Here Marx sets out the transformation problem in a letter to Engels.
The first volume of Capital was published in 1967.
So this is another instance of Marx distinguishing
labor values and prices of production before publication of Capital.
This post is the second in a series
I am working on in which he sets out critical parts of the (critique of) political economy
in Capital in letters to Engels. As I understand it, the concept of absolute rent
was original with Marx.
Marx criticizes Ricardo for not distinguishing the labor embodied
in inputs in production from their cost price. Is the distinction between
cost price and prices of production clear in this letter? Maybe not.
He goes on here about rent. He assumes that the organic composition
of capital is lower in agriculture than in industry. Hence, for
Marx, more surplus value is generated in agriculture, for a given
expenditure of capital, than in industry.
2 August 1862
Dear Frederick,
Best thanks for the 10 pounds.
I very much dislike your being in financial difficulties on my
account, but que faire? Who is capable of withstanding such a
crisis as the American one? Not to mention my peculiar bad
luck in having a rotten rag like the Vienna Presse to deal with.
OTHERWISE, the fellows might, at least, have been able to make up
for the loss of the Tribune TO SOME EXTENT. Do you suppose,
perhaps, that the time has now come for me to approach, say, the
Evening Post (THE ABOLITIONIST PAPER in New York) about my
contributing to it?
All things considered, it's a real miracle that I have been able to
get on with my theoretical writing to such an extent. I now
propose after all to include in this volume an extra chapter on the
theory of rent, i.e., by way of 'illustration' to an earlier thesis of
mine. Let me say a word or two about what will, in the text, be a
lengthy and complex affair, so that you may let me have your opinion
on it.
As you know, I distinguish 2 parts in capital: constant capital
(raw material, matières instrumentales, machinery, etc.), whose value
only reappears in the value of the product, and secondly variable
capital, i.e., the capital laid out in wages, which contains less
materialised labour than is given by the worker in return for it.
E.g. if the daily wage = 10 hours and the worker works 12, he
replaces the variable capital + 1/5 of the same (2 hours). This latter
surplus I call SURPLUS VALUE.
Let us assume that the rate of surplus value (that is the length of
the working day and the surplus labour in excess of the necessary
labour performed by the worker to reproduce his pay) is given,
e.g. = 50 p.c. In this case, in a 12 hour working day the worker
would work e.g. 8 hours for himself, and 4 hours (8/2) for the
EMPLOYER. And indeed, let us assume this to apply to all TRADES SO that
any variations there may be in the AVERAGE WORKING TIME simply allow
for the greater or lesser difficulty of the work, etc.
In these circumstances, given equal exploitation of the worker in
different TRADES, different capitals in different spheres of production
will, given equal size, yield very different AMOUNTS OF SURPLUS
VALUE and hence very different rates of profit, SINCE PROFIT IS NOTHING BUT
THE PROPORTION OF THE SURPLUS VALUE TO THE TOTAL CAPITAL ADVANCED. This
will depend on the organic composition of the capital, i.e., on its
division into constant and variable capital.
Let us assume, as above, that the surplus labour = 50 p.c. If,
therefore, e.g. 1 pound = 1 working day (no matter whether you think in
terms of a day or a week, etc.), the working day = 12 hours, and
the necessary labour (i.e. reproductive of the pay) = 8 hours, then
the wage of 30 workers (or working days) = 20 pounds and the value of
their labour = 30 pounds, the variable capital per worker (daily or
weekly) = 2/3 pounds and the value he creates = 1 pound. The AMOUNT of SURPLUS
VALUE produced by a capital of 100 pounds in DIFFERENT TRADES will vary greatly
according to the proportion in which the capital of 100 pounds is divided
into constant and variable capital. Let us call CONSTANT CAPITAL C, and
VARIABLE CAPITAL V. If, e.g. in the COTTON industry, the composition was
C 80, V 20, the value of the product would = 110 (given 50 p.c.
surplus value or SURPLUS LABOUR). The amount of the surplus value = 10
and the profit rate = 10 p.c., since the profit = the proportion of 10
(the SURPLUS VALUE): 100 (the total value OF THE CAPITAL EXPENDED). Let us
suppose that, in a large tailoring shop, the composition is C 50, V 50,
so that the product = 125, the surplus value (at a rate of 50 p.c. as
above) = 25 and the profit rate = 25 p.c. Let us take another industry
where the proportion is C 70, V 30, hence the product = 115,
the profit rate = 15 p.c. Finally, an industry where the
composition = C 90, V 10, hence the product = 105 and the profit
rate = 5 p.c.
Here, given equal exploitation of labour, we have IN DIFFÉRENT TRADES
very DIFFERENT AMOUNTS OF SURPLUS VALUE AND HENCE VERY DIFFERENT' RATES OF
PROFIT for capitals of equal size.
If, however, the above 4 capitals are taken together, we get
| 1. | C 80 | V 20 | 110 | profit rate = 10 p.c. | Rate of surplpus
value in all
cases = 50 p.c. |
| 2. | C 50 | V 50 | 125 | profit rate = 25 p.c. |
| 3. | C 70 | V 30 | 115 | profit rate = 15 p.c. |
| 4. | C 90 | V 10 | 105 | profit rate = 5 p.c. |
| Capital | 400 | Profit = 55 |
On 100, this makes a PROFIT RATE of 13 3/4 p.c.
If the total capital (400) of the class be considered, the profit rate
would = 13 3/4 p.c. And capitalists are brothers. As a result of
competition (TRANSFER OF CAPITAL OR WITHDRAWAL OF CAPITAL FROM ONE TRADE
TO THE OTHER), capitals of equal size in DIFFERENT TRADES, DESPITE THEIR
DIFFERENT OGRANIC COMPOSITIONS, YIELD THE SAME AVERAGE RATE OF PROFIT. In
other words, the AVERAGE profit, which F.I. A CAPITAL OF 100 pounds yields IN A
CERTAIN TRADE, it yields, not as a capital specifically applied to the same
nor, therefore, in the proportion in which it of itself produces SURPLUS
VALUE, but as an aliquot part of the total capital of the capitalist class. It
is a SHARE the dividend on which will be paid in proportion to its size
out of the total amount of the SURPLUS VALUE (or unpaid labour)
produced by the total variable (laid out in wages) capital of
the class.
If then 1, 2, 3, 4 in the above illustration are to make the same
AVERAGE PROFIT, each category must sell its goods at 113 1/3 pounds. 1 and
4 will sell them at more than their value, 2 and 3 at less.
The price so regulated = THE EXPENSES OF CAPITAL + THE AVERAGE PROFIT
(F.I. 10 p.c.), is what Smith called the NATURAL PRICE, COST PRICE, etc.
It is the AVERAGE PRICE to which competition between DIFFERENT TRADES
(by TRANSFER OF CAPITAL or WITHDRAWAL OF CAPITAL) reduces the prices in
DIFFERENT TRADES. Hence, competition reduces commodities not to
their value, but to the cost price, which, depending on the organic
composition of the respective capitals, is either above, below or = to
their values.
Ricardo confuses value and cost price. He therefore believes that,
if there were such a thing as absolute rent (i.e., rent independent of
variations in the fertility of the soil), AGRICULTURAL PRODUCE, etc.,
would be constantly sold for more than its value, because at more
than cost price (THE ADVANCED CAPITAL + THE AVERAGE PROFIT). That would
demolish the fundamental law. Hence he denies absolute rent and
assumes only differential rent.
But his identification of VALUES OF COMMODITIES and COST PRICES OF
COMMODITIES is totally wrong and has traditionally been taken over
from A. Smith.
The facts are as follows:
If we assume that the AVERAGE COMPOSITION of all NOT AGRICULTURAL
CAPITAL is C 80, V 20, then the product (assuming that the rate of
surplus value is 50 p.c.) = 110 and the profit rate = 10 p.c.
If we further assume that the AVERAGE COMPOSITION of AGRICULTURAL
CAPITAL is C 60, V 40 (in England, this figure is statistically fairly
correct; rent for pasture, etc., has no bearing on this question,
being determined not by itself, but by the CORN RENT), then the
product, given equal exploitation of labour as above = 120 and
profit rate = 20 p.c. Hence, if the farmer sells his AGRICULTURAL PRODUCE
for what it is worth, he is selling it at 120 and not at 110, its cost price.
But landed property prevents the farmer, like his BROTHER CAPITALISTS,
from equalising the value of the product to the cost price.
Competition between capitals cannot enforce this. The
landowner intervenes and pockets the difference between value and
cost price. A low proportion of constant to variable capital is in
general an expression of the poor (or relatively poor) development
of the productive power of labour in a particular sphere of
production. Hence, if the AVERAGE COMPOSITION of AGRICULTURAL CAPITAL
is e.g. C 60, V 40, while that of NOT AGRICULTURAL CAPITAL is C 80,
V 20, this proves that agriculture has not yet reached the same
stage of development as industry. (Which is easily explicable since,
apart from anything else, a prerequisite for industry is the older
science of mechanics, while the prerequisites for agriculture are the
completely new sciences of chemistry, geology and physiology.) If
the proportion in agriculture becomes C 80, V 20 (in the above
premise), then absolute rent disappears. All that remains is
differential rent, which I shall also expound in such a way as to
make Ricardo's assumption of the constant DETERIORATION OF AGRICULTURE
appear MOST RIDICULOUS AND ARBITRARY.
Having regard to the foregoing definition of COST PRICE as distinct
from VALUE, it should further be noted that, besides the distinction
between constant capital and variable capital, which arises out of the
immediate production process of capital, there is the further distinction
between fixed and circulating capital, which arises out of the circulation
process of capital. However, the formula would become too involved
if I were to seek to incorporate this in the above as well.
There you have - ROUGHLY, for the thing's fairly complicated -
the critique of Ricardo's theory. This much you will admit - that
by taking into account the ORGANIC COMPOSITION OF CAPITAL, one disposes
of a mass of what have so far seemed to be contradictions and
problems.
Apropos. There are certain reasons, of which I shall inform you
in my next letter, why I should be very glad if you would write
me a detailed military critique (I shall deal with the political
aspect) of Lassalle-Rüstow's liberation nonsense.
Your
K. M.
Regards to the ladies.
Imandt has announced himself. Izzy leaves on Monday.
It will be evident to you that, given my view of 'absolute rent',
landed property (UNDER CERTAIN HISTORICAL CIRCUMSTANCES) does INDEED put
up the prices of raw materials. Very important, communistically
speaking.
Assuming the correctness of the above view, it is by no means
essential for absolute rent to be paid under all circumstances or in
respect of every type of soil (even if the composition of AGRICULTURAL
CAPITAL is as assumed above). It is not paid when landed property
does not exist, either factually or legally. In such a case, AGRICULTURE
offers NO PECULIAR RESISTANCE TO THE APPLICATION OF CAPITAL, which then
moves as easily in this element as in the other. The agricultural
produce is then sold, as masses of industrial products always are,
at cost price for less than its value. In practice, landed property may
disappear, even when capitalist and landowner are one and the
same person, etc.
But it would be otiose to go into these details here.
Differential rent as such - which does not arise from the
circumstance that CAPITAL is employed ON LAND INSTEAD OF ANY OTHER
FIELD OF EMPLOYMENT - presents no difficulty in theory. It is nothing
other than SURPLUS PROFIT which also exists in every sphere of
industrial production wherever capital operates under better than
AVERAGE CONDITIONS. It is firmly ensconced in agriculture only because
founded on a basis as solid and (relatively) stable as the DIFFERENT
DEGREES OF NATURAL FERTILITY of various types of soil.
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