means — unconditional development of the productive
forces of society — comes continually into conflict with the limited purpose,
the self-expansion of the existing capital. The capitalist mode of production
is, for this reason, a historical means of developing the material forces of
production and creating an appropriate world-market and is, at the same time, a
continual conflict between this its historical task and its own corresponding
relations of social production.
III. Excess Capital And Excess Population
A drop in the rate of profit is attended by a rise in the minimum capital
required by an individual capitalist for the productive employment of labour;
required both for its exploitation generally, and for making the consumed
labour-time suffice as the labour-time necessary for the production of the
commodities, so that it does not exceed the average social labour-time required
for the production of the commodities. Concentration increases simultaneously,
because beyond certain limits a large capital with a small rate of profit
accumulates faster than a small capital with a large rate of profit. At a
certain high point this increasing concentration in its turn causes a new fall
in the rate of profit. The mass of small dispersed capitals is thereby driven
along the adventurous road of speculation, credit frauds, stock swindles, and
crises. The so-called plethora of capital always applies essentially to a
plethora of the capital for which the fall in the rate of profit is not
compensated through the mass of profit — this is always true of newly developing
fresh offshoots of capital — or to a plethora which places capitals incapable of
action on their own at the disposal of the managers of large enterprises in the
form of credit. This plethora of capital arises from the same causes as those
which call forth relative over-population, and is, therefore, a phenomenon
supplementing the latter, although they stand at opposite poles — unemployed
capital at one pole, and unemployed worker population at the other.
Over-production of capital, not of individual commodities — although
over-production of capital always includes over-production of commodities — is
therefore simply over-accumulation of capital. To appreciate what this
over-accumulation is (its closer analysis follows later), one need only assume
it to be absolute. When would over-production of capital be absolute?
Overproduction which would affect not just one or another, or a few important
spheres of production, but would be absolute in its full scope, hence would
extend to all fields of production?
There would be absolute over-production of capital as soon as additional
capital for purposes of capitalist production = 0. The purpose of capitalist
production, however, is self-expansion of capital,
i.e., appropriation
of surplus-labour, production of surplus-value, of profit. As soon as capital
would, therefore, have grown in such a ratio to the labouring population that
neither the absolute working-time supplied by this population, nor the relative
surplus working-time, could be expanded any further (this last would not be
feasible at any rate in the case when the demand for labour were so strong that
there were a tendency for wages to rise); at a point, therefore, when the
increased capital produced just as much, or even less, surplus-value than it did
before its increase, there would be absolute over-production of capital;
i.e., the increased capital C + ΔC would produce no more, or even less,
profit than capital C before its expansion by ΔC. In both cases there would be a
steep and sudden fall in the general rate of profit, but this time due to a
change in the composition of capital not caused by the development of the
productive forces, but rather by a rise in the money-value of the variable
capital (because of increased wages) and the corresponding reduction in the
proportion of surplus-labour to necessary labour.
In reality, it would appear that a portion of the capital would lie
completely or partially idle (because it would have to crowd out some of the
active capital before it could expand its own value), and the other portion
would produce values at a lower rate of profit, owing to the pressure of
unemployed or but partly employed capital. It would be immaterial in this
respect if a part of the additional capital were to take the place of the old
capital, and the latter were to take its position in the additional capital. We
should still always have the old sum of capital on one side, and the sum of
additional capital on the other. The fall in the rate of profit would then be
accompanied by an absolute decrease in the mass of profit, since the mass of
employed labour-power could not be increased and the rate of surplus-value
raised under the conditions we had assumed, so that the mass of surplus-value
could not be increased either. And the reduced mass of profit would have to be
calculated on an increased total capital. But even if it is assumed that the
employed capital continues to self-expand at the old rate of profit, and the
mass of profit hence remains the same, this mass would still he calculated on an
increased total capital, this likewise implying a fall in the rate of profit. If
a total capital of 1,000 yielded a profit of 100, and after being increased to
1,500 still yielded 100, then, in the second case, 1,000 would yield only 66⅔.
Self-expansion of the old capital, in the absolute sense, would have been
reduced. The capital = 1,000 would yield no more under the new circumstances
than formerly a capital = 666⅔.
It is evident, however, that this actual depreciation of the old capital
could not occur without a struggle, and that the additional capital ΔC could not
assume the functions of capital without a struggle. The rate of profit would not
fall under the effect of competition due to over-production of capital. It would
rather be the reverse; it would be the competitive struggle which would begin
because the fallen rate of profit and over-production of capital originate from
the same conditions. The part of ΔC in the hands of old functioning capitalists
would be allowed to remain more or less idle to prevent a depreciation of their
own original capital and not to narrow its place in the field of production. Or
they would employ it, even at a momentary loss, to shift the need of keeping
additional capital idle on newcomers and on their competitors in general.
That portion of ΔC which is in new hands would seek to assume a place for
itself at the expense of the old capital, and would accomplish this in part by
forcing a portion of the old capital to lie idle. It would compel the old
capital to give up its old place and withdraw to join completely or partially
unemployed additional capital.
A portion of the old capital has to lie unused under all circumstances; it
has to give up its characteristic quality as capital, so far as acting as such
and producing value is concerned. The competitive struggle would decide what
part of it would be particularly affected. So long as things go well,
competition effects an operating fraternity of the capitalist class, as we have
seen in the case of the equalisation of the general rate of profit, so that each
shares in the common loot in proportion to the size of his respective
investment. But as soon as it no longer is a question of sharing profits, but of
sharing losses, everyone tries to reduce his own share to a minimum and to shove
it off upon another. The class, as such, must inevitably lose. How much the
individual capitalist must bear of the loss,
i.e., to what extent he
must share in it at all, is decided by strength and cunning, and competition
then becomes a fight among hostile brothers. The antagonism between each
individual capitalist's interests and those of the capitalist class as a whole,
then comes to the surface, just as previously the identity of these interests
operated in practice through competition.
How is this conflict settled and the conditions restored which correspond to
the "sound" operation of capitalist production? The mode of settlement is
already indicated in the very emergence of the conflict whose settlement is
under discussion. It implies the withdrawal and even the partial destruction of
capital amounting to the full value of additional capital ΔC, or at least a part
of it. Although, as the description of this conflict shows, the loss is by no
means equally distributed among individual capitals, its distribution being
rather decided through a competitive struggle in which the loss is distributed
in very different proportions and forms, depending on special advantages or
previously captured positions, so that one capital is left unused, another is
destroyed, and a third suffers but a relative loss, or is just temporarily
depreciated, etc.
But the equilibrium would be restored under all circumstances through the
withdrawal or even the destruction of more or less capital. This would extend
partly to the material substance of capital,
i.e., a part of the means
of production, of fixed and circulating capital, would not operate, not act as
capital; some of the operating establishments would then be brought to a
standstill. Although, in this respect, time attacks and worsens all means of
production (except land), the stoppage would in reality cause far greater damage
to the means of production. However, the main effect in this case would be that
these means of production would cease to function as such, that their function
as means of production would be disturbed for a shorter or longer period.
The main damage, and that of the most acute nature, would occur in respect to
capital, and in so far as the latter possesses the characteristic of value it
would occur in respect to the
values of capitals. That portion of the
value of a capital which exists only in the form of claims on prospective shares
of surplus-value,
i.e., profit, in fact in the form of promissory notes
on production in various forms, is immediately depreciated by the reduction of
the receipts on which it is calculated. A part of the gold and silver lies
unused,
i.e., does not function as capital. Part of the commodities on
the market can complete their process of circulation and reproduction only
through an immense contraction of their prices, hence through a depreciation of
the capital which they represent. The elements of fixed capital are depreciated
to a greater or lesser degree in just the same way. It must be added that
definite, presupposed, price relations govern the process of reproduction, so
that the latter is halted and thrown into confusion by a general drop in prices.
This confusion and stagnation paralyses the function of money as a medium of
payment, whose development is geared to the development of capital and is based
on those presupposed price relations. The chain of payment obligations due at
specific dates is broken in a hundred places. The confusion is augmented by the
attendant collapse of the credit system, which develops simultaneously with
capital, and leads to violent and acute crises, to sudden and forcible
depreciations, to the actual stagnation and disruption of the process of
reproduction, and thus to a real falling off in reproduction.
But there would have been still other agencies at work at the same time. The
stagnation of production would have laid off a part of the working-class and
would thereby have placed the employed part in a situation, where it would have
to submit to a reduction of wages even below the average. This has the very same
effect on capital as an increase of the relative or absolute surplus-value at
average wages would have had. Prosperity would have led to more marriages among
labourers and reduced the decimation of offspring. While implying a real
increase in population, this does not signify an increase in the actual working
population. But it affects the relations of the labourer to capital in the same
way as an increase of the number of actually working labourers would have
affected them. On the other hand, the fall in prices and the competitive
struggle would have driven every capitalist to lower the individual value of his
total product below its general value by means of new machines, new and improved
working methods, new combinations,
i.e., to increase the productivity
of a given quantity of labour, to lower the proportion of variable to constant
capital, and thereby to release some labourers; in short, to create an
artificial over-population. Ultimately, the depreciation of the elements of
constant capital would itself tend to raise the rate of profit. The mass of
employed constant capital would have increased in relation to variable, but its
value could have fallen. The ensuing stagnation of production would have
prepared — within capitalistic limits — a subsequent expansion of
production.
And thus the cycle would run its course anew. Part of the capital,
depreciated by its functional stagnation, would recover its old value. For the
rest, the same vicious circle would be described once more under expanded
conditions of production, with an expanded market and increased productive
forces.
However, even under the extreme conditions assumed by us this absolute
over-production of capital is not absolute over-production, not absolute
over-production of means of production. It is over-production of means of
production only in so far as the latter serve
as capital, and
consequently include a self-expansion of value, must produce an additional value
in proportion to the increased mass.
Yet it would still be over-production, because capital would be unable to
exploit labour to the degree required by a "sound", "normal" development of the
process of capitalist production, to a degree which would at least increase the
mass of profit along with the growing mass of the employed capital; to a degree
which would, therefore, prevent the rate of profit from falling as much as the
capital grows, or even more rapidly.
Over-production of capital is never anything more than over-production of
means of production — of means of labour and necessities of life — which may
serve as capital,
i.e., may serve to exploit labour at a given degree
of exploitation; a fall in the intensity of exploitation below a certain point,
however, calls forth disturbances, and stoppages in the capitalist production
process, crises, and destruction of capital. It is no contradiction that this
over-production of capital is accompanied by more or less considerable relative
over-population. The circumstances which increased the productiveness of labour,
augmented the mass of produced commodities, expanded markets, accelerated
accumulation of capital both in terms of its mass and its value, and lowered the
rate of profit — these same circumstances have also created, and continuously
create, a relative overpopulation, an over-population of labourers not employed
by the surplus-capital owing to the low degree of exploitation at which alone
they could be employed, or at least owing to the low rate of profit which they
would yield at the given degree of exploitation.
If capital is sent abroad, this is not done because it absolutely could not
be applied at home, but because it can be employed at a higher rate of profit in
a foreign country. But such capital is absolute excess capital for the employed
labouring population and for the home country in general. It exists as such
alongside the relative over-population, and this is an illustration of how both
of them exist side by side, and mutually influence one another.
On the other hand, a fall in the rate of profit connected with accumulation
necessarily calls forth a competitive struggle. Compensation of a fall in the
rate of profit by a rise in the mass of profit applies only to the total social
capital and to the big, firmly placed capitalists. The new additional capital
operating independently does not enjoy any such compensating conditions. It must
still win them, and so it is that a fall in the rate of profit calls forth a
competitive struggle among capitalists, not vice versa. To be sure, the
competitive struggle is accompanied by a temporary rise in wages and a resultant
further temporary fall of the rate of profit. The same occurs when there is an
over-production of commodities, when markets are overstocked. Since the aim of
capital is not to minister to certain wants, but to produce profit, and since it
accomplishes this purpose by methods which adapt the mass of production to the
scale of production, not vice versa, a rift must continually ensue between the
limited dimensions of consumption under capitalism and a production which
forever tends to exceed this immanent barrier. Furthermore, capital consists of
commodities, and therefore over-production of capital implies over-production of
commodities. Hence the peculiar phenomenon of economists who deny
over-production of commodities, admitting over-production of capital. To say
that there is no general over-production, but rather a disproportion within the
various branches of production, is no more than to say that under capitalist
production the proportionality of the individual branches of production springs
as a continual process from disproportionality, because the cohesion of the
aggregate production imposes itself as a blind law upon the agents of
production, and not as a law which, being understood and hence controlled by
their common mind, brings the productive process under their joint control. It
amounts furthermore to demanding that countries in which capitalist production
is not developed, should consume and produce at a rate which suits the countries
with capitalist production. If it is said that over-production is only relative,
this is quite correct; but the entire capitalist mode of production is only a
relative one, whose barriers are not absolute. They are absolute only for this
mode,
i.e., on its basis. How could there otherwise be a shortage of
demand for the very commodities which the mass of the people lack, and how would
it be possible for this demand to be sought abroad, in foreign markets, to pay
the labourers at home the average amount of necessities of life? This is
possible only because in this specific capitalist interrelation the
surplus-product assumes a form in which its owner cannot offer it for
consumption, unless it first reconverts itself into capital for him. If it is
finally said that the capitalists have only to exchange and consume their
commodities among themselves, then the entire nature of the capitalist mode of
production is lost sight of; and also forgotten is the fact that it is a matter
of expanding the value of the capital, not consuming it. In short, all these
objections to the obvious phenomena of over-production (phenomena which pay no
heed to these objections) amount to the contention that the barriers of
capitalist production are not barriers of
production
generally, and therefore not barriers of this specific, capitalist mode of
production. The contradiction of the capitalist mode of production, however,
lies precisely in its tendency towards an absolute development of the productive
forces, which continually come into conflict with the specific
conditions of production in which capital moves, and alone can
move.
There are not too many necessities of life produced, in proportion to the
existing population. Quite the reverse. Too little is produced to decently and
humanely satisfy the wants of the great mass.
There are not too many means of production produced to employ the able-bodied
portion of the population. Quite the reverse. In the first place, too large a
portion of the produced population is not really capable of working, and is
through force of circumstances made dependent on exploiting the labour of
others, or on labour which can pass under this name only under a miserable mode
of production. In the second place, not enough means of production are produced
to permit the employment of the entire able-bodied population under the most
productive conditions, so that their absolute working period could be shortened
by the mass and effectiveness of the constant capital employed during
working-hours.
On the other hand, too many means of labour and necessities of life are
produced at times to permit of their serving as means for the exploitation of
labourers at a certain rate of profit. Too many commodities are produced to
permit of a realisation and conversion into new capital of the value and
surplus-value contained in them under the conditions of distribution and
consumption peculiar to capitalist production,
i.e., too many to permit
of the consummation of this process without constantly recurring explosions.
Not too much wealth is produced. But at times too much wealth is produced in
its capitalistic, self-contradictory forms.
The limitations of the capitalist mode of production come to the surface:
1) In that the development of the productivity of labour creates out of the
falling rate of profit a law which at a certain point comes into antagonistic
conflict with this development and must be overcome constantly through
crises.
2) In that the expansion or contraction of production are determined by the
appropriation of unpaid labour and the proportion of this unpaid labour to
materialised labour in general, or, to speak the language of the capitalists, by
profit and the proportion of this profit to the employed capital, thus by a
definite rate of profit, rather than the relation of production to social
requirements,
i.e., to the requirements of' socially developed human
beings. It is for this reason that the capitalist mode of production meets with
barriers at a certain expanded stage of production which, if viewed from the
other premise, would reversely have been altogether inadequate. It comes to a
standstill at a point fixed by the production and realisation of profit, and not
the satisfaction of requirements.
If the rate of profit falls, there follows, on the one hand, an exertion of
capital in order that the individual capitalists, through improved methods,
etc., may depress the value of their individual commodity below the social
average value and thereby realise an extra profit at the prevailing
market-price. On the other hand, there appears swindling and a general promotion
of swindling by recourse to frenzied ventures with new methods of production,
new investments of capital, new adventures, all for the sake of securing a shred
of extra profit which is independent of the general average and rises above
it.
The rate of profit,
i.e., the relative increment of capital, is
above all important to all new offshoots of capital seeking to find an
independent place for themselves. And as soon as formation of capital were to
fall into the hands of a few established big capitals, for which the mass of
profit compensates for the falling rate of profit, the vital flame of production
would be altogether extinguished. It would die out. The rate of profit is the
motive power of capitalist production. Things are produced only so long as they
can be produced with a profit. Hence the concern of the English economists over
the decline of the rate of profit. The fact that the bare possibility of this
happening should worry Ricardo, shows his profound understanding of the
conditions of capitalist production. It is that which is held against him, it is
his unconcern about "human beings," and his having an eye solely for the
development of the productive forces, whatever the cost in human beings and
capital-
values — it is precisely that which is the important thing
about him. Development of the productive forces of social labour is the
historical task and justification of capital. This is just the way in which it
unconsciously creates the material requirements of a higher mode of production.
What worries Ricardo is the fact that the rate of profit, the stimulating
principle of capitalist production, the fundamental premise and driving force of
accumulation, should be endangered by the development of production itself. And
here the quantitative proportion means everything. There is, indeed, something
deeper behind it, of which he is only vaguely aware. It comes to the surface
here in a purely economic way —
i.e., from the bourgeois point of view,
within the limitations of capitalist understanding, from the standpoint of
capitalist production itself — that it has its barrier, that it is relative,
that it is not an absolute, but only a historical mode of production
corresponding to a definite limited epoch in the development of the material
requirements of production.
IV. Supplementary Remarks
Since the development of the productivity of labour proceeds very
disproportionately in the various lines of industry, and not only
disproportionately in degree but frequently also in opposite directions, it
follows that the mass of average profit (= surplus-value) must be substantially
below the level one would naturally expect after the development of the
productiveness in the most advanced branches of industry. The fact that the
development of the productivity in different lines of industry proceeds at
substantially different rates and frequently even in opposite directions, is not
due merely to the anarchy of competition and the peculiarity of the bourgeois
mode of production. Productivity of labour is also bound up with natural
conditions, which frequently become less productive as productivity grows —
inasmuch as the latter depends on social conditions. Hence the opposite
movements in these different spheres — progress here, and retrogression there.
Consider the mere influence of the seasons, for instance, on which the bulk of
raw materials depends for its mass, the exhaustion of forest lands, coal and
iron mines, etc.
While the circulating part of constant capital, such as raw materials, etc.,
continually increases its mass in proportion to the productivity of labour, this
is not the case with fixed capital, such as buildings, machinery, and lighting
and heating facilities, etc. Although in absolute terms a machine becomes dearer
with the growth of its bodily mass, it becomes relatively cheaper. If five
labourers produce ten times as much of a commodity as before, this does not
increase the outlay for fixed capital ten-fold; although the value of this part
of constant capital increases with the development of the productiveness, it
does not by any means increase in the same proportion. We have frequently
pointed out the difference in the ratio of constant to variable capital as
expressed in the fall of the rate of profit, and the difference in the same
ratio as expressed in relation to the individual commodity and its price with
the development of the productivity of labour.
[The value of a commodity is determined by the total labour-time of past and
living labour incorporated in it. The increase in labour productivity consists
precisely in that the share of living labour is reduced while that of past
labour is increased, but in such a way that the total quantity of labour
incorporated in that commodity declines; in such a way, therefore, that living
labour decreases more than past labour increases. The past labour contained in
the value of a commodity — the constant part of capital — consists partly of the
wear and tear of fixed, partly of circulating, constant capital entirely
consumed by that commodity, such as raw and auxiliary materials. The portion of
value deriving from raw and auxiliary materials must decrease with the increased
productivity of labour, because with regard to these materials the productivity
expresses itself precisely by reducing their value. On the other hand, it is
most characteristic of rising labour productivity that the fixed part of
constant capital is strongly augmented, and with it that portion of its value
which is transferred by wear and tear to the commodities. For a new method of
production to represent a real increase in productivity, it must transfer a
smaller additional portion of the value of fixed capital to each unit of the
commodity in wear and tear than the portion of value deducted from it through
the saving in living labour; in short, it must reduce the value of the
commodity. It must obviously do so even if, as it occurs in some cases, an
additional value goes into the value of the commodity for more or dearer raw or
auxiliary materials over and above the additional portion for wear and tear of
the fixed capital. All additions to the value must be more than offset by the
reduction in value resulting from the decrease in living labour.
This reduction of the total quantity of labour going into a commodity seems,
accordingly, to be the essential criterion of increased productivity of labour,
no matter under what social conditions production is carried on. Productivity of
labour, indeed, would always be measured by this standard in a society, in which
producers regulate their production according to a preconceived plan, or even
under simple commodity-production. But how does the matter stand under
capitalist production?
Suppose, a certain line of capitalist industry produces a normal unit of its
commodity under the following conditions: The wear and tear of fixed capital
amounts to ½ shilling per piece; raw and auxiliary materials go into it to the
amount of 17½ shillings per piece; wages, 2 shillings; and surplus-value, 2
shillings at a rate of surplus-value of 100%. Total value = 22 shillings. We
assume for the sake of simplicity that the capital in this line of production
has the average composition of social capital, so that the price of production
of the commodity is identical with its value, and the profit of the capitalist
with the created surplus-value. Then the cost-price of the commodity = ½ + 17½ +
2 = 20s., the average rate of profit 2/20 = 10%, and the price of production per
piece of the commodity, like its value = 22s.
Suppose a machine is invented which reduces by half the living labour
required per piece of the commodity, but trebles that portion of its value
accounted for by the wear and tear of the fixed capital. In that case, the
calculation is: Wear and tear = 1½ s., raw and auxiliary materials, as before,
17½s., wages, 1s., surplus-value 1s., total 21s. The commodity then falls 1s. in
value; the new machine has certainly increased the productivity of labour. But
the capitalist sees the matter as follows: his cost-price is now 1½s. for wear,
17½s. for raw and auxiliary materials, 1s. for wages, total 20s., as before.
Since the rate of profit is not immediately altered by the new machine, he will
receive 10% over his cost-price, that is, 2s. The price of production, then,
remains unaltered = 22s., but is 1s. above the value. For a society producing
under capitalist conditions the commodity has not cheapened. The new machine is
no improvement for it. The capitalist is, therefore, not interested in
introducing it. And since its introduction would make his present, not as yet
worn-out, machinery simply worthless, would turn it into scrap-iron, hence would
cause a positive loss, he takes good care not to commit this, what is for him a
utopian, mistake.
The law of increased productivity of labour is not, therefore, absolutely
valid for capital. So far as capital is concerned, productiveness does not
increase through a saving in living labour in general, but only through a saving
in the
paid portion of living labour, as compared to labour expended in
the past, as we have already indicated in passing in Book I (Kap. XI II, 2, 5.
409/398). [English edition: Ch. XV, 2
. — Ed.] Here the capitalist mode
of production is beset with another contradiction. Its historical mission is
unconstrained development in geometrical progression of the productivity of
human labour. It goes back on its mission whenever, as here, it checks the
development of productivity. It thus demonstrates again that it is becoming
senile and that it is more and more outlived.]
[1]
Under competition, the increasing minimum of capital required with the
increase in productivity for the successful operation of an independent
industrial establishment, assumes the following aspect: As soon as the new, more
expensive equipment has become universally established, smaller capitals are
henceforth excluded from this industry. Smaller capitals can carry on
independently in the various spheres of industry only in the infancy of
mechanical inventions. Very large undertakings, such as railways, on the other
hand, which have an unusually high proportion of constant capital, do not yield
the average rate of profit, but only a portion of it, only an interest.
Otherwise the general rate of profit would have fallen still lower. But this
offers direct employment to large concentrations of capital in the form of
stocks.
Growth of capital, hence accumulation of capital, does not imply a fall in
the rate of profit, unless it is accompanied by the aforementioned changes in
the proportion of the organic constituents of capital. Now it so happens that in
spite of the constant daily revolutions in the mode of production, now this and
now that larger or smaller portion of the total capital continues to accumulate
for certain periods on the basis of a given average proportion of those
constituents, so that there is no organic change with its growth, and
consequently no cause for a fall in the rate of profit. This constant expansion
of capital, hence also an expansion of production, on the basis of the old
method of production which goes quietly on while new methods are already being
introduced at its side, is another reason, why the rate of profit does not
decline as much as the total capital of society grows.
The increase in the absolute number of labourers does not occur in all
branches of production, and not uniformly in all, in spite of the relative
decrease of variable capital laid out in wages. In agriculture, the decrease of
the element of living labour may be absolute.
At any rate, it is but a requirement of the capitalist mode of production
that the number of wage-workers should increase absolutely, in spite of its
relative decrease. Labour-power becomes redundant for it as soon as it is no
longer necessary to employ it for 12 to 15 hours daily. A development of
productive forces which would diminish the absolute number of labourers,
i.e., enable the entire nation to accomplish its total production in a
shorter time span, would cause a revolution, because it would put the bulk of
the population out of the running. This is another manifestation of the specific
barrier of capitalist production, showing also that capitalist production is by
no means an absolute form for the development of the productive forces and for
the creation of wealth, but rather that at a certain point it comes into
collision with this development. This collision appears partly in periodical
crises, which arise from the circumstance that now this and now that portion of
the labouring population becomes redundant under its old mode of employment. The
limit of capitalist production is the excess time of the labourers. The absolute
spare time gained by society does not concern it. The development of
productivity concerns it only in so far as it increases the surplus labour-time
of the working-class, not because it decreases the labour-time for material
production in general. It moves thus in a contradiction.
We have seen that the growing accumulation of capital implies its growing
concentration. Thus grows the power of capital, the alienation of the conditions
of social production personified in the capitalist from the real producers.
Capital comes more and more to the fore as a social power, whose agent is the
capitalist. This social power no longer stands in any possible relation to that
which the labour of a single individual can create. It becomes an alienated,
independent, social power, which stands opposed to society as an object, and as
an object that is the capitalist's source of power. The contradiction between
the general social power into which capital develops, on the one hand, and the
private power of the individual capitalists over these social conditions of
production, on the other, becomes ever more irreconcilable, and yet contains the
solution of the problem, because it implies at the same time the transformation
of the conditions of production into general, common, social, conditions. This
transformation stems from the development of the productive forces under
capitalist production, and from the ways and means by which this development
takes place.
No capitalist ever voluntarily introduces a new method of production, no
matter how much more productive it may be, and how much it may increase the rate
of surplus-value, so long as it reduces the rate of profit. Yet every such new
method of production cheapens the commodities. Hence, the capitalist sells them
originally above their prices of production, or, perhaps, above their value. He
pockets the difference between their costs of production and the market-prices
of the same commodities produced at higher costs of production. He can do this,
because the average labour-time required socially for the production of these
latter commodities is higher than the labour-time required for the new methods
of production. His method of production stands above the social average. But
competition makes it general and subject to the general law. There follows a
fall in the rate of profit — perhaps first in this sphere of production, and
eventually it achieves a balance with the rest — which is, therefore, wholly
independent of the will of the capitalist.
It is still to be added to this point, that this same law also governs those
spheres of production, whose product passes neither directly nor indirectly into
the consumption of the labourers, or into the conditions under which their
necessities are produced; it applies, therefore, also to those spheres of
production, in which there is no cheapening of commodities to increase the
relative surplus-value or cheapen labour-power. (At any rate, a cheapening of
constant capital in all these lines may increase the rate of profit, with the
exploitation of labour remaining the same.) As soon as the new production method
begins to spread, and thereby to furnish tangible proof that these commodities
can actually be produced more cheaply, the capitalists working with the old
methods of production must sell their product below its full price of
production, because the value of this commodity has fallen, and because the
labour-time required by them to produce it is greater than the social average.
In one word — and this appears as an effect of competition — these capitalists
must also introduce the new method of production, in which the proportion of
variable to constant capital has been reduced.
All the circumstances which lead to the use of machinery cheapening the price
of a commodity produced by it, come down in the last analysis to a reduction of
the quantity of labour absorbed by a single piece of the commodity; and
secondly, to a reduction in the wear-and-tear portion of the machinery, whose
value goes into a single piece of the commodity. The less rapid the wear of
machinery, the more the commodities over which it is distributed, and the more
living labour it replaces before its term of reproduction arrives. In both cases
the quantity and value of the fixed constant capital increase in relation to the
variable.
"All other things being equal, the power of a nation to save
from its profits varies with the rate of profits: is great when they are high,
less, when low; but as the rate of profits declines, all other things do not
remain equal.... A low rate of profits is ordinarily accompanied by a rapid rate
of accumulation, relatively to the numbers of the people, as in England ... a
high rate of profit by a slower rate of accumulation, relatively to the numbers
of the people. Examples: Poland, Russia, India, etc." (Richard Jones, An
Introductory Lecture on Political Economy, London, 1833, p. 50 ff.)
Jones emphasises correctly that in spite of the falling rate of profit the
inducements and faculties to accumulate are augmented; first, on account of the
growing relative overpopulation; second, because the growing productivity of
labour is accompanied by an increase in the mass of use-values represented by
the same exchange-value, hence in the material elements of capital; third,
because the branches of production become more varied; fourth, due to the
development of the credit system, the stock companies, etc., and the resultant
case of converting money into capital without becoming an industrial capitalist;
fifth, because the wants and the greed for wealth increase; and, sixth, because
the mass of investments in fixed capital grows, etc.
Three cardinal facts of capitalist production:
1) Concentration of means of production in few hands, whereby they cease to
appear as the property of the immediate labourers and turn into social
production capacities. Even if initially they are the private property of
capitalists. These are the trustees of bourgeois society, but they pocket all
the proceeds of this trusteeship.
2) Organisation of labour itself into social labour: through co-operation,
division of labour, and the uniting of labour with the natural sciences.
In these two senses, the capitalist mode of production abolishes private
property and private labour, even though in contradictory forms.
3) Creation of the world-market.
The stupendous productivity developing under the capitalist mode of
production relative to population, and the increase, if not in the same
proportion, of capital-values (not just of their material substance), which grow
much more rapidly than the population, contradict the basis, which constantly
narrows in relation to the expanding wealth, and for which all this immense
productiveness works. They also contradict the conditions under which this
swelling capital augments its value. Hence the crises.
