Profit, Rent, Interest and Asset Prices - Part 5 of 19

The mass and rate of profit, Marx has shown, are now objectively determinable. However, in the real world, a multiplicity of other factors intervene to prevent this appearing in a pure form. That is true of all objective laws. The rate at which an object falls to Earth can be objectively determined by the laws of physics, for example. In theory, as Galileo argued, it does not matter whether this object is a piece of lead or a feather; they should both fall to the ground at a rate of 32 feet per second per second, the rate of acceleration caused by gravity. In practice, of course they do not. Both fall to Earth through the atmosphere, and both thereby experience varying amounts of resistance from it. An object falling to Earth does not just respond to the law of gravity, but also to other laws, which determine its terminal velocity.

In the same way, even though the value of a commodity, or under capitalism, its price of production, can be objectively determined, its actual market price will only accidentally coincide with these objectively determined values. In the real world, a host of other factors will cause demand to be higher than supply, or lower than supply, so that the market price, at any one time, will be higher or lower than this objectively determined value, or price of production. Similarly, where the supply of labour-power rises relative to the demand, workers may not just face lower wages, as a result of this condition, but the working-day may rise beyond the normal working day, as capital feels enabled to use up this excess supply without threatening its own longer-term interests. As Marx puts it,

“We can only say that, the limits of the working day being given, the maximum of profit corresponds to the physical minimum of wages; and that wages being given, the maximum of profit corresponds to such a prolongation of the working day as is compatible with the physical forces of the labourer. The maximum of profit is therefore limited by the physical minimum of wages and the physical maximum of the working day. It is evident that between the two limits of the maximum rate of profit an immense scale of variations is possible. The fixation of its actual degree is only settled by the continuous struggle between capital and labour, the capitalist constantly tending to reduce wages to their physical minimum, and to extend the working day to its physical maximum, while the working man constantly presses in the opposite direction.”

(Value, Price and Profit) 

In other words, just as gravity exerts a force pulling objects to Earth, so the resistance to those objects provided by air, or water acts to push them in the opposite direction. But, these contending forces are not arbitrary. Neither are those that limit the extent to which capital can extend or intensify the working-day, or to which workers can push in the opposite direction; nor are the forces arbitrary which determine the extent to which capital can reduce wages, or to which workers can increase them. The notion that such consequences can result solely from industrial struggle is the basis of reformism and syndicalism. It implies that capital imposes such conditions upon workers arbitrarily, reducing the motivations of capital down to being a question of morals, and the greed of the capitalist, whilst similarly implying that workers' condition, within capitalism, can be extended almost without limit, solely on the basis of more militant industrial struggle, or political reforms that bring about a redistribution of income. 

That is a moralistic, Sismondist view, and not the scientific view of Marx. As Marx puts it,

“As to the limits of the value of labour, its actual settlement always depends upon supply and demand, I mean the demand for labour on the part of capital, and the supply of labour by the working men.”

(ibid) 

But, those factors which, on the one hand, increase the demand for labour-power, i.e. the accumulation of capital, can simultaneously act to increase its supply. For example, as capital accumulates, the population will also grow. Moreover, this accumulation of capital, Marx has demonstrated also goes along with a change in the composition of capital, because as technology improves, new machines are introduced, and these machines raise the productivity of labour, so that less labour is required to produce a given amount of output. Consequently, even as the accumulation of capital may outstrip the growth of population, so a relative excess population is created. As wages rise, putting pressure on profits, capital will have an increased incentive to utilise science and technology to develop new labour-saving technologies that relatively reduce its demand for labour-power. It is the interplay of these contending forces that play out, over periods of many years, that create the objective laws that determine the long wave.

“Take, for example, the rise in England of agricultural wages from 1849 to 1859. What was its consequence? The farmers could not, as our friend Weston would have advised them, raise the value of wheat, nor even its market prices. They had, on the contrary, to submit to their fall. But during these eleven years they introduced machinery of all sorts, adopted more scientific methods, converted part of arable land into pasture, increased the size of farms, and with this the scale of production, and by these and other processes diminishing the demand for labour by increasing its productive power, made the agricultural population again relatively redundant. This is the general method in which a reaction, quicker or slower, of capital against a rise of wages takes place in old, settled countries. Ricardo has justly remarked that machinery is in constant competition with labour, and can often be only introduced when the price of labour has reached a certain height, but the appliance of machinery is but one of the many methods for increasing the productive powers of labour. The very same development which makes common labour relatively redundant simplifies, on the other hand, skilled labour, and thus depreciates it.”

(ibid)

And, as Marx puts it elsewhere.

“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.”

(Capital III, Chapter 15)

So long as capitalism exists, these objective laws will continue to apply and thereby determine the distribution of revenue. As Marx puts it in the Critique of the Gotha Programme.

“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of non-workers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?”

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Capital III, Chapter 48 - Part 16

This cost of production argument is found in Adam Smith, along with his labour theory of value. It is also found in Storch.

“Wages, profit, and rent are the three original sources of all revenue, as well as of all exchangeable value (A. Smith) [An Inquiry into the Nature and Causes of the Wealth of Nations, Aberdeen, London, 1848, S. 43. — Ed.] — It is thus that the causes of material production are at the same time the sources of the original revenues which exist. (Storch [Cours d’économie politique, St.-Pétersbourg, 1815. — Ed.], I, p. 259. — Ed.)” (Note 50, p 826)

This raises commodity fetishism to new heights. Instead of value being labour, and the exchange of value ultimately being an exchange of equal amounts of labour, the thing being bought and sold, the commodity, is itself seen to be inherently valuable, i.e. it is viewed as having value embodied in it, rather than simply being a representative of a certain quantity of social labour-time.

“All forms of society, in so far as they reach the stage of commodity-production and money circulation, take part in this perversion. But under the capitalist mode of production and in the case of capital, which forms its dominant category, its determining production relation, this enchanted and perverted world develops still more.” (p 826-7)

This mystification of the actual social relations, that exists in commodity exchange must, therefore, cause an even greater mystification, under capitalist production, because labour-power, capital and land each appear as commodities, and each form the basis, therefore, of different classes of property, upon which rest different social classes.

At certain points of the process, and at different stages of the development of capitalism, these real relations may be more apparent that at others.

For example, in the early stages of capitalist development, capital relies on the extraction of absolute surplus value. This becomes manifest in a struggle over the length of the working day. In this struggle there stands a fairly open social conflict between the interests of labour and capital. It is fairly obvious, in this conflict, that the source of additional value comes from labour.

If the worker works for 12 hours, they produce 20% more value than if they work for only 10 hours. Capital opposed the reduction of hours, because, if wages remained constant, and were equal to 6 hours, the surplus value appropriated would fall from 6 hours to 4 hours.

But, when capital moves to the extraction of relative surplus value, it is not so apparent that the additional value is the product of labour. Rather, labour's productive power appears to be a function of capital. Relative surplus value is made possible because of rising social productivity, which reduces the portion of the working day required to reproduce labour-power.

If productivity rises so that only 4 hours rather than 6 hours are required to meet the workers requirements, then in a 10 hour day, the amount of surplus value rises from 4 hours to 6 hours, and this increase in the value appropriated by capital appears to flow directly from the application of this capital, rather than the productive power of labour. The additional value appears to flow from the thing capital, rather than from the social relation with wage labour, which enables a greater proportion of the value produced by labour during the day to be appropriated by capital.

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Yes, Protest The Russian Embassy

Yesterday, Boris Johnson said that people should be protesting outside the Russian Embassy, in London, against the bombing of civilians, in Aleppo, by Russian and Syrian warplanes. He's right. Socialists should be protesting the brutal actions of Putin and Assad, but we can make no common cause with people like Johnson, in undertaking such protests. Johnson represents a government, which along with its NATO allies, has been responsible for widespread, murderous attacks on civilians across the globe, including the use of cruise missiles, and other such weapons of mass destruction, and the use of depleted uranium munitions, whose terrible effects will continue to affect people for generations to come, just as did the use of Agent Orange, by the US, in Vietnam.

Socialists should protest the brutal actions of Putin and Assad's forces. Johnson's criticism of people like the Stop The War Coalition, who fail to protest, or even criticise, the actions of any of those reactionary forces, ranged against the reactionary forces of western imperialism, effectively place themselves in the camp of one set of reactionary forces as opposed to the other. They make themselves, at the least, passive dupes of reactionaries like Putin or Assad, or Hamas, Hezbollah, the Iranian Mullahs and so on. They are a mirror image of those like the AWL, who make themselves willing dupes of imperialism, in such conflicts. Both, are the result of the same Third Campist, petit-bourgeois, moralistic approach to politics, which starts from a moral imperative of some worthy aim – opposition to imperialism in one case, opposition to anti-democratic, authoritarianism in the other – rather than the Marxist imperative to defend and advance the cause of the global working-class, and to build its unity, self-activity and self government.

Both groups, thereby place the fate of the working-class in the hands of some alien class force, having lost faith in the working-class itself to be the vehicle of progressive change, or at least faith in its ability to provide solutions to immediate problems. Trotsky warned against such an approach long ago. In his writings on the Balkan Wars, for example, he wrote that even where imperialist forces intervene in such situations to overturn some existing set of reactionary conditions – in that case the oppression of peoples within the Ottoman Empire – they do so for their own reasons, and so even the end result of their actions can never be the end result that we as socialists seek. Moreover, we never advocate that the working-class should passively rely on, or fail to oppose the intervention of our class enemies in such situations, rather than advocating the building of working-class unity, and self-activity. Eighty years after the Battle of Cable Street, we should remember that lesson.

“Democracy has no right, political or moral, to entrust the organisation of the Balkan peoples to forces that are outside its control – for it is not known when and where these forces will stop, and democracy, having once granted them the mandate of its political confidence, will be unable to check them.” (Trotsky – War Correspondence, The Balkan Wars 1912-13, p 148-52)

“...only a struggle against the usurpation of history's tasks by the present masters of the situation will educate the Balkan peoples to play the role of superseding not only Turkish despotism but also those who, for their own reactionary purposes, are, by their own barbarous methods, now destroying that despotism...

Our agitation, on the contrary, against the way that history's problems are at present being solved, goes hand in hand with the work of the Balkan Social Democrats. And when we denounce the bloody deeds of the Balkan 'liberation' from above we carry forward the struggle not only against liberal deception of the Russian masses but also against enslavement of the Balkan masses.” (ibid, p 293-4)

“It is necessary to vindicate the possibility for these peoples themselves to settle their own affairs, not only as they wish and see fit but also by their own strength, in the land where they are established. This means that European democracy has to combat every attempt to subject the fate of the Balkans to the ambitions of the Great Powers.” (ibid, p 148)

Bourgeois politicians, like Johnson, and the liberal interventionists point to Syria as an example of what happens when western imperialism fails to intervene in such situations, as an antidote to the criticism of their disastrous adventures in Iraq, Libya and elsewhere. But, in doing so they lie. A large part of the problems currently existing in the Middle East stem from the original intervention of western colonialism in the region, and the carving up of the region into countries that met the requirements of those colonial powers, rather than being based on any consideration of tribal, ethnic or religious divisions. It was as Trotsky describes in relation to the Balkans a solution imposed from above.

The more immediate problem emanating from the growth of ISIS, and other Islamist organisations, is itself a consequence of the fostering of such organisations by the US, for its own global strategic interests. It was the US that encouraged the growth of Bin Laden and the Mujaheddin in Afghanistan to oppose the Russian backed regime in Kabul, during the 1980's. It was the US, via the CIA that utilised Bin Laden and Al Qaeda to turn the facscistic, criminal thugs of the KLA, into a more effective terrorist organisation in Serbia, to stir up ethnic tensions in Kosovo, to undermine the Serbian regime, and thereby weaken Russian influence in the region. It is US, UK, and French armaments shipped to the regime in Saudi Arabia, and other Gulf Monarchies that has enabled them to oppress their own populations, and to arm and finance the Wahhabist militants that have spread across the globe, as the breeding ground of Islamist terror.

It was the intervention of the US and UK in Iraq that opened the door to sectarian division of the country, and enabled the Islamists to walk into the resulting vacuum. It was the lying words of the UK, US and EU in calling for a no-fly zone in Libya, which turned into them undertaking tens of thousands of bombing runs, and cruise missile attacks to overthrow Gaddafi, which opened the door to the establishment of the Islamist reign of terror there. Moreover, the talk of war crimes by Russia and Assad, are wholly hypocritical coming from politicians and regimes that undertook the three month long intensive bombardment, and massacre of the people of Sirte!

But, the claim that the US, and UK have not been intervening in Syria is itself a lie, even prior to their more recent bombing of ISIS. The fact is that it is only the prospect of such intervention, based on the past intervention in Iraq, Libya and elsewhere, that has led to small groups of people undertaking adventures to overthrow regimes without the necessary social forces to succeed. They do so in the expectation that imperialism will come to their aid, and do the work for them that their own resources cannot achieve. And, in Syria, it was the West's allies in the gulf monarchies that directly financed, trained and armed the Islamist terror groups acting in Syria. NATO member Turkey allowed a free flow of Islamist terrorists, not just from Islamic states, but also from the US and Europe into Syria to undertake such activity. They were given tacit sanction, and often safe harbour, by the Islamist regime in Turkey itself, just as in the 1980's, the US utilised the Islamist regime in Pakistan to channel terrorists and arms into Afghanistan to fight the Russians.

The US and its allies have utilised Islamist terror groups to further their own global strategic interests, and they bear the responsibility for the vile atrocities that those terrorist organisations have inflicted. But, as Trotsky pointed out in his writings on the Balkan Wars, the fact that such conflicts see terrible atrocities on one side, does not mean that socialists can ignore or fail to oppose the atrocities committed on the other, even where they are committed by forces that claim to be acting to promote “liberation”. In the Balkans, it was the “liberal interventionist” forces of Russia, that claimed to be liberating the people's of the area from the Oriental despotism of the Ottomans. It was those liberating forces that claimed the moral high ground for themselves, and their imperialist apologists who censored the criticism of the atrocities committed by the “liberating” forces.

Trotsky wrote about the atrocities committed by such “liberal intervention”.

“An individual, a group, a party, or a class that ‘objectively’ picks its nose while it watches men drunk with blood massacring defenceless people is condemned by history to rot and become worm-eaten while it is still alive.

“On the other hand, a party or the class that rises up against every abominable action wherever it has occurred, as vigorously and unhesitatingly as a living organism reacts to protect its eyes when they are threatened with external injury – such a party or class is sound of heart. Protest against the outrages in the Balkans cleanses the social atmosphere in our own country, heightens the level of moral awareness among our own people. The working masses of the population in every country are both a potential instrument of bloody outrages and a potential victim of such deeds. Therefore an uncompromising protest against atrocities serves not only the purpose of moral self-defence on the personal and party level but also the purpose of politically safeguarding the people against adventurism concealed under the flag of ‘liberation’.” (ibid, p 293)

“Liberation”, for the people of Syria, and for the rest of that region cannot be handed to them from above, by the actions of imperialistic “liberal interventionist forces”. It can only be won by the masses of that region themselves, with the active support of the global working-class. If we had, at least, a functioning socialist internation across Europe, it would be a powerful force to throw its weight behind the masses of Syria, Iraq, Jordan, Egypt, Libya, and so on, not only to fight for a democratic solution to their problems, but also for a sustainable solution based upon the formation of a Middle East Federation of states, in the same way that Trotsky argued for the Balkans. It would be able to throw its weight behind the working-class of Russia, suffering under the heel of Putin's authoritarian regime.

Where the solution does not lie, is in demands for western imperialism to impose solutions from above, such as the proposal for a “no-fly zone”. Who exactly would impose and police this no-fly zone? In reality, it is simply a demand for Putin and Assad to give up their current dominant position, and to hand it over to the US and NATO. That will never happen, and any attempt to impose such a no-fly zone, whilst Russina planes continue to fly, in the area, is an open invitation for the start of World War III!.

“But the majority of politicians, while quite properly refusing the Great Powers the right to make any claims on the Balkans, desire at the same time that Russia should help, arms in hand, the Balkan peoples to reorganise the Balkans as these leading political personalities would like the Balkans to be. This hope, or this demand, may become the source of great mistakes and great misfortunes. I say nothing about the fact that this approach to the question transforms the Balkan War into a conscious provocation to a measuring of strength on the all-European scale, which can mean nothing short of a European War. And, however dear to us the fate of the young Balkan peoples, however warmly we wish for them the best possible development of cultured existence on their own soil, there is one thing we must tell them plainly and honestly, as we must tell ourselves: We do not want, and we are unable to put our own cultural development at risk. Bismark once said that the whole Balkan Peninsula was not worth the bones of a single Pomeranian grenadier. We too can say today: If the leading parties of the Balkans, after all their sad experience of European intervention, can see no other way of settling the fate of the Balkans but a fresh European intervention, the results of which no one can foreordain, then their political plans are indeed not worth the bones of a single infantryman from Kursk. That may sound harsh, but it is the only way that this tragic question can be seen by any honest democratic politician who thinks not only of today but also of tomorrow.” (ibid pp 153-4)

Lenin made a similar point,

“The several demands of democracy, including self-determination, are not an absolute, but only a small part of the general-democratic (now: general-socialist) world movement. In individual concrete cases, the part may contradict the whole; if so, it must be rejected...

Let us assume that between two great monarchies there is a little monarchy whose kinglet is “bound” by blood and other ties to the monarchs of both neighbouring countries. Let us further assume that the declaration of a republic in the little country and the expulsion of its monarch would in practice lead to a war between the two neighbouring big countries for the restoration of that or another monarch in the little country. There is no doubt that all international Social-Democracy, as well as the really internationalist section of Social-Democracy in the little country, would be against substituting a republic for the monarchy in this case. The substitution of a republic for a monarchy is not an absolute, but one of the democratic demands, subordinate to the interests of democracy (and still more, of course, to those of the socialist proletariat) as a whole.” 

(Lenin - The Discussion On Self-Determination Summed Up)

However much we may sympathise with the plight of the Syrian people, we cannot risk the possibility of a conflict between Russia and its allies, with the US and NATO, because that would threaten not just the interests of the global working-class that must come first, but the future of humanity itself.

By all means we should protest outside the Russian Embassy, and the Syrian Embassy against the atrocities they are committing in Syria. But, we should also protest outside the US Embassy, outside the UK Ministry of Defence and Foreign Office, as well as outside the Saudi and other Gulf State Embassies against their own acts of barbarism and support for the terrorists operating across the Middle East.

The solution to the problems in the region lies with the working-class of that region, and the support that can be given to it, by the global working-class. That is the movement we should be building, not simply protest movements against western imperialism. Such a movement has to openly criticise an oppose the reactionaries like Putin and Assad on the other side, who form part of the problem not the solution.

Trotsky, who argued the need to oppose the liberal intervention, was criticised as a "doctrinaire", by those liberal politicians, but a hundred years on, the words of Trotsky in relation to the “liberation” of the Balkans, still resonate in what we see today of the supposed “liberation” of Syria.

“To speak of the 'liberation' of Macedonia, laid waste, ravaged, infected with disease from end to end, means either to mock reality or to mock oneself. Before our eyes a splendid peninsula, richly endowed by nature, which in the last few decades has made great cultural progress, is being hurled back with blood and iron into the dark age of famine and cruel barbarism. All the accumulations of culture are perishing, the work of fathers, grandfathers and great grandfathers is being reduced to dust, cities are being laid waste, villages are going up in flames, and no end can yet be seen to this frenzy of destruction...Face to face with such reversions to barbarism it is hard to believe that 'man' is a proud sounding word. But at least the 'doctrinaires' have one consolation, and it is not small: they can with a clear conscience say, 'Neither by deed nor word nor thought are we guilty of this blood'” (loc.cit. p 332)

Capital III, Chapter 48 - Part 15

What is then an historically limited and determined set of production and social relations becomes seen as eternal. In every society, means of production are considered capital, just as all labour is considered wage labour, even though, throughout the vast majority of Man's history, neither of these categories existed, because the producers owned their own means of production. Capital is then nothing more than means of production owned by capitalists with the capitalist being the representative of capital, just as labour is wage labour, whose representative is the worker. By the same token, land then becomes portions of the Earth's surface in the hands of landlords, who are its representatives.

“These means of production are in themselves capital by nature; capital is merely an "economic appellation" for these means of production; and so, in itself land is by nature the earth monopolised by a certain number of landowners. Just as products confront the producer as an independent force in capital and capitalists — who actually are but the personification of capital — so land becomes personified in the landlord and likewise gets on its hind legs to demand, as an independent force, its share of the product created with its help. Thus, not the land receives its due portion of the product for the restoration and improvement of its productivity, but instead the landlord takes a share of this product to chaffer away or squander.” (p 824)

Capital can only exist where labour exists in the form of wage labour. Where labour exists in the form of the direct labour of individual peasant producers, there is no labour-power to be bought as a commodity. Therefore, capital cannot buy it or extract surplus value. Even where labour exists, in the form of slave labour, this precludes capital, because slave labour is not free, it is not the sale of labour-power as a commodity, but the sale of the slave themselves as a commodity. The slave no more than a machine or pack animal enters the production process as an independent economic agent, and nor do they enter the process of exchange either.

But, if the specific historical form of wage labour is equated with labour itself, then this means that the means of production, with which the worker works, are themselves transformed, in all modes of production, equally into being capital, and all land into landed property, privately monopolised.

“Their definite social character in the process of capitalist production bearing the stamp of a definite historical epoch is a natural, and intrinsic substantive character belonging to them, as it were, from time immemorial, as elements of the production process. Therefore, the respective part played by the earth as the original field of activity of labour, as the realm of forces of Nature, as the pre-existing arsenal of all objects of labour, and the other respective part played by the produced means of production (instruments, raw materials, etc.) in the general process of production, must seem to be expressed in the respective shares claimed by them as capital and landed property, i.e., which fall to the share of their social representatives in the form of profit (interest) and rent, like to the labourer — the part his labour plays in the process of production is expressed in wages. Rent, profit and wages thus seem to grow out of the role played by the land, produced means of production, and labour in the simple labour-process, even when we consider this labour-process as one carried on merely between man and Nature, leaving aside any historical determination.” (p 825)

Looked at from the other side, if wage labour is the same as labour, then wages must be the same as the value produced by labour, the wages merely being the contribution of labour, whose value having been contributed to the product, flows back to the worker in equal measure. But, if this is true for labour, it must also be true for capital and land too. The profit that returns to capital must only be the reflux of the equivalent amount of value that the capital has contributed to the product and likewise with the rent that flows to the landlord.

“Landed property, capital and wage-labour are thus transformed from sources of revenue — in the sense that capital attracts to the capitalist, in the form of profit, a portion of the surplus-value extracted by him from labour, that monopoly in land attracts for the landlord another portion in the form of rent; and that labour grants the labourer the remaining portion of value in the form of wages — from sources by means of which one portion of value is transformed into the form of profit, another into the form of rent, and a third into the form of wages — into actual sources from which these value portions and respective portions of the product in which they exist, or for which they are exchangeable, arise themselves, and from which, therefore, in the final analysis, the value of the product itself arises.” (p 826)

Back To Part 14

Forward To Part 16

Profit, Rent, Interest and Asset Prices - Part 4 of 19

Having then determined the objective basis for the value of labour-power, as the labour-time required for the reproduction of the worker, over their average lifespan, and having determined the normal working-day as an objective period that maximises the production of surplus value, that amount of surplus value can then itself be objectively determined. On the one hand, there is an objectively determined value of commodities required for the reproduction of labour-power, and whose alternative form is money wages, and on the other is the amount of new value that this labour-power produces during the normal working day. The mass of surplus value, is then objectively determinable as the difference between these two amounts.

But, having determined the mass of surplus value, it is then also possible to objectively determine the rate of profit too. The rate of profit is the relation between this mass of surplus value, and the capital laid-out for its production. In other words, it is the equivalent of the profit margin. As the rate of profit, it is expressed as s/c + v, and as the profit margin it is expressed as p/k. In this formulation, k is simply the cost of production, which in turn, is c + v, (or more correctly c + d + v) the amount of materials used in production, the wear and tear of the fixed capital, during the year, and the amount paid out as wages, whilst p is the amount of profit realised during the year.

But, the constant capital, c, is also comprised of commodities, whether those commodities be the raw and auxiliary materials consumed in production, or the machines, buildings and other fixed capital, a part of whose value is transferred, as wear and tear, during production. Consequently, the value of these commodities that comprise the constant capital is also, thereby, objectively determinable. Finally, the commodities required for the reproduction of labour-power, represented by the variable capital, have a value that is also objectively determinable by the labour-time required for their reproduction.

In short, Marx has shown that the value of c, v, and s are all objectively determinable, and so consequently not only is the amount of surplus value no longer an arbitrary, inexplicable quantum, but its relation to the capital required for its production is also now objectively determinable. Similarly, the value of the fixed capital that must be present for production to occur has already been determined. Consequently, the basis for calculating not just the rate of profit, but also the annual rate of profit, also exists.

The annual rate of profit is the relation between the surplus value produced in one turnover period, to the capital advanced for its production in one turnover period, multiplied by the number of times the circulating capital turns over during the year. On this basis, taking the whole social capital into consideration, an average rate of profit can then be also objectively determined.

For the first time, then, Marx provides an objective basis for the determination of all these relations, which in turn drive the other economic relations within the capitalist economy. On the basis of this sound, objective economic footing, he can then analyse the way this surplus value divides up into the specific forms of profit of enterprise, interest and rent.

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Forward To Part 5

Capital III, Chapter 48 - Part 14

Similarly, the relation capital-profit is also wrong. Capital exists in its relation to wage labour. This is the only means of capital extracting surplus value, by exploiting labour-power. But, the profit that arises as a consequence of this relation between between capital and wage labour does not constitute the whole of the surplus value. A portion of the surplus value produced by this relation is obtained by the landlord, as rent, and by the money-lending capitalist as interest, yet neither of these classes play any part in this relation, neither participate in the extraction of surplus value from the worker.

The notion of capital – interest is then even more irrational, because interest is paid only to the money-lending capitalist, the owner of fictitious rather than productive-capital, which neither has any relation to the worker, nor the production of value nor surplus value.

Each of the supposed sources of these revenues – capital, land, wage labour – are use values, and yet the revenues themselves profit, interest, rent and wages are values.

“However, this is compensated for (this relation not only between incommensurable magnitudes, but also between wholly unlike, mutually unrelated, and non-comparable things) in that capital, like land and labour, is simply considered as a material substance, that is, simply as a produced means of production, and thus is abstracted both as a relation to the labourer and as value.” (p 823-4)

In other words, the concept of capital, as a social relation between capital and wage labour, an historically specific form, is hidden so that capital becomes the ahistoric means of production, which are used in the production process, in all modes of production, from primitive communism through to the future communist society. Rather than capital being something that can only exist under specific historical conditions, whereby the majority of society are dispossessed of the means of production, which became the property of a few, and who will only allow the producers access to these means of production if they undertake unpaid labour, a condition that requires that labour-power itself is sold as a commodity, capital becomes nothing more than the means of production, in the form of buildings, machinery and materials, whose value is itself determined by the labour-time required for its production.

This becomes even more irrational when capital comes to be considered not even as this productive-capital but only as the money used to buy it, as the fictitious capital in the hands of the money-lending capitalists, lent out to the productive-capitalists, in return for shares, bonds etc.

“Thirdly, if understood in this way, the formula, capital — interest (profit), land — rent, labour — wages, presents a uniform and symmetrical incongruity. In fact, since wage-labour does not appear as a socially determined form of labour, but rather all labour appears by its nature as wage-labour (thus appearing to those in the grip of capitalist production relations), the definite specific social forms assumed by the material conditions of labour — the produced means of production and the land — with respect to wage-labour (just as they, in turn, conversely presuppose wage-labour), directly coincide with the material existence of these conditions of labour or with the form possessed by them generally in the actual labour-process, independent of its concrete historically determined social form, or indeed independent of any social form.” (p 824)

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Capital III, Chapter 48 - Part 13

It is not land, which creates the value represented by differential rent. The differential rent is a function of the relative fertility of different soils, but it is not that relative fertility, which determines the value of products, arising from these different soils. That depends upon the labour-time required for their production. That labour-time may be greater or smaller for any given level of output, depending upon the soil fertility. But, also the rent, as a function of these product values, depends not just upon the individual values of products, produced on different soils, but on their general market value, which is determined as a result of competition between the capitals employed on these different soils, as well as upon the average rate of profit, which has nothing to do with the land or its relative fertility.

The concept of labour being the source of wages is no more rational than of land being the source of rent.

“In so far as labour is value-creating, and is manifested in the value of commodities, it has nothing to do with the distribution of this value among various categories.” (p 823)

In other words, labour creates new value, as a consequence of its expenditure, but this tells us nothing about how much of this new value should be distributed as wages, profit, interest or rent. These are determined by quite different factors. The amount that must be distributed as wages depends upon the value of labour-power, i.e. upon how much value must be set aside to buy the necessary wage goods required to reproduce that labour-power. That itself may fluctuate, as a consequence of competition, and the relation of supply and demand for labour-power, at any time, depending upon the needs of capital. But, even assuming that we take wages as an average, equal to the value of labour-power, this leaves the remaining portion of the new value, created by labour, the surplus value, to be divided as profits, interest and rent, according to the laws previously described.

Moreover, as set out earlier, although concrete forms of labour are the source of value, they are not the essence of value, they are not its substance. In just the same way that a candle, a torch or the sun are sources of light, none of these sources are the substance of light, which is comprised of the photons emanating from these sources. In the same way, the concrete labour of a tailor, a mechanic or a brain surgeon is the source of value, but none of them are the substance of value, which is comprised of abstract labour.

“In so far as it has the specifically social character of wage-labour, it is not value-creating. It has already been shown in general that wages of labour, or price of labour, is but an irrational expression for the value, or price of labour-power; and the specific social conditions, under which this labour-power is sold, have nothing to do with labour as a general agent in production.” (p 823)

The labour that determines the value of labour-power – that is that determines the value of the commodities required to reproduce labour-power – which is paid as wages, the price of that labour-power, is exactly the same abstract labour that determines the value of all other commodities.

“Labour is also materialised in that value component of a commodity which as wages forms the price of labour-power; it creates this portion just as much as the other portions of the product; but it is materialised in this portion no more and no differently than in the portions forming rent or profit. And, in general, when we establish labour as value-creating, we do not consider it in its concrete form as a condition of production, but in its social delimitation which differs from that of wage-labour.” (p 823)

In other words, its not wage-labour per se that creates value. It is the act of performing free labour, as part of any labour process, in any mode of production, and so abstracted from any historically determined form of that labour, which creates value. The labour of the individual member of a primitive commune, just as much as the labour of a peasant in an Indian village commune, or an independent English yeoman, or the citizen of a future communist society, are all equally value creating, no more nor less than the labour of the wage labourer under capitalism.

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