Karl Marx - Exposition of the Internal Contradictions of the Law (Chap. 3.15.1) lyrics

Capital Vol. III Part III The Law of the Tendency of the Rate of Profit to Fall Chapter 15. Exposition of the Internal Contradictions of the Law I. General 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 an*lysing the rate of profit, Ricardo actually an*lyses the rate of surplus-value alone, and this only on the a**umption 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 ma**, 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 ma** 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 p1 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 = p1 + i + r/C = p1/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 p1, i, and r to be steadily increasing, each individually, while s/C = p/C, as well as p1/C, i/C, and r/C, should each by itself be steadily shrinking, or that p1 should increase in relation to i, or r in relation to p1 or to p1 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 p1, 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 p1, i, and r is merely a varying distribution of s among different cla**es. Consequently, p1/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 50c + 50v to 75c + 25v, 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 p1/C = 20%, i/C = 10%, and r/C = 20%. If the proportions had remained the same after the change from 50% to 25%, then p1/C = 10%, i/C = 5%, and r/C = 10%. If, however, p1/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 p1 and i, while p would have remained the same. Under both a**umptions, the sum of p1, i, and r would have increased, because produced by a capital four times as large. Furthermore, Ricardo's a**umption 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 ma** of surplus-value thus produced swells to immense dimensions. Now comes the second act of the process. The entire ma** 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 a**ume 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 ma** 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 ma** of profit will always depend on the magnitude of the advanced capital. The accumulation, however, is then determined by that portion of this ma** 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 ma**, but also on the cheapness of the commodities which the capitalist can buy with it, commodities which pa** partly into his consumption, his revenue, and partly into his constant capital. (Wages are here a**umed to be given.) The ma** 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 ma** of the capital = 1,000 and the added labour = 100, the reproduced capital = 1,100. If the ma** = 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 ma** 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 Connection 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 a**istance, 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 ma** 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.