Karl Marx

A Critique of Political Economy Volume III

The Process of Capitalist Production as a Whole Edited by Friedrich Engels
Written: Karl Marx, 1863-1883, edited by Friedrick Engels and completed by im 11 years a!ter Marx"s deat # $o%rce: &nstit%te o! Marxism-'eninism, ($$), 1*+*# ,%blis er: &nternational ,%blis ers, -., /n0d01 First ,%blis ed: 18*2# 3n-'ine 4ersion: Marx0org 1**6, Marxists0org 1***# 5ranscribed: in 1**6 by 6inric K% ls, 7a8e Walters and 9odiac, and by 5im 7elaney and M0 :ri!!in in 1***#65M' Mark%p: 9odiac 1**6, 5im 7elaney and M0 :ri!!in in 1***# ,roo!ed and ;orrected: by ; ris ;layton <==6->, Mark 6arris <=1=0

Capital

Table of Contents
Preface (Engels, 1894)...................................................................................................................5 Part I. The Conversion of Sur lus!"alue into Profit an# of the $ate of Sur lus!"alue into the $ate of Profit.........................................................................................................................19 ; apter 10 ;ost-,rice and ,ro!it000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001* ; apter <0 5 e )ate o! ,ro!it0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<> ; apter 30 5 e )elation o! t e )ate o! ,ro!it to t e )ate o! $%rpl%s-4al%e0000000000000000000000000000003< ; apter 20 5 e E!!ect o! t e 5%rno8er on t e )ate o! ,ro!it000000000000000000000000000000000000000000000000000002+ ; apter +0 Economy in t e Employment o! ;onstant ;apital0000000000000000000000000000000000000000000000000002* &0 &n :eneral000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000002* &&0 $a8ings &n 'abo%r ;onditions ?t 5 e Expense 3! 5 e 'abo%rers00000000000000000000000000000000000++ &&&0 Economy &n 5 e :eneration ?nd 5ransmission 3! ,o@er, ?nd &n A%ildings000000000000000062 &40 (tilisation 3! 5 e Excretions 3! ,rod%ction000000000000000000000000000000000000000000000000000000000000000000>= 40 Economy 5 ro%g &n8entions000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000>3 ; apter 60 5 e E!!ect o! ,rice Fl%ct%ation00000000000000000000000000000000000000000000000000000000000000000000000000000000>2 &0 Fl%ct%ations in t e ,rice o! )a@ Materials, and t eir 7irect E!!ects on t e )ate o! ,ro!it >2 &&0 ?ppreciation, 7epreciation, )elease ?nd 5ie-(p 3! ;apital0000000000000000000000000000000000000000000>> &&&0 :eneral &ll%stration0 5 e ;otton ;risis 3! 1861-6+0000000000000000000000000000000000000000000000000000000086 Experiments in corpore 8ili00000000000000000000000000000000000000000000000000000000000000000000000000000000000000001=< ; apter >0 $%pplementary )emarks00000000000000000000000000000000000000000000000000000000000000000000000000000000000000001=+ Part II. Conversion of Profit into %verage Profit...................................................................1&'

; apter 80 7i!!erent ;ompositions o! ;apitals in 7i!!erent Aranc es o! ,rod%ction and )es%lting 7i!!erences in )ates o! ,ro!it00000000000000000000000000000000000000000000000000000000000000000000000000000000001=> ; apter *0 Formation o! a :eneral )ate o! ,ro!it B?8erage )ate o! ,ro!itC and 5rans!ormation o! t e 4al%es o! ;ommodities into ,rices o! ,rod%ction00000000000000000000000000000000000000000000000000000000112 ; apter 1=0 ED%alisation o! t e :eneral )ate o! ,ro!it 5 ro%g ;ompetition0 Market-,rices and Market-4al%es0 $%rpl%s-,ro!it0000000000000000000000000000000000000000000000000000000000000000001<6 ; apter 110 E!!ects o! :eneral Wage Fl%ct%ations on ,rices o! ,rod%ction000000000000000000000000000121 ; apter 1<0 $%pplementary )emarks00000000000000000000000000000000000000000000000000000000000000000000000000000000000000122 &0 ;a%ses &mplying a ; ange in t e ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000122 &&0 ,rice o! ,rod%ction o! ;ommodities o! ?8erage ;omposition0000000000000000000000000000000000000012+ &&&0 5 e ;apitalist"s :ro%nds !or ;ompensating00000000000000000000000000000000000000000000000000000000000000000012+ Part III. The (a) of the Ten#enc* of the $ate of Profit to +all............................................148 ; apter 130 5 e 'a@ ?s $%c 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000128 ; apter 120 ;o%nteracting &n!l%ences000000000000000000000000000000000000000000000000000000000000000000000000000000000000016= &0 &ncreasing &ntensity 3! Exploitation0000000000000000000000000000000000000000000000000000000000000000000000000000000016= &&0 7epression 3! Wages Aelo@ 5 e 4al%e 3! 'abo%r-,o@er000000000000000000000000000000000000000000016< &&&0 ; eapening 3! Elements 3! ;onstant ;apital0000000000000000000000000000000000000000000000000000000000000016< &40 )elati8e 38er-,op%lation00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000016< 40 Foreign 5rade00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000163 4&0 5 e &ncrease 3! $tock ;apital00000000000000000000000000000000000000000000000000000000000000000000000000000000000000162 ; apter 1+0 Exposition o! t e &nternal ;ontradictions o! t e 'a@000000000000000000000000000000000000000000166 &0 :eneral000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000166 &&0 ;on!lict Aet@een Expansion 3! ,rod%ction ?nd ,rod%ction 3! $%rpl%s-4al%e00000000000016* &&&0 Excess ;apital ?nd Excess ,op%lation00000000000000000000000000000000000000000000000000000000000000000000000001>1 &40 $%pplementary )emarks000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001>> Part I". Conversion of Co,,o#it*!Ca ital an# -one*!Ca ital into Co,,ercial Ca ital an# -one*!.ealing Ca ital (-erchant/s Ca ital).................................................................180 ; apter 160 ;ommercial ;apital00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000018< ; apter 1>0 ;ommercial ,ro!it000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001*= ; apter 180 5 e 5%rno8er o! Merc ant"s ;apital0 ,rices00000000000000000000000000000000000000000000000000000000<=< ; apter 1*0 Money-7ealing ;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<1= ; apter <=0 6istorical Facts abo%t Merc ant"s ;apital00000000000000000000000000000000000000000000000000000000000<12 Part ". .ivision of Profit into Interest an# Profit of Enter rise. Interest!1earing Ca ital 000 ; apter <10 &nterest-Aearing ;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<<< ; apter <<0 7i8ision o! ,ro!it0 )ate o! &nterest0 -at%ral )ate o! &nterest00000000000000000000000000000000<32 ; apter <30 &nterest and ,ro!it o! Enterprise000000000000000000000000000000000000000000000000000000000000000000000000000<21 ; apter <20 ExternaliEation o! t e )elations o! ;apital in t e Form o! &nterest-Aearing ;apital 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<++ ; apter <+0 ;redit and Fictitio%s ;apital00000000000000000000000000000000000000000000000000000000000000000000000000000000<6< ; apter <60 ?cc%m%lation o! Money-;apital0 &ts &n!l%ence on t e &nterest )ate00000000000000000000<81 ; apter <>0 5 e )ole o! ;redit in ;apitalist ,rod%ction0000000000000000000000000000000000000000000000000000000003=3 ; apter <80 Medi%m o! ;irc%lation and ;apital# 4ie@s o! 5ooke and F%llarton000000000000000000003=>

; apter <*0 ;omponent ,arts o! Aank ;apital000000000000000000000000000000000000000000000000000000000000000000000000318 ; apter 3=0 Money-;apital and )eal ;apital0 &000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000003<> ; apter 310 Money ;apital and )eal ;apital0 &&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000033* 5rans!ormation 3! Money &nto 'oan ;apital00000000000000000000000000000000000000000000000000000000000000000000033* <0 5rans!ormation 3! ;apital 3r )e8en%e &nto Money 5 at &s 5rans!ormed &nto 'oan ;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000326 ; apter 3<0 Money ;apital and )eal ;apital0 &&&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000328 ; apter 330 5 e Medi%m o! ;irc%lation in t e ;redit $ystem0000000000000000000000000000000000000000000000003+8 ; apter 320 5 e ;%rrency ,rinciple and t e Englis Aank 'egislation o! 1822000000000000000000000383 ; apter 3+0 ,recio%s Metal and )ate o! Exc ange000000000000000000000000000000000000000000000000000000000000000002=< &0 Mo8ement 3! 5 e :old )eser8e00000000000000000000000000000000000000000000000000000000000000000000000000000000000002=< &&0 5 e )ate 3! Exc ange0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000002=8 )ate 3! Exc ange Wit ?sia0000000000000000000000000000000000000000000000000000000000000000000000000000000000000021= England"s Aalance 3! 5rade0000000000000000000000000000000000000000000000000000000000000000000000000000000000000002<1 ; apter 360 ,re-;apitalist )elations ips0000000000000000000000000000000000000000000000000000000000000000000000000000000002<2 &nterest &n 5 e Middle ?ges00000000000000000000000000000000000000000000000000000000000000000000000000000000000000023+ ?d8antages 7eri8ed Ay 5 e ; %rc From 5 e ,ro ibition 3! &nterest000000000000000000000238 Part "I. Transfor,ation of Sur lus!Profit into 2roun#!$ent..............................................44& ; apter 3>0 &ntrod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000022= ; apter 380 7i!!erential )ent: :eneral )emarks000000000000000000000000000000000000000000000000000000000000000000002+> ; apter 3*0 First Form o! 7i!!erential )ent B7i!!erential )ent &C0000000000000000000000000000000000000000000263 ; apter 2=0 $econd Form o! 7i!!erential )ent B7i!!erential )ent &&C000000000000000000000000000000000000002>* ; apter 210 7i!!erential )ent &&0 First ;ase: ;onstant ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000000286 ; apter 2<0 7i!!erential )ent &&0 $econd ;ase: Falling ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000002*1 &0 ,rod%cti8ity o! t e additional in8estment o! capital remains t e same00000000000000000000000000002*1 &&0 7ecreasing rate o! prod%cti8ity o! t e additional capital0000000000000000000000000000000000000000000000002*6 &&&0 )ising rate o! prod%cti8ity o! t e additional capital0000000000000000000000000000000000000000000000000000002*> ; apter 230 7i!!erential )ent &&0 5 ird ;ase: )ising ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000000000+=1 ; apter 220 7i!!erential )ent ?lso on t e Worst ;%lti8ated $oil0000000000000000000000000000000000000000000+<3 ; apter 2+0 ?bsol%te :ro%nd-)ent00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+<* ; apter 260 A%ilding $ite )ent0 )ent in Mining0 ,rice o! 'and0000000000000000000000000000000000000000000000+22 ; apter 2>0 :enesis o! ;apitalist :ro%nd-)ent0000000000000000000000000000000000000000000000000000000000000000000000++= &0 &ntrod%ctory )emarks00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++= &&0 'abo%r rent000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++2 &&&0 )ent &n Kind00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++6 &40 Money-)ent000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++8

40 MFtayage ?nd ,easant ,roprietors ip 3! 'and ,arcels0000000000000000000000000000000000000000000000000+61 Part "II. $evenues an# their Sources.....................................................................................538 ; apter 280 5 e 5rinity Form%la00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+68 & 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+68 &&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+6* &&&0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+6* ; apter 2*0 ;oncerning t e ?nalysis o! t e ,rocess o! ,rod%ction0000000000000000000000000000000000000000+>* ; apter +=0 &ll%sions ;reated Ay ;ompetition000000000000000000000000000000000000000000000000000000000000000000000000+*= ; apter +10 7istrib%tion )elations and ,rod%ction )elations00000000000000000000000000000000000000000000000006=+ ; apter +<0 ;lasses0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000061= Su le,ent 4* +re#eric5 Engels..................................................................................................................311 &ntrod%ction000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000611 'a@ o! 4al%e and )ate o! ,ro!it00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000611 5 e $tock Exc ange000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000006<1

Preface (Engels, 1894)

?t last & a8e t e pri8ilege o! making p%blic t is t ird book o! MarxGs main @ork, t e concl%sion o! t e t eoretical part0 W en & p%blis ed t e second 8ol%me, in 188+, & t o%g t t at except !or a !e@, certainly 8ery important, sections t e t ird 8ol%me @o%ld probably o!!er only tec nical di!!ic%lties0 5 is @as indeed t e case0 A%t & ad no idea at t e time t at t ese sections, t e most important parts o! t e entire @ork, @o%ld gi8e me as m%c tro%ble as t ey did, H%st as & did not anticipate t e ot er obstacles, @ ic @ere to retard completion o! t e @ork to s%c an extent0 -ext and most important o! all, it @as my eye @eakness @ ic !or years restricted my @riting time to a minim%m, and @ ic , e8en no@, permits me to @rite by arti!icial lig t only in exceptional cases0 F%rt ermore, t ere @ere ot er pressing labo%rs @ ic co%ld not be t%rned do@n, s%c as ne@ editions and translations o! MarxGs and my o@n earlier @orks, ence re8ie@s, pre!aces, and s%pplements, o!ten impossible @it o%t !res st%dy, etc0 ?bo8e all, t ere @as t e Englis edition o! t e !irst 8ol%me o! t is @ork, !or @ ose text & am %ltimately responsible and @ ic conseD%ently cons%med m%c o! my time0 W oe8er as in any @ay !ollo@ed t e colossal gro@t o! international socialist literat%re d%ring t e last ten years, partic%larly t e great n%mber o! translations o! MarxGs and my o@n earlier @orks, @ill agree @it me t at & a8e been l%cky t at t e n%mber o! lang%ages in @ ic & co%ld be o! elp to t e translators, and t ere!ore co%ld not re!%se in all conscience to re8ie@ t eir @ork, is 8ery limited0 A%t t e gro@t o! literat%re @as merely indicati8e o! a corresponding gro@t o! t e international @orking-class mo8ement itsel!0 ?nd t is imposed ne@ obligations %pon me0 From t e !irst days o! o%r p%blic acti8ity it @as Marx and & @ o s o%ldered t e main b%rden o! t e @ork as go-bet@eens !or t e national mo8ements o! $ocialists and @orkers in t e 8ario%s co%ntries0 5 is @ork expanded in proportion to t e expansion o! t e mo8ement as a @ ole0 (p to t e time o! is deat , Marx ad borne t e br%nt o! t e b%rden in t is as @ell0 A%t a!ter is deat t e e8er-increasing b%lk o! @ork ad to be done by mysel! alone0 $ince t en it as become t e r%le !or t e 8ario%s national @orkersG parties to establis direct contacts, and t is is !ort%nately e8er more t e case0 .et reD%ests !or my assistance are still !ar more !reD%ent t an & @o%ld @is in 8ie@ o! my t eoretical @ork0 A%t i! a man as been acti8e in t e mo8ement !or more t an !i!ty years, as & a8e been, e regards t e @ork connected @it it as a bo%nden d%ty t at brooks no delay0 &n o%r e8ent!%l time, H%st as in t e 16t cent%ry, p%re t eorists on social a!!airs are !o%nd only on t e side o! reaction and !or t is reason t ey are not e8en t eorists in t e !%ll sense o! t e @ord, b%t simply apologists o! reaction0 &n 8ie@ o! t e !act t at & li8e in 'ondon my party contacts are limited to correspondence in @inter, @ ile in s%mmer t ey are largely personal0 5 is !act, and t e necessity o! !ollo@ing t e mo8ement in a steadily gro@ing n%mber o! co%ntries and a still more rapidly gro@ing n%mber o! press organs, a8e compelled me to reser8e matters @ ic permit no interr%ption !or completion d%ring t e @inter mont s, and primarily t e !irst t ree mont s o! t e year0 W en a man is past se8enty is MeynertGs association !ibres o! t e brain !%nction @it annoying pr%dence0 6e no longer s%rmo%nts interr%ptions in di!!ic%lt t eoretical problems as easily and D%ickly as be!ore0 &t came abo%t t ere!ore t at t e @ork o! one @inter, i! it @as not completed, ad to be largely beg%n ane@ t e !ollo@ing @inter0 5 is @as t e case @it t e most di!!ic%lt !i!t part0 ?s t e reader @ill obser8e !rom t e !ollo@ing, t e @ork o! editing t e t ird 8ol%me @as essentially di!!erent !rom t at o! editing t e second0 &n t e case o! t e t ird 8ol%me t ere @as not ing to go by o%tside a !irst extremely incomplete dra!t0 5 e beginnings o! t e 8ario%s parts @ere, as a r%le, pretty care!%lly done and e8en stylistically polis ed0 A%t t e !art er one @ent, t e more sketc y and incomplete @as t e man%script, t e more exc%rsions it contained into arising side-iss%es @ ose proper place in t e arg%ment @as le!t !or later decision, and t e longer and

more complex t e sentences, in @ ic t o%g ts @ere recorded in statu nascendi. &n some places and@riting and presentation betrayed all too clearly t e o%tbreak and grad%al progress o! t e attacks o! ill ealt , ca%sed by o8er@ork, @ ic at t e o%tset rendered t e a%t orGs @ork increasingly di!!ic%lt and !inally compelled im periodically to stop @ork altoget er0 ?nd no @onder0 Aet@een 1863 and 186>, Marx not only completed t e !irst dra!t o! t e t@o last 8ol%mes o! Capital and prepared t e !irst 8ol%me !or t e printer, b%t also per!ormed t e enormo%s @ork connected @it t e !o%nding and expansion o! t e &nternational WorkingmenGs ?ssociation0 ?s a res%lt, already in 1862 and 186+ omino%s signs o! ill ealt appeared @ ic pre8ented Marx !rom personally p%tting t e !inis ing to%c es to t e second and t ird 8ol%mes0 & began my @ork by dictating into readable copy t e entire man%script, @ ic @as o!ten ard to decip er e8en !or me0 5 is alone reD%ired considerable time0 &t @as only t en t at & co%ld start on t e act%al editing0 & limited t is to t e essential0 & tried my best to preser8e t e c aracter o! t e !irst dra!t @ ere8er it @as s%!!iciently clear0 & did not e8en eliminate repetitions, @ ere8er t ey, as @as MarxGs c%stom, 8ie@ed t e s%bHect !rom anot er standpoint or at least expressed t e same t o%g t in di!!erent @ords0 W ere8er my alterations or additions exceeded t e bo%nds o! editing, or @ ere & ad to apply MarxGs !act%al material to independent concl%sions o! my o@n, i! e8en as !ait !%l as possible to t e spirit o! Marx, & a8e enclosed t e entire passage in brackets and a!!ixed my initials0 $ome o! my !ootnotes are not enclosed in brackets# b%t @ ere8er & a8e initialled t em & am responsible !or t e entire note0 ?s is only to be expected in a !irst dra!t, t ere are n%mero%s all%sions in t e man%script to points @ ic @ere to a8e been expanded %pon later, @it o%t t ese promises al@ays a8ing been kept0 & a8e le!t t em, beca%se t ey re8eal t e a%t orGs intentions relati8e to !%t%re elaboration0 -o@ as to details0 ?s regards t e !irst part, t e main man%script @as ser8iceable only @it s%bstantial limitations0 5 e entire mat ematical calc%lation o! t e relation bet@een t e rate o! s%rpl%s-8al%e and t e rate o! pro!it B@ ic makes %p o%r ; apter &&&C is introd%ced in t e 8ery beginning, @ ile t e s%bHect treated in o%r ; apter & is considered later and as t e occasion arises0 5@o attempts at re8ising, eac o! t em eig t pages in folio, @ere %se!%l ere0 A%t e8en t ese did not possess t e desired contin%ity t ro%g o%t0 5 ey !%rnis ed t e s%bstance !or @ at is no@ ; apter &0 ; apter && is taken !rom t e main man%script0 5 ere @as a series o! %ncompleted mat ematical calc%lations !or ; apter &&&, as @ell as a @ ole, almost complete, note-book dating !rom t e se8enties, @ ic presents t e relation o! t e rate o! s%rpl%s-8al%e to t e rate o! pro!it in t e !orm o! eD%ations0 My !riend $am%el Moore, @ o as also translated t e greater portion o! t e !irst 8ol%me into Englis , %ndertook to edit t is notebook !or me, a @ork !or @ ic e @as !ar better eD%ipped, being an old ;ambridge mat ematician0 &t @as !rom is s%mmary, @it occasional %se o! t e main man%script, t at & t en compiled ; apter &&&0 -ot ing b%t t e title @as a8ailable !or ; apter &40 A%t since its s%bHect-matter, t e in!l%ence o! t%rno8er on t e rate o! pro!it, is o! 8ital importance, & a8e @ritten it mysel!, !or @ ic reason t e @ ole c apter as been placed in brackets0 &t de8eloped in t e co%rse o! t is @ork t at t e !orm%la !or t e rate o! pro!it gi8en in ; apter &&& reD%ired modi!ication to be generally 8alid0 Aeginning @it ; apter 4, t e main man%script is t e sole so%rce !or t e remainder o! t e part, alt o%g many transpositions and s%pplements @ere also essential0 ?s !or t e !ollo@ing t ree parts, aside !rom stylistic editing & @as able to !ollo@ t e original man%script almost t ro%g o%t0 ? !e@ passages dealing mostly @it t e in!l%ence o! t%rno8er ad to be bro%g t into agreement @it ; apter &4, @ ic & ad inserted, and are like@ise placed in brackets and !ollo@ed by my initials0 5 e greatest di!!ic%lty @as presented by ,art 4 @ ic dealt @it t e most complicated s%bHect in t e entire 8ol%me0 ?nd it @as H%st at t is point t at Marx @as o8ertaken by one o! t e abo8e-

mentioned serio%s attacks o! illness0 6ere, t en, @as no !inis ed dra!t, not e8en a sc eme @ ose o%tlines mig t a8e been !illed o%t, b%t only t e beginning o! an elaboration I o!ten H%st a disorderly mass o! notes, comments and extracts0 & tried at !irst to complete t is part, as & ad done to a certain extent @it t e !irst one, by !illing in t e gaps and expanding %pon passages t at @ere only indicated, so t at it @o%ld at least approximately contain e8eryt ing t e a%t or ad intended0 & tried t is no less t an t ree times, b%t !ailed in e8ery attempt, and t e time lost in t is is one o! t e c ie! ca%ses t at eld %p t is 8ol%me0 ?t last & realised t at & @as on t e @rong track0 & s o%ld a8e ad to go t ro%g t e entire 8ol%mino%s literat%re in t is !ield, and @o%ld in t e end a8e prod%ced somet ing t at @o%ld ne8ert eless not a8e been a book by Marx0 & ad no ot er c oice b%t to more or less c%t t e :ordian knot by con!ining mysel! to as orderly an arrangement o! a8ailable matter as possible, and to making only t e most indispensable additions0 ?nd so it @as t at & s%cceeded in completing t e principal labo%rs !or t is part in t e spring o! 18*30 ?s !or t e 8ario%s c apters, ; apters JJ& to JJ&4 @ere, in t e main, complete0 ; apters JJ4 and JJ4& reD%ired a si!ting o! t e re!erences and an interpolation o! material !o%nd else@ ere0 ; apters JJ4&& and JJ&J co%ld be taken almost completely !rom t e original man%script, b%t ; apter JJ4&&& ad to be re-arranged in places0 5 e real di!!ic%lty, o@e8er, began @it ; apter JJJ0 From ere on it @as not only a matter o! properly arranging t e re!erences, b%t o! p%tting t e train o! t o%g t into proper order, interr%pted as it @as at e8ery point by inter8ening cla%ses and de8iations, etc0, and res%med else@ ere, o!ten H%st cas%ally0 5 %s, ; apter JJJ @as p%t toget er by means o! transpositions and excisions @ ic @ere %tilised, o@e8er, in ot er places0 ; apter JJJ&, again, possessed greater contin%ity0 A%t t en !ollo@s a long section in t e man%script, entitled K5 e ;on!%sionL, containing not ing b%t extracts !rom parliamentary reports on t e crises o! 1828 and 18+>, in @ ic are compiled statements o! t@enty-t ree b%sinessmen and economists, largely on money and capital, gold drain, o8er-spec%lation, etc0, and s%pplied ere and t ere @it s ort !acetio%s comments0 ,ractically all t e t en c%rrent 8ie@s concerning t e relation o! money to capital are represented t erein, eit er in t e ans@ers or in t e D%estions, and it @as t e Kcon!%sionL re8ealed in identi!ying money and capital in t e money-market t at Marx meant to treat @it criticism and sarcasm0 ?!ter many attempts & con8inced mysel! t at t is c apter co%ld not be p%t into s ape0 &ts material, partic%larly t at s%pplied @it MarxGs comments, @as %sed @ ere8er & !o%nd an opport%ne place !or it0 -ext, in tolerable order, comes @ at & placed in ; apter JJJ&&0 A%t t is is immediately !ollo@ed by a ne@ batc o! extracts !rom parliamentary reports on e8ery concei8able t ing pertinent to t is part, intermingled @it t e a%t orGs comments0 5o@ard t e end t ese extracts and comments are !oc%ssed more and more on t e mo8ement o! monetary metals and on exc ange rates, and close @it all kinds o! miscellaneo%s remarks0 3n t e ot er and, t e K,recapitalistL c apter B; ap0 JJJ4&C @as D%ite complete0 3! all t is material beginning @it t e K;on!%sionL, sa8e t at @ ic ad been pre8io%sly inserted, & made %p ; apters JJJ&&& to JJJ40 5 is co%ld not, o! co%rse, be done @it o%t considerable interpolations on my part !or t e sake o! contin%ity0 (nless t ey are merely !ormal in nat%re, t e interpolations are expressly indicated as belonging to me0 &n t is @ay & a8e !inally s%cceeded in @orking into t e text all t e a%t orGs rele8ant statements0 -ot ing as been le!t o%t b%t a small portion o! t e extracts, @ ic eit er repeated @ at ad already been said, or to%c ed on points @ ic t e man%script did not treat any !%rt er0 5 e part on gro%nd-rent @as m%c more !%lly treated, alt o%g by no means properly arranged, i! only !or t e !act t at Marx !o%nd it necessary to recapit%late t e plan o! t e entire part in ; apter J'&&& Bt e last portion o! t e part on rent in t e man%scriptC0 5 is @as all t e more desirable, since t e man%script opens @it ; apter JJJ4&&, !ollo@ed by ; apters J'4 to J'4&&, and only t erea!ter ; apters JJJ4&&& to J'&40 5 e titles !or t e di!!erential rent && in8ol8ed t e

greatest amo%nt o! @ork and so did t e disco8ery t at t e t ird case o! t is class o! rent ad not at all been analysed in ; apter J'&&&, @ ere it belonged0 &n t e se8enties Marx engaged in entirely ne@ special st%dies !or t is part on gro%nd-rent0 For years e ad st%died t e )%ssian originals o! statistical reports ine8itable a!ter t e Kre!ormL o! 1861 in )%ssia and ot er p%blications on lando@ners ip, ad taken extracts !rom t ese originals, placed at is disposal in admirably complete !orm by is )%ssian !riends, and ad intended to %se t em !or a ne@ 8ersion o! t is part0 3@ing to t e 8ariety o! !orms bot o! lando@ners ip and o! exploitation o! agric%lt%ral prod%cers in )%ssia, t is co%ntry @as to play t e same role in t e part dealing @it gro%nd-rent t at England played in Aook & in connection @it ind%strial @agelabo%r0 6e @as %n!ort%nately denied t e opport%nity o! carrying o%t t is plan0 'astly, t e se8ent part @as a8ailable complete, b%t only as a !irst dra!t, @ ose endlessly in8ol8ed periods ad !irst to be dissected to be made printable0 5 ere exists only t e beginning o! t e !inal c apter0 &t @as to treat o! t e t ree maHor classes o! de8eloped capitalist society I t e lando@ners, capitalists and @age-labo%rers I corresponding to t e t ree great !orms o! re8en%e, gro%nd-rent, pro!it and @ages, and t e class str%ggle, an ine8itable concomitant o! t eir existence, as t e act%al conseD%ence o! t e capitalist period0 Marx %sed to lea8e s%c concl%ding s%mmaries %ntil t e !inal editing, H%st be!ore going to press, @ en t e latest istorical de8elopments !%rnis ed im @it %n!ailing reg%larity @it proo!s o! t e most la%dable timeliness !or is t eoretical propositions0 ;itations and proo!s ill%strating is statements are, as in t e second 8ol%me, considerably less n%mero%s t an in t e !irst0 M%otations !rom Aook & re!er to pages in t e <nd and 3rd editions0 W ere8er t e man%script re!ers to t eoretical statements o! earlier economists, t e name alone is gi8en as a r%le, and t e D%otations @ere to be added d%ring t e !inal editing0 3! co%rse, & ad to lea8e t is as it @as0 5 ere are only !o%r parliamentary reports, b%t t ese are ab%ndantly %sed0 5 ey are t e !ollo@ing: 1C )eports !rom ;ommittees Bo! t e 'o@er 6o%seC, 4ol%me 4&&&, ;ommercial 7istress, 4ol%me &&, ,art &0 182>-280 Min%tes o! E8idence0 I M%oted as ;ommercial 7istress 182>-280 <C $ecret ;ommittee o! t e 6o%se o! 'ords on ;ommercial 7istress 182>0 )eport printed in 18280 E8idence printed in 18+> Bbeca%se considered too compromising in 1828C0 I M%oted as ;0 70 1828N+>0 3C )eport: Aank ?cts, 18+>0 I 7itto, 18+80 I )eports o! t e ;ommittee o! t e 'o@er 6o%se on t e E!!ect o! t e Aank ?cts o! 1822 and 182+0 Wit e8idence0 I M%oted as: A0 ?0 Balso as A0 ;0C 18+> or 18+80 & am going to start on t e !o%rt 8ol%me-t e istory o! t e t eory o! s%rpl%s-8al%e I as soon as it is in any @ay possible0 &n t e pre!ace to t e second 8ol%me o! Capital & ad to sD%are acco%nts @it t e gentlemen @ o raised a %e and cry at t e time beca%se t ey !ancied to a8e disco8ered Kin )odbert%s t e secret so%rce and s%perior predecessor o! MarxL0 & o!!ered t em an opport%nity to s o@ K@ at t e economics o! a )odbert%s can accomplis L# & de!ied t em to s o@ Kin @ ic @ay an eD%al a8erage rate o! pro!it can and m%st come abo%t, not only @it o%t a 8iolation o! t e la@ o! 8al%e, b%t on t e 8ery basis o! itL0 5 ese same gentlemen @ o !or eit er s%bHecti8e or obHecti8e, b%t as a r%le anyt ing b%t scienti!ic reasons @ere t en lionising t e bra8e )odbert%s as an economic star o! t e !irst magnit%de, a8e @it o%t exception !ailed to !%rnis an ans@er0 6o@e8er, ot er people a8e t o%g t it @ort t eir @ ile to occ%py t emsel8es @it t e problem0 &n is critiD%e o! t e second 8ol%me B Conrads Jahrbcher, J&, 188+, $0 2+<-6+C, ,ro!essor 'exis took %p t e D%estion, alt o%g e did not care to o!!er a direct sol%tion0 6e says:

K5 e sol%tion o! t e contradictionL Bbet@een t e )icardo-Marxian la@ o! 8al%e and an eD%al a8erage rate o! pro!itC Kis impossible i! t e 8ario%s classes o! commodities are considered individually and i! t eir 8al%e is to be eD%al to t eir exc ange-8al%e, and t e latter eD%al or proportional to t eir price0L ?ccording to im, t e sol%tion is only possible i! K@e cease meas%ring t e 8al%e o! indi8id%al commodities according to labo%r, and consider only t e prod%ction o! commodities as a whole and t eir distrib%tion among t e aggregate classes o! capitalists and @orkers0000 5 e @orking class recei8es b%t a certain portion o! t e total prod%ct,000 t e ot er portion, @ ic !alls to t e s are o! t e capitalist class, represents t e s%rpl%s-prod%ct in t e Marxian sense, and accordingly 000 t e s%rpl%s-8al%e0 5 en t e members o! t e capitalist class di8ide t is total s%rpl%s-8al%e among t emsel8esnot in accordance @it t e n%mber o! @orkers employed by t em, b%t in proportion to t e capital in8ested by eac , t e land also being acco%nted !or as capital-8al%e0L 5 e Marxian ideal 8al%es determined by %nits o! labo%r incorporated in t e commodities do not correspond to prices b%t may be Kregarded as points o! depart%re o! a s i!t @ ic leads to t e act%al prices0 5 e latter depend on t e !act t at eD%al s%ms o! capital demand eD%al pro!its0L For t is reason some capitalists @ill sec%re prices ig er t an t e ideal 8al%es !or t eir commodities, and ot ers @ill sec%re lo@er prices0 KA%t since t e losses and gains o! s%rpl%s-8al%e balance one anot er @it in t e capitalist class, t e total amo%nt o! t e s%rpl%s-8al%e is t e same as it @o%ld be i! all prices @ere proportional to t e ideal 8al%es0L &t is e8ident t at t e problem as not in any @ay been sol8ed ere, b%t as, t o%g some@ at loosely and s allo@ly, been on t e @ ole correctly formulated. ?nd t is is, indeed, more t an @e co%ld a8e expected !rom a man @ o, like t e abo8e a%t or, takes a certain pride in being a

K8%lgar economistL0 &t is really s%rprising @ en compared @it t e andi@ork o! ot er 8%lgar economists, @ ic @e s all later disc%ss0 'exisGs 8%lgar economy is, any o@, in a class o! its o@n0 6e says t at capital gains might, at any rate, be deri8ed in t e @ay indicated by Marx, b%t t at not ing compels one to accept t is 8ie@0 3n t e contrary0 4%lgar economy, e says, as at least a more pla%sible explanation, namely: K5 e capitalist sellers, s%c as t e prod%cer o! ra@ materials, t e man%!act%rer, t e @ olesale dealer, and t e retail dealer, all make a gain on t eir transactions by selling at a price ig er t an t e p%rc ase price, t %s adding a certain percentage to t e price t ey t emsel8es pay !or t e commodity0 5 e @orker alone is %nable to obtain a similar additional 8al%e !or is commodity# e is compelled by reason o! is %n!a8o%rable condition 8is-O-8is t e capitalist to sell is labo%r at t e price it costs im, t at is to say, !or t e essential means o! is s%bsistence0000 5 %s, t ese additions to prices retain t eir !%ll impact @it regard to t e b%ying @orker, and ca%se t e trans!er o! a part o! t e 8al%e o! t e total prod%ct to t e capitalist class0L 3ne need not strain is t inking po@ers to see t at t is explanation !or t e pro!its o! capital, as ad8anced by K8%lgar economy,L amo%nts in practice to t e same t ing as t e Marxian t eory o! s%rpl%s-8al%e# t at t e @orkers are in H%st t e same K%n!a8o%rable conditionL according to 'exis as according to Marx# t at t ey are H%st as m%c t e 8ictims o! s@indle beca%se e8ery non-@orker can sell commodities abo8e price, @ ile t e @orker cannot do so# and t at it is H%st as easy to b%ild %p an at least eD%ally pla%sible 8%lgar socialism on t e basis o! t is t eory, as t at b%ilt in England on t e !o%ndation o! Pe8onsGs and MengerGs t eory o! %se-8al%e and marginal %tility0 & e8en s%spect t at i! Mr0 :eorge Aernard $ a@ ad been !amiliar @it t is t eory o! pro!it, e @o%ld a8e likely !allen to @it bot ands, discarding Pe8ons and Karl Menger, to b%ild ane@ t e Fabian c %rc o! t e !%t%re %pon t is rock0 &n reality, o@e8er, t is t eory is merely a parap rase o! t e Marxian0 W at de!rays all t e price additionsQ &t is t e @orkersG Ktotal prod%ctL0 ?nd t is is d%e to t e !act t at t e commodity Klabo%rL, or, as Marx as it, labo%r-po@er, as to be sold belo@ its price0 For i! it is a common property o! all commodities to be sold at a price ig er t an t eir cost o! prod%ction, @it labo%r being t e sole exception since it is al@ays sold at t e cost o! prod%ction, t en labo%r is simply sold belo@ t e price t at r%les in t is @orld o! 8%lgar economy0 6ence t e res%ltant extra pro!it accr%ing to t e capitalist, or capitalist class, arises, and can only arise, in t e last analysis, !rom t e !act t at t e @orker, a!ter reprod%cing t e eD%i8alent !or t e price o! is labo%r-po@er, m%st prod%ce an additional prod%ct !or @ ic e is not paid I i0e0, a s%rpl%s-prod%ct, a prod%ct o! %npaid labo%r, or s%rpl%s-8al%e0 'exis is an extremely ca%tio%s man in t e c oice o! is terms0 6e does not say any@ ere o%trig t t at t e abo8e is is o@n conception0 A%t i! it is, it is plain as day t at @e are not dealing @it one o! t ose ordinary 8%lgar economists, o! @ om e says imsel!

t at e8ery one o! t em is Kat best only a opeless idiotL in MarxGs eyes, b%t @it a Marxist disg%ised as a 8%lgar economist0 W et er t is disg%ise as occ%rred conscio%sly or %nconscio%sly is a psyc ological D%estion @ ic does not interest %s at t is point0 W oe8er @o%ld care to in8estigate t is, mig t also probe o@ a man as s re@d as 'exis %ndo%btedly is, co%ld at one time de!end s%c nonsense as bimetallism0 5 e !irst to really attempt an ans@er to t e D%estion @as 7r0 Conrad Schmidt in is pamp let entitled Die Durchsdinittsprofitrate auf Grundlage des Mar !schen "erthgeset#es, $t%ttgart, 7ietE, 188*0 $c midt seeks to reconcile t e details o! t e !ormation o! market-prices @it bot t e la@ o! 8al%e and @it t e a8erage rate o! pro!it0 5 e ind%strial capitalist recei8es in is prod%ct, !irst, an eD%i8alent o! t e capital e as ad8anced, and, second, a s%rpl%s-prod%ct !or @ ic e as paid not ing0 A%t to obtain a s%rpl%s-prod%ct e m%st ad8ance capital to prod%ction0 5 at is, e m%st apply a certain D%antity o! materialised labo%r to be able to appropriate t is s%rpl%s-prod%ct0 For t e capitalist, t ere!ore, t e capital e ad8ances represents t e D%antity o! materialised labo%r socially necessary !or im to obtain t is s%rpl%s-prod%ct0 5 is applies to e8ery ind%strial capitalist0 -o@, since commodities are m%t%ally exc anged, according to t e la@ o! 8al%e, in proportion to t e labo%r socially necessary !or t eir prod%ction and since, as !ar as t e capitalist is concerned, t e labo%r necessary !or t e man%!act%re o! t e s%rpl%s-prod%ct appens to be past labo%r acc%m%lated in is capital, it !ollo@s t at s%rpl%s-prod%cts are exc anged in proportion to t e s%ms o! capital reD%ired !or t eir prod%ction, and not in proportion to t e labo%r actually incorporated in t em0 6ence t e s are o! eac %nit o! capital is eD%al to t e s%m o! all prod%ced s%rpl%s-8al%es di8ided by t e s%m o! t e capitals expended in prod%ction0 ?ccordingly, eD%al s%ms o! capital yield eD%al pro!its in eD%al time spans, and t is is accomplis ed by adding t e cost-price o! t e s%rpl%s-prod%ct so calc%lated, i0e0, t e a8erage pro!it, to t e cost-price o! t e paid prod%ct and by selling bot t e paid and %npaid prod%ct at t is increased price0 5 e a8erage rate o! pro!it takes s ape in spite o! a8erage commodity-prices being determined, as $c midt olds, by t e la@ o! 8al%e0 5 e constr%ction is extremely ingenio%s0 &t is completely patterned a!ter t e 6egelian model, b%t like t e maHority o! 6egelian constr%ctions it is not correct0 $%rpl%s-prod%ct or paid prod%ct, makes no di!!erence0 &! t e la@ o! 8al%e is also to be directly 8alid !or t e a8erage prices, bot o! t em m%st be sold at prices proportionate to t e socially necessary labo%r reD%ired and expended in prod%cing t em0 5 e la@ o! 8al%e is aimed !rom t e !irst against t e idea deri8ed !rom t e capitalist mode o! t o%g t t at acc%m%lated labo%r o! t e past, @ ic comprises capital, is not merely a certain s%m o! !inis ed 8al%e, b%t t at, beca%se a !actor in prod%ction and t e !ormation o! pro!it, it also prod%ces 8al%e and is ence a so%rce o! more 8al%e t an it as itsel!# it establis es t at li8ing labo%r alone possesses t is !ac%lty0 &t is @ell kno@n t at capitalists expect eD%al pro!its proportionate to t eir capitals and regard t eir ad8ances o! capital as a sort o! costprice o! t eir pro!its0 A%t i! $c midt %tilises t is conception as a means o! reconciling prices based on t e a8erage rate o! pro!it @it t e la@ o! 8al%e, e rep%diates t e la@ o! 8al%e itsel! by attrib%ting to it as one o! its co-determinati8e !actors a conception @it @ ic t e la@ is @ olly at 8ariance0 Eit er acc%m%lated labo%r creates 8al%e t e same as li8ing labo%r0 &n t at case t e la@ o! 8al%e does not apply0 3r, it does not create 8al%e0 &n t at case $c midtGs demonstration is incompatible @it t e la@ o! 8al%e0 $c midt strayed into t is bypat @ en D%ite close to t e sol%tion, beca%se e belie8ed t at e needed not ing s ort o! a mat ematical !orm%la to demonstrate t e con!ormance o! t e a8erage price o! e8ery indi8id%al commodity @it t e la@ o! 8al%e0 A%t @ ile on t e @rong track in t is instance, in t e immediate proximity o! t e goal, t e rest o! is booklet is e8idence o! t e

%nderstanding @it @ ic e dre@ !%rt er concl%sions !rom t e !irst t@o 8ol%mes o! Capital. 6is is t e ono%r o! independently !inding t e correct explanation de8eloped by Marx in t e t ird part o! t e t ird 8ol%me !or t e it erto inexplicable sinking tendency o! t e rate o! pro!it, and, similarly, o! explaining t e deri8ation o! commercial pro!it o%t o! ind%strial s%rpl%s-8al%e, and o! making a great n%mber o! obser8ations concerning interest and gro%nd-rent, in @ ic e anticipates ideas de8eloped by Marx in t e !o%rt and !i!t parts o! t e t ird 8ol%me0 &n a s%bseD%ent article B$eue %eit, 18*<-*3, -os0 3 and 2C, $c midt takes a di!!erent tack in is e!!ort to sol8e t e problem0 6e contends t at it is competition @ ic prod%ces t e a8erage rate o! pro!it by ca%sing t e trans!er o! capital !rom branc es o! prod%ction @it %nder-a8erage pro!it to branc es @it abo8e-a8erage pro!it0 &t is not a re8elation t at competition is t e great eD%aliser o! pro!its0 A%t no@ $c midt tries to pro8e t at t is le8elling o! pro!its is identical @it a red%ction o! t e selling price o! commodities in excess s%pply to a magnit%de o! 8al%e @ ic society can pay !or t em according to t e la@ o! 8al%e0 MarxGs analyses in t e book itsel! are ample e8idence @ y t is @ay, too, co%ld not lead to t e goal0 ?!ter $c midt &. 'ireman tackled t e problem BConrads Jahrbcher, dritte Folge, &&&, $0 >*3C0 & s all not go into is remarks on ot er aspects o! t e Marxian analysis0 5 ey rest %pon t e !alse ass%mption t at Marx @is es to de!ine @ ere e only in8estigates, and t at in general one mig t expect !ixed, c%t-to-meas%re, once and !or all applicable de!initions in MarxGs @orks0 &t is sel!e8ident t at @ ere t ings and t eir interrelations are concei8ed, not as !ixed, b%t as c anging, t eir mental images, t e ideas, are like@ise s%bHect to c ange and trans!ormation# and t ey are not encaps%lated in rigid de!initions, b%t are de8eloped in t eir istorical or logical process o! !ormation0 5 is makes clear, o! co%rse, @ y in t e beginning o! is !irst book Marx proceeds !rom t e simple prod%ction o! commodities as t e istorical premise, %ltimately to arri8e !rom t is basis to capital I @ y e proceeds !rom t e simple commodity instead o! a logically and istorically secondary !orm I !rom an already capitalistically modi!ied commodity0 5o be s%re, Fireman positi8ely !ails to see t is0 5 ese and ot er side-iss%es, @ ic co%ld gi8e rise to still ot er di8erse obHections, are better le!t by t e @ayside, @ ile @e go on !ort @it to t e gist o! t e matter0 W ile t eory teac es Fireman t at at a gi8en rate o! s%rpl%s-8al%e t e latter is proportional to t e labo%r-po@er employed, e learns !rom experience t at at a gi8en a8erage rate o! pro!it, pro!it is proportional to t e total capital employed0 6e explains t is by saying t at pro!it is merely a con8entional p enomenon B@ ic means in is lang%age t at it belongs to a de!inite social !ormation @it @ ic it stands and !allsC0 &ts existence is simply tied %p @it capital0 5 e latter, pro8ided it is strong eno%g to sec%re a pro!it !or itsel!, is compelled by competition also to sec%re !or itsel! a rate o! pro!it eD%al !or all s%ms o! capital0 ;apitalist prod%ction is simply impossible @it o%t an eD%al rate o! pro!it0 :i8en t is mode o! prod%ction, t e D%antity o! pro!it !or t e indi8id%al capitalist can, at a certain rate o! pro!it, depend only on t e magnit%de o! is capital0 3n t e ot er and, pro!it consists o! s%rpl%s-8al%e, o! %npaid labo%r0 A%t o@ is s%rpl%s8al%e, @ ose magnit%de inges %pon t e degree o! labo%r exploitation, trans!ormed into pro!it, @ ose magnit%de depends %pon t e amo%nt o! t e capital employedQ K$imply by selling commodities abo8e t eir 8al%e in all branc es o! prod%ction in @ ic t e ratio bet@een 000 constant and 8ariable capital is greatest# b%t t is also implies t at commodities are sold belo@ t eir 8al%e in t ose branc es o! prod%ction in @ ic t e ratio bet@een constant and 8ariable capital R c:8 is smallest, and t at commodities are sold at t eir tr%e

8al%e only in branc es in @ ic

t e ratio o! c:8

represents a certain mean !ig%re0000 &s t is discrepancy bet@een indi8id%al prices and t eir respecti8e 8al%es a re!%tation o! t e 8al%e principleQ Ay no means0 For since t e prices o! some commodities rise abo8e t eir 8al%e as m%c as t e prices o! ot ers !all belo@ it, t e total s%m o! prices remains eD%al to t e total s%m o! 8al%es 000 in t e end t is incongr%ity disappears0L 5 is incongr%ity is a Kdist%rbanceL# K o@e8er, in t e exact sciences it is not c%stomary to regard a predictable dist%rbance as a re!%tation o! a la@L0 3n comparing t e rele8ant passages in ; apter &J @it t e abo8e, it @ill be seen t at Fireman as indeed placed is !inger on t e salient point0 A%t t e %ndeser8edly cool reception o! is able article s o@s o@ many interconnecting links @o%ld still be needed e8en a!ter t is disco8ery to enable Fireman to @ork o%t a !%ll and compre ensi8e sol%tion0 ?lt o%g many @ere interested in t is problem, t ey @ere all still !ear!%l o! getting t eir !ingers b%rnt0 ?nd t is is explained not only by t e incomplete !orm in @ ic Fireman le!t is disco8ery, b%t also by t e %ndeniable !a%ltiness o! bot is conception o! t e Marxian analysis and o! is o@n general critiD%e o! t e latter, based as it @as on is misconception0 W ene8er t ere is a c ance o! making a !ool o! imsel! o8er some di!!ic%lt matter, 6err ,ro!essor P%li%s "olf, o! 9%ric , ne8er !ails to do so0 6e tells %s B Conrads Jahrbcher, 18*1, dritte Folge, &&, $0 3+< and !ollo@ingC t at t e entire problem is resol8ed in relati8e s%rpl%s-8al%e0 5 e prod%ction o! relati8e s%rpl%s-8al%e rests on t e increase o! constant capital 8is-O-8is 8ariable capital0 K? pl%s in constant capital pres%pposes a pl%s in t e prod%cti8e po@er o! t e labo%rers0 $ince t is pl%s in prod%cti8e po@er Bby @ay o! lo@ering t e @orkerGs cost o! li8ingC prod%ces a pl%s in s%rpl%s-8al%e, a direct relation is establis ed bet@een t e increasing s%rpl%s-8al%e and t e increasing s are o! constant capital in total capital0 ? pl%s in constant capital indicates a pl%s in t e prod%cti8e po@er o! labo%r0 Wit 8ariable capital remaining t e same and constant capital increasing, s%rpl%s-8al%e m%st t ere!ore, in accordance @it Marx, increase as @ell0 5 is @as t e problem presented to %s0L 5r%e, Marx says t e 8ery opposite in a %ndred places in t e !irst ook# tr%e, t e assertion t at, according to Marx, @ en 8ariable capital s rinks, relati8e s%rpl%s-8al%e increases in proportion to t e increase in constant capital, is so asto%nding t at it p%ts to s ame all parliamentary

declamation# tr%e, 6err P%li%s Wol! demonstrates in is e8ery line t at e does not in t e least %nderstand, be it relati8ely or absol%tely, t e concepts o! relati8e or absol%te s%rpl%s-8al%e# to be s%re e says imsel! t at Kat !irst glance one seems really to e in a nest o! incongr%itiesL, @ ic , by t e @ay, is t e only tr%e statement in is entire article0 A%t @ at does all t at matterQ 6err P%li%s Wol! is so pro%d o! is brilliant disco8ery t at e cannot re!rain !rom besto@ing post %mo%s praise on Marx !or it and !rom extolling is o@n !at omless nonsense as a Kne@ proo! o! t e keen and !ar-sig ted @ay set !ort L0 A%t no@ comes t e c oicest bit o! all0 6err Wol! says: K)icardo as like@ise claimed t at an eD%al in8estment o! capital yielded eD%al s%rpl%s-8al%e Bpro!itC, H%st as t e same expendit%re o! labo%r created t e same s%rpl%s-8al%e Bas regards its D%antityC0 ?nd t e D%estion no@ @as o@ t e one agreed @it t e ot er0 A%t Marx as re!%sed to accept t is @ay o! p%tting t e problem0 (e has proved beyond a doubt )in the third volume* t at t e second statement @as not necessarily a conseD%ence o! t e la@ o! 8al%e, t at it e8en contradicted is la@ o! 8al%e and s o%ld t ere!ore be !ort @it rep%diated0L ?nd t ere%pon Wol! probes @ o o! %s t@o, Marx or &, ad made a mistake0 &t does not occ%r to im, nat%rally, t at it is e @ o is groping in t e dark0 & s o%ld o!!end my readers and !ail to see t e %mo%r o! t e sit%ation i! & @ere to @aste a single @ord on t is c oice morsel0 & s all only add t at is a%dacity in %sing t e opport%nity to report t e ostensible gossip among pro!essors t at ;onrad $c midtGs abo8e-named @ork @as Kdirectly inspired by EngelsL matc es t e a%dacity @it @ ic e dared to say at one time @ at KMarx as pro8ed beyond a do%bt in t e t ird 8ol%me0L 6err P%li%s Wol!S &t may be c%stomary in t e @orld in @ ic yo% li8e and stri8e !or t e man @ o p%blicly poses a problem to ot ers to acD%aint is close !riends on t e sly @it its sol%tion0 & am D%ite prepared to belie8e t at yo% are capable o! t is sort o! t ing0 A%t t at a man need not stoop to s%c s abby tricks in my @orld is pro8ed by t e present pre!ace0 -o sooner ad Marx died t an Mr0 +chille ,oria astened to p%blis an article abo%t im in t e $uova +ntologia B?pril 1883C0 5o begin @it , a biograp y brimming @it misin!ormation, !ollo@ed by a critiD%e o! p%blic, political and literary @ork0 6e !alsi!ies MarxGs materialist conception o! istory and distorts it @it an ass%rance t at bespeaks a great p%rpose0 ?nd t is p%rpose @as e8ent%ally carried o%t0 &n 1886, t e same Mr0 'oria p%blis ed a book, ,a teoria economica della constitu#ione politica, in @ ic e anno%nced to is asto%nded contemporaries t at MarxGs conception o! istory, so completely and p%rpose!%lly misrepresented by im in isL BMarxGsC Ksystem o! criticism o! capitalist economy is

1883, @as is o@n disco8ery0 5o be s%re, t e Marxian t eory is red%ced in t is book to a rat er , ilistine le8el, and t e istorical ill%strations and proo!s abo%nd in bl%nders @ ic @o%ld ne8er be tolerated in a !o%rt -!orm boy0 A%t @ at does t at matterQ 5 e disco8ery t at political conditions and e8ents are e8ery@ ere in8ariably explained by corresponding economic conditions @as, as is ere@it demonstrated, not made by Marx in 182+, b%t by Mr0 'oria in 18860 ?t least e as appily con8inced is co%ntrymen o! t is, and, a!ter is book appeared in Frenc , also some Frenc men, and can no@ pose in &taly as t e a%t or o! a ne@ epoc -making t eory o! istory %ntil t e &talian $ocialists !ind time to strip t e ill%strio%s 'oria o! is stolen peacock !eat ers0 A%t t is is H%st a sample or Mr0 'oriaGs style0 6e ass%res %s t at all MarxGs t eories rest on conscious sop istry Bun consaputo sofismaC# t at Marx did not stop at paralogisms e8en @ en he -new them to be paralogisms )sapendoli tali*, etc0 ?nd a!ter t %s impressing t e necessary %pon is readers @it a series o! similar contemptible insin%ations, so t at t ey s o%ld regard Marx as an %nprincipled %pstart . la 'oria @ o ac ie8es is little e!!ects by t e same @retc ed %mb%g as o%r pro!essor !rom ,ad%a, e re8eals an important secret to t em, and t ereby takes %s back to t e rate o! pro!it0 Mr0 'oria says: ?ccording to Marx, t e amo%nt o! s%rpl%s-8al%e B@ ic Mr0 'oria ere identi!ies @it pro!itC prod%ced in a capitalist ind%strial establis ment s o%ld depend on t e 8ariable capital employed in it, since constant capital does not yield pro!it0 A%t t is is contrary to !act0 For in practice pro!it does not depend on 8ariable, b%t on total capital0 ?nd Marx imsel! recognises t is BAook &, ; ap0 J&&&C and admits t at on t e s%r!ace !acts appear to contradict is t eory0 A%t o@ does e get aro%nd t is contradictionQ 6e re!ers is readers to an as yet %np%blis ed s%bseD%ent 8ol%me0 'oria as already told his readers abo%t t is 8ol%me t at e did not belie8e Marx ad e8er entertained t e t o%g t o! @riting it, and no@ exclaims tri%mp antly: K& a8e not been @rong in contending t at t is second 8ol%me, @ ic Marx al@ays !lings at is ad8ersaries @it o%t it e8er appearing, mig t 8ery @ell a8e been a s re@d expedient applied by Marx @ ene8er scienti!ic arg%ments !ailed spediente ideato dal Mar im )un ingegnoso a sostitu#ione degli

argomenti scientifici*./ ?nd @ osoe8er is not con8inced a!ter t is t at Marx stands in t e same class o! scienti!ic s@indlers as l!illustre 'oria, is past all redemption0 We a8e at least learned t is m%c : ?ccording to Mr0 'oria, t e Marxian t eory o! s%rpl%s-8al%e is absol%tely incompatible @it t e existence o! a general eD%al rate o! pro!it0 5 en, t ere appeared t e second 8ol%me and t ere@it my p%blic c allenge precisely on t is 8ery point0 &! Mr0 'oria ad been one o! %s di!!ident :ermans, e @o%ld a8e experienced a certain degree o! embarrassment0 A%t e is a cocky so%t erner, coming !rom a ot climate, @ ere, as e can testi!y, cool ner8e is a nat%ral reD%irement0 5 e D%estion o! t e rate o! pro!it as been p%blicly p%t0 Mr0 'oria as p%blicly declared it insol%ble0 ?nd !or t is 8ery reason e is no@ going to o%tdo imsel! by p%blicly sol8ing it0

5 is miracle is accomplis ed in Conrads Jahrbcher, ne%e Folge, A%c JJ, $0 <>< and !ollo@ing, in an article dealing @it ;onrad $c midtGs already cited pamp let0 ?!ter 'oria learned !rom $c midt o@ commercial pro!it @as made, e s%ddenly sa@ daylig t0 K$ince determining 8al%e by means o! labo%r-time is to t e ad8antage o! t ose capitalists @ o in8est a greater portion o! t eir capital in @ages, t e %nprod%cti8eL Bread commercialC Kcapital can deri8e a ig er interestL Bread pro!itC K!rom t ese pri8ileged capitalists and t %s bring abo%t an eD%alisation bet@een t e indi8id%al ind%strial capitalists000 For instance, i! eac o! t e ind%strial capitalists ?, A, ; %ses 2== @orking-days and =, 2==, <== constant capital respecti8ely in prod%ction, and i! t e @ages !or 2== @orking-days amo%nt to += @orking-days, t en eac recei8es a s%rpl%s-8al%e o! += @orking-days, and t e rate o! pro!it is 2==T !or t e !irst, 3303T !or t e second, and <=T !or t e t ird capitalist0 A%t i! a !o%rt capitalist 7 acc%m%lates an %nprod%cti8e claims an interestL Bpro!itC capital o! 3==, @ ic

KeD%al in 8al%e to 2= @orking-days !rom ?, and an interest o! <= @orking-days !rom A, t en t e rate o! pro!it o! capitalists ? and A @ill sink to <=T, H%st as t at o! ;, @ ile 7 @it is capital o! 3== recei8es pro!it o! 6=, or a rate o! pro!it o! <=T, t e same as t e ot er capitalists0L Wit s%c astonis ing dexterity, l!illustre 'oria sol8es by sleig t o! and t e D%estion @ ic e ad declared insol%ble ten years pre8io%sly0 (n!ort%nately, e did not let %s into t e secret @ ere!rom t e K%nprod%cti8e capitalL obtained t e po@er to sD%eeEe o%t o! t e ind%strialists t eir extra pro!it in excess o! t e a8erage rate o! pro!it, and to retain it in its o@n pocket, H%st as t e lando@ner pockets t e tenantGs s%rpl%s-pro!it as gro%nd-rent0 &ndeed, according to im it @o%ld be t e merc ants @ o @o%ld raise a trib%te analogo%s to gro%nd-rent !rom t e ind%strialists, and @o%ld t ereby bring abo%t an a8erage rate o! pro!it0 ;ommercial capital is indeed a 8ery essential !actor in prod%cing t e general rate o! pro!it, as nearly e8erybody kno@s0 A%t only a literary ad8ent%rer @ o in is eart sneeEes at political economy, can 8ent%re t e assertion t at it as t e magic po@er to absorb all s%rpl%s-8al%e in excess o! t e general rate o! pro!it e8en be!ore t is general rate as taken s ape, and to con8ert it into gro%nd-rent !or itsel! @it o%t, moreo8er, e8en a8ing need to do @it any real estate0 -o less astonis ing is t e assertion t at commercial capital manages to disco8er t e partic%lar ind%strialists, @ ose s%rpl%s-8al%e H%st co8ers t e a8erage rate o! pro!it, and t at it considers it a pri8ilege to mitigate t e lot o! t ese l%ckless 8ictims o! t e Marxian la@ o! 8al%e to a certain extent by selling t eir prod%cts gratis !or t em, @it o%t asking

as m%c as a commission !or it0 W at a mo%ntebank one m%st be to imagine t at Marx ad need to resort to s%c miserable tricksS A%t it is not %ntil @e compare im @it is nort ern competitors, !or instance @it 6err P%li%s Wol!, @ o @as not born yesterday eit er, t at t e ill%strio%s 'oria s ines in is !%ll glory0 W at a yelping p%p 6err Wol! appears e8en in is big 8ol%me on So#ialismus und -apitalistische Gesellschaftsordnung,alongside t e &talianS 6o@ a@k@ard, & am almost tempted to say modest, e appears beside t e rare con!idence o! t e maestro @ o takes it !or granted t at Marx, neit er more nor less t an ot er people, @as as m%c a sop ist, paralogist, %mb%g and mo%ntebank as Mr0 'oria imsel! I t at Marx took in t e p%blic @it t e promise o! ro%nding o%t is t eory in a s%bseD%ent 8ol%me @ ene8er e @as in a di!!ic%lt position, kno@ing !%ll @ell t at e neit er co%ld nor e8er @o%ld @rite it0 Ao%ndless ner8e co%pled @it a !lair !or slipping like an eel t ro%g impossible sit%ations, a eroic contempt !or p%mmellings recei8ed, asty plagiarism o! ot er peopleGs accomplis ments, import%nate and !an!aronading ad8ertising, spreading is !ame by means o! a c or%s o! !riends I @ o can eD%al im in all t isQ &taly is t e land o! classicism0 E8er since t e great era @ en t e da@n o! modern times rose t ere, it as prod%ced magni!icent c aracters o! %neD%alled classic per!ection, !rom 7ante to :aribaldi0 A%t t e period o! its degradation and !oreign domination also beD%eat ed it classic c aractermasks, among t em t@o partic%larly clear-c%t types, t at o! $ganarelle and 7%lcamara0 5 e classic %nity o! bot is embodied in o%r illustre 'oria0 &n concl%sion & m%st take my readers across t e ?tlantic0 7r0 BMed0C George C. Stiebeling, o! -e@ .ork, as also !o%nd a sol%tion to t e problem, and a 8ery simple one0 $o simple, indeed, t at no one eit er ere, or t ere, took im serio%sly0 5 is aro%sed is ire, and e complained bitterly abo%t t e inH%stice o! it in an endless stream o! pamp lets and ne@spaper articles appearing on bot sides o! t e great @ater0 6e @as told in t e $eue %eit t at is entire sol%tion rested on a mat ematical error0 A%t t is co%ld scarcely dist%rb im0 Marx ad also made mat ematical errors, and @as yet rig t in many t ings0 'et %s t en take a look at 7r0 $tiebelingGs sol%tion0 K& take t@o !actories @orking @it eD%al capitals !or an eD%al lengt o! time, b%t @it a di!!erent ratio o! ;onstant and 8ariable capitals0 & make t e total capital Bc U 8C R y, and t e di!!erence in t e ratio o! t e constant and 8ariable capital R x0 For !actory &, y R c U 8, !or !actory &&, y R Bc I xC U B8 U xC0 5 ere!ore t e rate o! s%rpl%s-8al%e !or !actory & R sN8, and !or !actory && R sNB8 U xC0 ,ro!it BpC is @ at & call t e total s%rpl%s-8al%e BsC by @ ic t e total capital y, or c U 8, is a%gmented in t e gi8en time# t %s p R s0 6ence, t e rate o! pro!it !or !actory & R pNy, or sNBc U 8C, and !or !actory && it is also pNy, or sN Bc - xC U B8 U xC, i0e0, it is also sNBc U 8C0 5 e 000 problem t %s resol8es itsel! in s%c a @ay t at, on t e basis o! t e la@ o! 8al%e, @it eD%al capital and eD%al time, b%t %neD%al D%antities o!

li8ing labo%r, a c ange in t e rate o! s%rpl%s-8al%e ca%ses t e eD%alisation o! an a8erage rate o! pro!it0L B:0 ;0 $tiebeling, Das "erthgeset# und die &rofitrate, -e@ .ork, Po n 6einric 0C 6o@e8er pretty and re8ealing t e abo8e calc%lation may be, @e are compelled to ask 7r0 $tiebeling one D%estion: 6o@ does e kno@ t at t e s%m o! s%rpl%s-8al%e prod%ced by !actory & is exactly eD%al to t e s%m o! t e s%rpl%s-8al%e prod%ced by !actory &&Q 6e states explicitly t at c, 8, y and x, t at is, all t e ot er !actors in t e calc%lation, are t e same !or bot !actories, b%t makes no mention o! s0 &t does not by any means !ollo@ !rom t e !act t at e designated bot o! t e abo8e-mentioned D%antities o! s%rpl%s-8al%e algebraically @it s0 )at er, it is H%st t e t ing t at as to be pro8ed, since Mr0 $tiebeling @it o%t !%rt er ado also identi!ies pro!it p @it t e s%rpl%s-8al%e0 -o@ t ere are H%st t@o possible alternati8es0 Eit er t e t@o sGs are eD%al, bot !actories prod%ce eD%al D%antities o! s%rpl%s-8al%e, and t ere!ore also eD%al D%antities o! pro!it, since bot capitals are eD%al0 &n t at case Mr0 $tiebeling as !rom t e start taken !or granted @ at e @as really called %pon to pro8e0 3r, one !actory prod%ces more s%rpl%s-8al%e t an t e ot er, in @ ic case is entire calc%lation t%mbles abo%t is ears0 Mr0 $tiebeling spared neit er pains nor money to b%ild mo%ntains o! calc%lations %pon t is mat ematical error, and to ex ibit t em to t e p%blic0 & can ass%re im, !or is o@n peace o! mind, t at t ey are nearly all eD%ally @rong, and t at in t e exceptional cases @ en t is is not so, t ey pro8e somet ing entirely di!!erent !rom @ at e set o%t to pro8e0 6e pro8es, !or instance, by comparing (0$0 cens%s !ig%res !or 18>= and 188= t at t e rate o! pro!it as act%ally !allen, b%t interprets it @rongly and ass%mes t at MarxGs t eory o! a constantly stable rate o! pro!it s o%ld be corrected on t e basis o! experience0 .et it !ollo@s !rom t e t ird part o! t e present t ird book t at t is Marxian Kstable rate o! pro!itL is p%rely a !igment o! Mr0 $tiebelingGs imagination, and t at t e tendency !or t e rate o! pro!it to !all is d%e to circ%mstances @ ic are H%st t e re8erse o! t ose indicated by 7r0 $tiebeling0 -o do%bt 7r0 $tiebeling as t e best intentions, b%t @ en a man @ants to deal @it scienti!ic D%estions e s o%ld abo8e all learn to read t e @orks e @is es to %se H%st as t e a%t or ad @ritten t em, and abo8e all @it o%t reading anyt ing into t em t at t ey do not contain0 5 e o%tcome o! t e entire in8estigation s o@s again @it re!erence to t is D%estion as @ell t at it is t e Marxian sc ool alone @ ic as accomplis ed somet ing0 &! Fireman and ;onrad $c midt read t is t ird book, eac one, !or is part, may @ell be satis!ied @it is o@n @ork0 'ondon, 3ctober 2, 18*2 'rederic- 0ngels

Part I. The Conversion of Surplus !alue into Profit an" of the #ate of Surplus !alue into the #ate of Profit
Chapter 1. Cost-Price and Profit
&n Aook & @e analysed t e p enomena @ ic constit%te t e process of capitalist production as s%c , as t e immediate prod%cti8e process, @it no regard !or any o! t e secondary e!!ects o! o%tside in!l%ences0 A%t t is immediate process o! prod%ction does not ex a%st t e li!e span o! capital0 &t is s%pplemented in t e act%al @orld by t e process of circulation, @ ic @as t e obHect o! st%dy in Aook &&0 &n t e latter, namely in ,art &&&, @ ic treated t e process o! circ%lation as a medi%m !or t e process o! social reprod%ction, it de8eloped t at t e capitalist process o! prod%ction taken as a @ ole represents a synt esis o! t e processes o! prod%ction and circ%lation0 ;onsidering @ at t is t ird book treats, it cannot con!ine itsel! to general re!lection relati8e to t is synt esis0 3n t e contrary, it m%st locate and describe t e concrete !orms @ ic gro@ o%t o! t e movements of capital as a whole 0 &n t eir act%al mo8ement capitals con!ront eac ot er in s%c concrete s ape, !or @ ic t e !orm o! capital in t e immediate process o! prod%ction, H%st as its !orm in t e process o! circ%lation, appear only as special instances0 5 e 8ario%s !orms o! capital, as e8ol8ed in t is book, t %s approac step by step t e !orm @ ic t ey ass%me on t e s%r!ace o! society, in t e action o! di!!erent capitals %pon one anot er, in competition, and in t e ordinary conscio%sness o! t e agents o! prod%ction t emsel8es0 5 e 8al%e o! e8ery commodity prod%ced in t e capitalist @ay is represented in t e !orm%la: ; R c U 8 U s0 &! @e s%btract s%rpl%s-8al%es !rom t is 8al%e o! t e prod%ct t ere remains a bare eD%i8alent or a s%bstit%te 8al%e in goods, !or t e capital-8al%e c U 8 expended in t e elements o! prod%ction0 For example, i! t e prod%ction o! a certain article reD%ires a capital o%tlay o! V+==, o! @ ic V<= are !or t e @ear and tear o! instr%ments o! prod%ction, V38= !or t e materials o! prod%ction, and V1== !or labo%r-po@er, and i! t e rate o! s%rpl%s-8al%e is 1==T, t en t e 8al%e o! t e prod%ct R 2==c U 1==8 U 1==s R V6==0 ?!ter ded%cting t e s%rpl%s-8al%e o! V1==, t ere remains a commodity-8al%e o! V+== @ ic only replaces t e expended capital o! V+==0 5 is portion o! t e 8al%e o! t e commodity, @ ic replaces t e price o! t e cons%med means o! prod%ction and labo%r-po@er, only replaces @ at t e commodity costs t e capitalist imsel!0 For im it, t ere!ore, represents t e cost-price o! t e commodity0 W at t e commodity costs t e capitalist and its act%al prod%ction cost are t@o D%ite di!!erent magnit%des0 5 at portion o! t e commodity-8al%e making %p t e s%rpl%s-8al%e does not cost t e capitalist anyt ing simply beca%se it costs t e labo%rer %npaid labo%r0 .et, on t e basis o! capitalist prod%ction, a!ter t e labo%rer enters t e prod%ction process e imsel! constit%tes an ingredient o! operating prod%cti8e capital, @ ic belongs to t e capitalist0 5 ere!ore, t e capitalist is t e act%al prod%cer o! t e commodity0 For t is reason t e cost-price o! t e commodity necessarily appears to t e capitalist as t e act%al cost o! t e commodity0 &! @e take k to be t e cost-price, t e !orm%la ; R c U 8 U s t%rns into t e !orm%la ; R k U s, t at is, t e commodity-8al%e R cost-price U s%rpl%s-8al%e0

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5 e gro%ping o! t e 8ario%s 8al%e portions o! a commodity @ ic only replace t e 8al%e o! t e capital expended in its prod%ction %nder t e ead o! cost-price expresses, on t e one and, t e speci!ic c aracter o! capitalist prod%ction0 5 e capitalist cost o! t e commodity is meas%red by t e expendit%re o!capital, @ ile t e act%al cost o! t e commodity is meas%red by t e expendit%re o! labour0 5 %s, t e capitalist cost-price o! t e commodity di!!ers in D%antity !rom its 8al%e, or its act%al cost-price0 &t is smaller t an t e 8al%e o! t e commodity, beca%se, @it ; R k U s, it is e8ident t at k R ; - s0 3n t e ot er and, t e cost-price o! a commodity is by no means simply a category @ ic exists only in capitalist book-keeping0 5 e indi8id%alisation o! t is portion o! 8al%e is contin%ally mani!est in practice in t e act%al prod%ction o! t e commodity, beca%se it as e8er to be recon8erted !rom its commodity-!orm by @ay o! t e process o! circ%lation into t e !orm o! prod%cti8e capital, so t at t e cost-price o! t e commodity al@ays m%st rep%rc ase t e elements o! prod%ction cons%med in its man%!act%re0 5 e category o! cost-price, on t e ot er and, as not ing to do @it t e !ormation o! commodity-8al%e, or @it t e process o! sel!-expansion o! capital0 W en & kno@ t at o! t e 8al%e o! a commodity @ort V6==, !i8e-sixt s, or V+==, represent no more t an an eD%i8alent o! t e capital o! V+== cons%med in its prod%ction and t at it can t ere!ore s%!!ice only to rep%rc ase t e material elements o! t is capital, & kno@ not ing as yet eit er o! t e @ay in @ ic t ese !i8esixt s o! t e 8al%e o! t e commodity, @ ic represent its cost-price, are prod%ced, or abo%t t e @ay in @ ic t e last sixt , @ ic constit%tes its s%rpl%s-8al%e, @as prod%ced0 5 e in8estigation @ill s o@, o@e8er, t at in capitalist economics t e cost-price ass%mes t e !alse appearance o! a category o! 8al%e prod%ction itsel!0 5o ret%rn to o%r example0 $%ppose t e 8al%e prod%ced by one labo%rer d%ring an a8erage social @orking-day is represented by a money s%m o! 6s0 R 6M0 5 en t e ad8anced capital o! V+== R 2==c U 1==8 represents a 8al%e prod%ced in 1,666W ten- o%r @orking-days, o! @ ic 1,333X @orking-days are crystallised in t e 8al%e o! t e means o! prod%ction R 2== c, and 333X are crystallised in t e 8al%e o! labo%r-po@er R 1==80 6a8ing ass%med a rate o! s%rpl%s-8al%e o! 1==T, t e prod%ction o! t e commodity to be ne@ly !ormed entails a labo%r expendit%re R 1== 8 U 1==s R 666W ten- o%r @orking-days0 We kno@, t en Bsee A%c 1, Kap0 4&&, $0 <=1N1*3C /Englis edition: ; 0 &J, p0 <1<0-0d01 t at t e 8al%e o! t e ne@ly created prod%ct o! V6== is composed o! 1C t e reappearing 8al%e o! t e constant capital o! V2== expended !or means o! prod%ction, and <C a ne@ly prod%ced 8al%e o! V<==0 5 e cost-price o! t e commodity R V+== comprises t e reappearing 2== c and one- al! o! t e ne@ly prod%ced 8al%e o! V<== B R 1==8C, t at is, t@o elements o! t e commodity-8al%e @ ic are o! entirely di!!erent origin0 3@ing to t e p%rposi8e nat%re o! t e labo%r expended d%ring 666W ten- o%r @orking-days, t e 8al%e o! t e cons%med means o! prod%ction amo%nting to V2== is trans!erred !rom t ese means o! prod%ction to t e prod%ct0 5 is pre8io%sly existing 8al%e t %s reappears as a component part o! t e 8al%e o! t e prod%ct, b%t is not created in t e process o! prod%ction o! this commodity0 &t exists as a component o! t e 8al%e o! t e commodity only beca%se it pre8io%sly existed as an element o! t e in8ested capital0 5 e expended constant capital is t ere!ore replaced by t at portion o! t e 8al%e o! t e commodity @ ic t is capital itsel! adds to t at 8al%e0 5 is element o! t e cost-price, t ere!ore, as a do%ble meaning0 3n t e one and, it goes into t e cost-price o! t e commodity, beca%se it is part o! t e commodity-8al%e @ ic replaces cons%med capital0 ?nd on t e ot er and, it !orms an element o! t e commodity-8al%e only beca%se it is t e 8al%e o! expended capital or beca%se t e means o! prod%ction cost so and so m%c 0 &t is D%ite t e re8erse in t e case o! t e ot er element o! t e cost-price0 5 e 666W @orking-days expended in t e prod%ction o! t e commodity create a ne@ 8al%e o! V<==0 3ne portion o! t is ne@ 8al%e merely replaces t e ad8anced 8ariable capital o! V1==, or t e price o! t e labo%r-po@er employed0 A%t t is ad8anced capital-8al%e does not in any @ay go into t e creation o! t e ne@ 8al%e0 $o !ar as t e ad8ance o! capital is concerned, labo%r-po@er co%nts as a value0 A%t in t e

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process o! prod%ction it acts as t e creator o! 8al%e0 5 e place o! t e 8al%e o! t e labo%r-po@er t at obtains @it in t e ad8anced capital is taken in t e act%ally functioning prod%cti8e capital by li8ing 8al%e-creating labo%r-po@er itsel!0 5 e di!!erence bet@een t ese 8ario%s elements o! t e commodity-8al%e, @ ic toget er make %p t e cost-price, leaps to t e eye @ ene8er a c ange takes place in t e siEe o! t e 8al%e o! eit er t e expended constant, or t e expended 8ariable, part o! t e capital0 'et t e price o! t e same means o! prod%ction, or o! t e constant part o! capital, rise !rom V2== to V6==, or, con8ersely, let it !all to V<==0 &n t e !irst case it is not only t e cost-price o! t e commodity @ ic rises !rom V+== to 6==c U 1==8 R V>==, b%t also t e 8al%e o! t e commodity @ ic rises !rom V6== to 6== c U 1==8 U 1==s R V8==0 &n t e second case, it is not only t e cost-price @ ic !alls !rom V+== to <== cU1==8 R V3==, b%t also t e 8al%e o! t e commodity @ ic !alls !rom V6== to <== c U 1==8 U 1==s R V2==0 $ince t e expended constant capital trans!ers its o@n 8al%e to t e prod%ct, t e 8al%e o! t e prod%ct rises or !alls @it t e absol%te magnit%de o! t at capital-8al%e, ot er conditions remaining eD%al0 ?ss%me, on t e ot er and, t at, ot er circ%mstances remaining %nc anged, t e price o! t e same amo%nt o! labo%r-po@er rises !rom V1== to V1+=, or, con8ersely, t at it !alls !rom V1== to V+=0 &n t e !irst case, t e cost-price rises !rom V+== to 2== c U 1+=8 R V++=, and !alls in t e second case !rom V+== to 2== c U +=8 R V2+=0 A%t in eit er case t e commodity-8al%e remains %nc anged R V6==# one time it is 2== cU 1+=8 U +=s, and t e ot er time, 2== c U +=8 U 1+=s0 5 e ad8anced 8ariable capital does not add its o@n 8al%e to t e prod%ct0 5 e place o! its 8al%e is taken in t e prod%ct rat er by a ne@ 8al%e created by labo%r0 5 ere!ore, a c ange in t e absol%te magnit%de o! t e 8ariable capital, so !ar as it expresses merely a c ange in t e price o! labo%rpo@er, does not in t e least alter t e absol%te magnit%de o! t e commodity-8al%e, beca%se it does not alter anyt ing in t e absol%te magnit%de o! t e ne@ 8al%e created by li8ing labo%r-po@er0 $%c a c ange rat er a!!ects only t e relati8e proportion o! t e t@o component parts o! t e ne@ 8al%e, o! @ ic one !orms s%rpl%s-8al%e and t e ot er makes good t e 8ariable capital and t ere!ore passes into t e cost-price o! t e commodity0 5 e t@o elements o! t e cost-price, in t e present case 2== c U 1==8, a8e only t is in common t at t ey are bot parts o! t e commodity-8al%e t at replace ad8anced capital0 A%t t is tr%e state o! a!!airs necessarily appears re8ersed !rom t e standpoint o! capitalist prod%ction0 5 e capitalist mode o! prod%ction di!!ers !rom t e mode o! prod%ction based on sla8ery, among ot er t ings, by t e !act t at in it t e 8al%e, and accordingly t e price, o! labo%r-po@er appears as t e 8al%e, or price, o! labo%r itsel!, or as @ages BA%c 1, Kap0 J4&&C /Englis edition: ; 0 J&J0 I 0d010 5 e 8ariable part o! t e ad8anced capital, t ere!ore, appears as capital expended in @ages, as a capital-8al%e @ ic pays !or t e 8al%e, and accordingly t e price, o! all t e labo%r expended in prod%ction0 'et %s ass%me, !or instance, t at an a8erage ten- o%r social @orking-day is incorporated in a s%m o! money amo%nting to 6 s illings0 &n t at case t e ad8ance o! a 8ariable capital o! V1== represents t e money expression o! a 8al%e prod%ced in 333 X# ten- o%r @orkingdays0 A%t t is 8al%e, representing p%rc ased labo%r-po@er in t e capital ad8anced, does not, o@e8er, !orm a part o! t e act%ally !%nctioning prod%cti8e capital0 &ts place in t e process o! prod%ction is taken by li8ing labo%r-po@er0 &!, as in o%r ill%stration, t e degree o! exploitation o! t e latter is 1==T, t en it is expended d%ring 666W ten- o%r @orking-days, and t ereby adds to t e prod%ct a ne@ 8al%e o! V<==0 A%t in t e capital ad8anced t e 8ariable capital o! V1== !ig%res as capital in8ested in @ages, or as t e price o! labo%r per!ormed d%ring 666W ten- o%r days0 5 e s%m o! V1== di8ided by 666W gi8es %s 3 s illings as t e price o! a ten- o%r @orking-day, @ ic is eD%al in 8al%e to t e prod%ct o! !i8e o%rs" labo%r0 -o@, i! @e compare t e capital ad8anced on t e one and @it t e commodity-8al%e on t e ot er, @e !ind:

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&0 ;apital ad8anced V+== R V2== o! capital expended in means o! prod%ction Bprice o! means o! prod%ctionC U V1== o! capital expended in labo%r Bprice o! 666W @orking-days, or @ages !or sameC0 &&0 4al%e o! commodities V6== R V+== representing t e cost-price BV2== price o! expended means o! prod%ction U V1== price o! expended 666W# @orking-daysC U V1== s%rpl%s-8al%e0 &n t is !orm%la, t e portion o! capital in8ested in labo%r-po@er di!!ers !rom t at in8ested in means o! prod%ction, s%c as cotton or coal, only by ser8ing as payment !or a materially di!!erent element o! prod%ction, b%t not by any means beca%se it ser8es a !%nctionally di!!erent p%rpose in t e process o! creating commodity-8al%e, and t ereby also in t e process o! t e sel!-expansion o! capital0 5 e price o! t e means o! prod%ction reappears in t e cost-price o! t e commodities, H%st as it !ig%red in t e capital ad8anced, and it does so beca%se t ese means o! prod%ction a8e been p%rposi8ely cons%med0 5 e price, or @ages, !or t e 666W @orking-days cons%med in t e prod%ction o! t ese commodities like@ise reappears in t e cost-price o! t e commodities H%st as it as !ig%red in t e capital ad8anced, and also beca%se t is amo%nt o! labo%r as been p%rposi8ely expended0 We see only !inis ed and existing 8al%es I t e portions o! t e 8al%e o! t e ad8anced capital @ ic go into t e making o! t e 8al%e o! t e prod%ct I b%t not t e element creating ne@ 8al%es0 5 e distinction bet@een constant and 8ariable capital as disappeared0 5 e entire costprice o! V+== no@ as t e do%ble meaning t at, !irst, it is t at portion o! t e commodity-8al%e o! V6== @ ic replaces t e capital o! V+== expended in t e prod%ction o! t e commodity# and t at, secondly, t is component o! t e commodity-8al%e exists only beca%se it existed pre8io%sly as t e cost-price o! t e elements o! prod%ction employed, namely means o! prod%ction and labo%r, i0e0, as ad8anced capital0 5 e capital-8al%e reappears as t e cost-price o! a commodity beca%se, and in so !ar as, it as been expended as a capital-8al%e0 5 e !act t at t e 8ario%s components o! t e 8al%e o! t e ad8anced capital a8e been expended !or materially di!!erent elements o! prod%ction, namely !or instr%ments o! labo%r, ra@ materials, a%xiliary materials, and labo%r, reD%ires only t at t e cost-price o! t e commodity m%st b%y back t ese materially di!!erent elements o! prod%ction0 $o !ar as t e !ormation o! t e cost-price is concerned, o@e8er, only one distinction is appreciable, namely t at bet@een !ixed and circ%lating capital0 &n o%r example @e a8e set do@n V<= !or @ear and tear o! instr%ments o! labo%r B2==c R V<= !or depreciation o! instr%ments o! labo%r U V38= !or materials o! prod%ctionC0 Ae!ore t e prod%cti8e process t e 8al%e o! t ese instr%ments o! labo%r @as, say, V1,<==0 ?!ter t e commodities a8e been prod%ced it exists in t@o !orms, t e V<= as part o! t e 8al%e o! t e commodity, and 1,<== - <=, or V1,18=, as t e remaining 8al%e o! t e instr%ments o! labo%r @ ic , as be!ore, are in t e possession o! t e capitalist# in ot er @ords, as an element o! is prod%cti8e, not o! is commodity-capital0 Materials o! prod%ction and @ages, as distinct !rom means o! labo%r, are entirely cons%med in t e prod%ction o! t e commodity and t %s t eir entire 8al%e goes into t at o! t e prod%ced commodity0 We a8e seen o@ t ese 8ario%s components o! t e ad8anced capital ass%me t e !orms o! !ixed and circ%lating capital in relation to t e t%rno8er0 ?ccordingly, t e capital ad8anced R V1,68=: !ixed capital R V1,<== U circ%lating capital R V28= B R V38= in materials o! prod%ction pl%s V1== in @agesC0 A%t t e cost-price o! t e commodity only R V+== BV<= !or t e @ear and tear o! t e !ixed capital, and V28= !or circ%lating capitalC0 5 is di!!erence bet@een t e cost-price o! t e commodity and t e capital ad8anced merely pro8es, o@e8er, t at t e cost-price o! t e commodity is !ormed excl%si8ely by t e capital act%ally cons%med in its prod%ction0 Means o! prod%ction 8al%ed at V1,<== are employed in prod%cing t e commodity, b%t only V<= o! t is ad8anced capital-8al%e are lost in prod%ction0 5 %s, t e employed !ixed capital goes only partially into t e cost-price o! t e commodity, beca%se it is only partially cons%med in its

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prod%ction0 5 e employed circ%lating capital goes entirely into t e cost-price o! t e commodity, beca%se it is entirely cons%med in prod%ction0 A%t does not t is only pro8e t at t e cons%med portions o! t e !ixed and circ%lating capital pass %ni!ormly, pro rata to t e magnit%de o! t eir 8al%es, into t e cost-price o! t e commodity and t at t is component o! t e 8al%e o! t e commodity originates solely @it t e capital expended in its prod%ctionQ &! t is @ere not so, it @o%ld be inexplicable @ y t e ad8anced !ixed capital o! V1,<== s o%ld not, aside !rom t e V<= @ ic it loses in t e prod%cti8e process, also contrib%te t e ot er V1,18= @ ic it does not lose0 5 is di!!erence bet@een !ixed and circ%lating capital @it re!erence to t e calc%lation o! t e costprice, t ere!ore, only con!irms t e seeming origination o! t e cost-price !rom t e expended capital-8al%e, or t e price paid by t e capitalist imsel! !or t e expended elements o! prod%ction, incl%ding labo%r0 3n t e ot er and, so !ar as t e !ormation o! 8al%e is concerned, t e 8ariable portion o! capital in8ested in labo%r-po@er is ere emp atically identi!ied %nder t e ead o! circ%lating capital @it constant capital Bt at part o! capital @ ic consists o! materials o! prod%ctionC, and t is completes t e mysti!ication o! t e sel!-expansion process o! capital0 1 $o !ar @e a8e considered H%st one element o! t e 8al%e o! commodities, namely t e cost-price0 We m%st no@ t%rn also to t e ot er component o! t e 8al%e o! commodities, namely t e excess o8er t e cost-price, or t e s%rpl%s-8al%e0 &n t e !irst place, t en, s%rpl%s-8al%e is t e excess 8al%e o! a commodity o8er and abo8e its cost-price0 A%t since t e cost-price eD%als t e 8al%e o! t e cons%med capital, into @ ose material elements it is contin%ally recon8erted, t is excess 8al%e is an accretion in t e 8al%e o! t e capital expended in t e prod%ction o! t e commodity and ret%rning by @ay o! its circ%lation0 We a8e already seen earlier t at, t o%g s, t e s%rpl%s-8al%e, springs merely !rom a c ange in t e 8al%e o! t e 8ariable capital 8 and is, t ere!ore, originally b%t an increment o! 8ariable capital, a!ter t e process o! prod%ction is o8er it ne8ert eless also !orms an increment o! c U 8, t e expended total capital0 5 e !orm%la c U B8 U sC, @ ic indicates t at s is prod%ced t ro%g t e con8ersion o! a de!inite capital-8al%e 8 ad8anced !or labo%r-po@er into a !l%ct%ating magnit%de, i0e0, o! a constant magnit%de into a 8ariable one, may also be represented as Bc U 8C U s0 Ae!ore prod%ction took place @e ad a capital o! V+==0 ?!ter prod%ction is completed @e a8e t e capital o! V+== pl%s a 8al%e increment o! V1==0< 6o@e8er, s%rpl%s-8al%e !orms an increment not only o! t e portion o! t e ad8anced capital @ ic goes into t e sel!-expansion process, b%t also o! t e portion @ ic does not go into it0 &n ot er @ords, it is an accretion not only to t e cons%med capital made good o%t o! t e cost-price o! t e commodity, b%t to all t e capital in8ested in prod%ction0 Ae!ore t e prod%ction process @e ad a capital 8al%ed at V1,68=, namely V1,<== o! !ixed capital in8ested in means o! prod%ction, only V<= o! @ ic go into t e 8al%e o! t e commodity !or @ear and tear, pl%s V28= o! circ%lating capital in materials o! prod%ction and @ages0 ?!ter t e prod%ction process @e a8e V1,18= as t e constit%ent element o! t e 8al%e o! t e prod%cti8e capital pl%s a commodity-capital o! V6==0 Ay adding t ese t@o s%ms o! 8al%e @e !ind t at t e capitalist no@ as a 8al%e o! V1,>8=0 ?!ter ded%cting is ad8anced total capital o! V1,68= t ere remains a 8al%e increment o! V1==0 5 e V1== o! s%rpl%s-8al%e t %s !orm as m%c o! an increment in relation to t e in8ested V1,68= as to its !raction o! V+== expended d%ring prod%ction0 &t is no@ clear to t e capitalist t at t is increment o! 8al%e springs !rom t e prod%cti8e processes %ndertaken @it t e capital, t at it t ere!ore springs !rom t e capital itsel!, beca%se it is t ere a!ter t e prod%ction process, @ ile it is not t ere be!ore it0 ?s !or t e capital cons%med in prod%ction, t e s%rpl%s-8al%e seems to spring eD%ally !rom all its di!!erent elements o! 8al%e consisting o! means o! prod%ction and labo%r0 For all t ese elements contrib%te eD%ally to t e !ormation o! t e cost-price0 ?ll o! t em add t eir 8al%es, obtaining as ad8anced capital, to t e 8al%e o! t e prod%ct, and are not di!!erentiated as constant and 8ariable magnit%des o! 8al%e0 5 is becomes ob8io%s i! @e ass%me !or a moment t at all t e expended capital consisted eit er excl%si8ely o! @ages, or excl%si8ely o! t e 8al%e o! t e means o! prod%ction0 &n t e !irst case, @e s o%ld t en a8e t e

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commodity-8al%e o! +==8 U 1==s instead o! t e commodity-8al%e o! 2== c U 1==8 U 1==s0 5 e capital o! V+== laid o%t in @ages represents t e 8al%e o! all t e labo%r expended in t e prod%ction o! t e commodity-8al%e o! V6==, and !or H%st t is reason !orms t e cost-price o! t e entire prod%ct0 A%t t e !ormation o! t is cost-price, @ ereby t e 8al%e o! t e expended capital is reprod%ced as a constit%ent part o! t e 8al%e o! t e prod%ct, is t e only process in t e !ormation o! t is commodity-8al%e t at is kno@n to %s0 We do not kno@ o@ its s%rpl%s-8al%e portion o! V1== is !ormed0 5 e same is tr%e in t e second case, in @ ic t e commodity-8al%e R +== c U 1==s0 We kno@ in bot cases t at s%rpl%s-8al%e is deri8ed !rom a gi8en 8al%e, beca%se t is 8al%e @as ad8anced in t e !orm o! prod%cti8e capital, be it in t e !orm o! labo%r or o! means o! prod%ction0 3n t e ot er and, t is ad8anced capital-8al%e cannot !orm s%rpl%s-8al%e !or t e reason t at it as been expended and t ere!ore constit%tes t e cost-price o! t e commodity0 ,recisely beca%se it !orms t e cost-price o! t e commodity, it does not !orm any s%rpl%s-8al%e, b%t merely an eD%i8alent, a 8al%e replacing t e expended capital0 $o !ar, t ere!ore, as it !orms s%rpl%s-8al%e, it does so not in its speci!ic capacity as expended, b%t rat er as ad8anced, and ence %tilised, capital0 For t is reason, t e s%rpl%s-8al%e arises as m%c o%t o! t e portion o! t e ad8anced capital @ ic goes into t e cost-price o! t e commodity, as o%t o! t e portion @ ic does not0 &n s ort, it arises eD%ally o%t o! t e !ixed and t e circ%lating components o! t e %tilised capital0 5 e aggregate capital ser8es materially as t e creator o! prod%cts, t e means o! labo%r as @ell as t e materials o! prod%ction, and t e labo%r0 5 e total capital materially enters into t e act%al labo%rprocess, e8en t o%g only a portion o! it enters t e process o! sel!-expansion0 5 is is, per aps, t e 8ery reason @ y it contrib%tes only in part to t e !ormation o! t e cost-price, b%t totally to t e !ormation o! s%rpl%s-8al%e0 6o@e8er t at may be, t e o%tcome is t at s%rpl%s-8al%e springs sim%ltaneo%sly !rom all portions o! t e in8ested capital0 5 is ded%ction may be s%bstantially abbre8iated, by saying pointedly and concisely in t e @ords o! Malt %s: K5 e capitalist 000 e pects an eD%al pro!it %pon all t e parts o! t e capital @ ic e ad8ances0L 3 &n its ass%med capacity o! o!!spring o! t e aggregate ad8anced capital, s%rpl%s-8al%e takes t e con8erted !orm o! profit0 6ence, a certain 8al%e is capital @ en it is in8ested @it a 8ie@ to prod%cing pro!it2 , or, t ere is pro!it beca%se a certain 8al%e @as employed as capital0 $%ppose pro!it is p0 5 en t e !orm%la ; R c U 8 U s R k U s t%rns into t e !orm%la ; R k U p, or t e value of a commodity R cost1price U profit0 5 e pro!it, s%c as it is represented ere, is t %s t e same as s%rpl%s-8al%e, only in a mysti!ied !orm t at is nonet eless a necessary o%tgro@t o! t e capitalist mode o! prod%ction0 5 e genesis o! t e m%tation o! 8al%es t at occ%rs in t e co%rse o! t e prod%ction process, m%st be trans!erred !rom t e 8ariable portion o! t e capital to t e total capital, beca%se t ere is no apparent distinction bet@een constant and 8ariable capital in t e ass%med !ormation o! t e cost-price0 Aeca%se at one pole t e price o! labo%r-po@er ass%mes t e transm%ted !orm o! @ages, s%rpl%s-8al%e appears at t e opposite pole in t e transm%ted !orm o! pro!it0 We a8e seen t at t e cost-price o! a commodity is smaller t an its 8al%e0 $ince ; R k U s, it !ollo@s t at k R ; - s0 5 e !orm%la ; R k U s red%ces itsel! to ; R k, or commodity-8al%e R commodity cost-price only i! s R =, a case @ ic ne8er occ%rs on t e basis o! capitalist prod%ction, alt o%g pec%liar market conditions may red%ce t e selling price o! commodities to t e le8el o!, or e8en belo@, t eir cost-price0 6ence, i! a commodity is sold at its 8al%e, a pro!it is realised @ ic is eD%al to t e excess o! its 8al%e o8er its cost-price, and t ere!ore eD%al to t e entire s%rpl%s-8al%e incorporated in t e 8al%e o! t e commodity0 A%t t e capitalist may sell a commodity at a pro!it e8en @ en e sells it belo@ its 8al%e0 $o long as its selling price is ig er t an its cost-price, t o%g it may be lo@er t an its 8al%e, a portion o! t e s%rpl%s-8al%e incorporated in it is al@ays realised, t %s al@ays yielding a pro!it0 &n o%r ill%stration t e 8al%e o! t e commodity is V6==, and t e cost-price V+==0 &! t e

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commodity is sold at V+1=, +<=, +3=, +6= or +*=, it is sold respecti8ely V*=, 8=, >=, 2=, or 1= belo@ its 8al%e0 .et a pro!it o! V1=, <=, 3=, 6=, or *= respecti8ely is realised in its sale0 5 ere is ob8io%sly an inde!inite n%mber o! selling prices possible bet@een t e 8al%e o! a commodity and its cost-price0 5 e greater t e s%rpl%s-8al%e element o! t e 8al%e o! a commodity, t e greater t e practical range o! t ese intermediate prices0 5 is explains more t an H%st t e e8eryday p enomena o! competition, s%c as certain cases o! %nderselling, abnormally lo@ commodity-prices in certain lines o! ind%stry + , etc0 5 e !%ndamental la@ o! capitalist competition, @ ic political economy ad not it erto grasped, t e la@ @ ic reg%lates t e general rate o! pro!it and t e so-called prices o! prod%ction determined by it, rests, as @e s all later see, on t is di!!erence bet@een t e 8al%e and t e cost-price o! commodities, and on t e res%lting possibility o! selling a commodity at a pro!it %nder its 8al%e0 5 e minimal limit o! t e selling price o! a commodity is its cost-price0 &! it is sold %nder its costprice, t e expended constit%ent elements o! prod%cti8e capital cannot be !%lly replaced o%t o! t e selling price0 &! t is process contin%es, t e 8al%e o! t e ad8anced capital disappears0 From t is point o! 8ie@ alone, t e capitalist is inclined to regard t e cost-price as t e tr%e inner 8al%e o! t e commodity, beca%se it is t e price reD%ired !or t e bare conser8ation o! is capital0 A%t t ere is also t is, t at t e cost-price o! a commodity is t e p%rc ase price paid by t e capitalist imsel! !or its prod%ction, t ere!ore t e p%rc ase price determined by t e prod%ction process itsel!0 For t is reason, t e excess 8al%e, or t e s%rpl%s-8al%e, realised in t e sale o! a commodity appears to t e capitalist as an excess o! its selling price o8er its 8al%e, instead o! an excess o! its 8al%e o8er its cost-price, so t at accordingly t e s%rpl%s-8al%e incorporated in a commodity is not realised t ro%g its sale, b%t springs o%t o! t e sale itsel!0 We a8e gi8en t is ill%sion closer consideration in Aook & BKap0 &4, <C/Englis edition: ; 0 4, <0 I 0d01 BK;ontradictions in t e :eneral Form%la o! ;apitalLC, b%t re8ert ere !or a moment to t e !orm in @ ic it @as rea!!irmed by 5orrens, among ot ers, as an ad8ance o! political economy beyond )icardo0 K5 e nat%ral price, consisting o! t e cost o! prod%ction, or, in ot er @ords, o! t e capital expended in raising or !abricating commodities, cannot incl%de t e pro!it0000 5 e !armer, @e @ill s%ppose, expends one %ndred D%arters o! corn in c%lti8ating is !ields, and obtains in ret%rn one %ndred and t@enty D%arters0 &n t is case, t@enty D%arters, being t e excess o! prod%ce abo8e expendit%re, constit%te t e !armer"s pro!it# b%t it @o%ld be abs%rd to call t is excess, or pro!it, a part o! t e expendit%res000 5 e master man%!act%rer expends a certain D%antity o! ra@ material, o! tools and implements o! trade, and o! s%bsistence !or labo%r, and obtains in ret%rn a D%antity o! !inis ed @ork0 5 is !inis ed @ork m%st possess a ig er exc angeable 8al%e t an t e materials, tools, and s%bsistence, by t e ad8ance o! @ ic obtained0L it @as

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5orrens concl%des t ere!rom t at t e excess o! t e selling price o8er t e cost-price, or pro!it, is deri8ed !rom t e !act t at t e cons%mers, Keit er by immediate or circ%ito%s barter gi8e some greater portion o! all t e ingredients o! capital t an t eir prod%ction costs0L 6 &ndeed, t e excess o8er a gi8en magnit%de cannot !orm a part o! t is magnit%de, and t ere!ore t e pro!it, t e excess 8al%e o! a commodity o8er t e capitalist"s expendit%res, cannot !orm a part o! t ese expendit%res0 6ence, i! no ot er element t an t e 8al%e ad8ance o! t e capitalist enters into t e !ormation o! t e 8al%e o! a commodity, it is inexplicable o@ more 8al%e s o%ld come o%t o! prod%ction t an @ent into it, !or somet ing cannot come o%t o! not ing0 A%t 5orrens only e8ades t is creation o%t o! not ing by trans!erring it !rom t e sp ere o! commodity-prod%ction to t at o! commodity-circ%lation0 ,ro!it cannot come o%t o! prod%ction, says 5orrens, !or ot er@ise it @o%ld already be contained in t e cost o! prod%ction, and t ere @o%ld not be a s%rpl%s o8er t is cost0 ,ro!it cannot come o%t o! t e exc ange o! commodities, replies )amsay, %nless it already existed be!ore t is exc ange0 5 e s%m o! t e 8al%e o! t e exc anged prod%cts is e8idently not altered in t e exc ange o! t ese prod%cts, @ ose s%m o! 8al%e it is0 &t is t e same be!ore and a!ter t e exc ange0 &t s o%ld be noted ere t at Malt %s re!ers expressly to t e a%t ority o! 5orrens > alt o%g e imsel! as a di!!erent explanation !or t e sale o! commodities abo8e t eir 8al%e, or rat er as no explanation at all, since all arg%ments o! t is sort ne8er, in e!!ect, !ail to be red%ced to t e same t ing as t e once-!amed negati8e @eig t o! p logiston0 &n a social order dominated by capitalist prod%ction e8en t e non-capitalist prod%cer is gripped by capitalist conceptions0 AalEac, @ o is generally remarkable !or is pro!o%nd grasp o! reality, aptly describes in is last no8el, ,es &aysans, o@ a petty peasant per!orms many small tasks grat%ito%sly !or is %s%rer, @ ose good@ill e is eager to retain, and o@ e !ancies t at e does not gi8e t e latter somet ing !or not ing beca%se is o@n labo%r does not cost im any cas o%tlay0 ?s !or t e %s%rer, e t %s !ells t@o dogs @it one stone0 6e sa8es t e cas o%tlay !or @ages and enmes es t e peasant, @ o is grad%ally r%ined by depri8ing is o@n !ield o! labo%r, deeper and deeper in t e spider-@eb o! %s%ry0 5 e t o%g tless conception t at t e cost-price o! a commodity constit%tes its act%al 8al%e, and t at s%rpl%s-8al%e springs !rom selling t e prod%ct abo8e its 8al%e, so t at commodities @o%ld be sold at t eir 8al%e i! t eir selling price @ere to eD%al t eir cost-price, i0e0, i! it @ere to eD%al t e price o! t e cons%med means o! prod%ction pl%s @ages, as been eralded to t e @orld as a ne@ly disco8ered secret o! socialism by ,ro%d on @it is c%stomary D%asi-scienti!ic c icanery0 &ndeed, t is red%ction o! t e 8al%e o! commodities to t eir cost-price is t e basis o! is ,eople"s Aank0 &t @as earlier s o@n t at t e 8ario%s constit%ent elements o! t e 8al%e o! a prod%ct may be represented in proportional parts o! t e prod%ct itsel!0 For instance BA%c &, Kap0 4& 1, <, $0 <11N<=3C/Englis edition: ; 0 &J, <, pp0 <<=-<10 I 0d01 i! t e 8al%e o! <= lbs0 o! yarn is 3= s illings I namely <2 s illings o! means o! prod%ction, 3 s illings o! labo%r-po@er, and 3 s illings o! s%rpl%s-8al%e I t en t is s%rpl%s-8al%e may be represented as 1N1= o! t e prod%ctR< lbs0 o! yarn0 $ o%ld t ese <= lbs0 o! yarn no@ be sold at t eir cost-price, at <> s illings, t en t e p%rc aser recei8es < lbs0 o! yarn !or not ing, or t e article is sold 1N1= belo@ its 8al%e0 A%t t e labo%rer as, as be!ore, per!ormed is s%rpl%s-labo%r, only t is time !or t e p%rc aser o! t e yarn instead o! t e capitalist yarn prod%cer0 &t @o%ld be altoget er @rong to ass%me t at i! all commodities @ere sold at t eir cost-price, t e res%lt @o%ld really be t e same as i! t ey ad all been sold abo8e t eir cost-price, b%t at t eir 8al%e0 For e8en i! t e 8al%e o! t e labo%r-po@er, t e lengt o! t e @orking-day, and t e degree o! exploitation o! labo%r @ere t e same e8ery@ ere, t e D%antities o! s%rpl%s-8al%e contained in t e 8al%es o! t e 8ario%s kinds o! commodities @o%ld be %neD%al, depending on t e di!!erent organic composition o! t e capitals ad8anced !or t eir prod%ction08

Chapter 2. The Rate of Profit

5 e general !orm%la o! capital is M-;-M"0 &n ot er @ords, a s%m o! 8al%e is t ro@n into circ%lation to extract a larger s%m o%t o! it0 5 e process @ ic prod%ces t is larger s%m is capitalist prod%ction0 5 e process t at realises it is circ%lation o! capital0 5 e capitalist does not prod%ce a commodity !or its o@n sake, nor !or t e sake o! its %se-8al%e, or is personal cons%mption0 5 e prod%ct in @ ic t e capitalist is really interested is not t e palpable prod%ct itsel!, b%t t e excess 8al%e o! t e prod%ct o8er t e 8al%e o! t e capital cons%med by it0 5 e capitalist ad8ances t e total capital @it o%t regard to t e di!!erent roles played by its components in t e prod%ction o! s%rpl%s-8al%e0 6e ad8ances all t ese components %ni!ormly, not H%st to reprod%ce t e ad8anced capital, b%t rat er to prod%ce 8al%e in excess o! it0 5 e only @ay in @ ic e can con8ert t e 8al%e o! is ad8anced 8ariable capital into a greater 8al%e is by exc anging it !or li8ing labo%r and exploiting li8ing labo%r0 A%t e cannot exploit t is labo%r %nless e makes a sim%ltaneo%s ad8ance o! t e conditions !or per!orming t is labo%r, namely means o! labo%r and s%bHects o! labo%r, mac inery and ra@ materials, i0e0, %nless e con8erts a certain amo%nt o! 8al%e in is possession into t e !orm o! conditions o! prod%ction# !or e is a capitalist and can %ndertake t e process o! exploiting labo%r only beca%se, being t e o@ner o! t e conditions o! labo%r, e con!ronts t e labo%rer as t e o@ner o! only labo%r-po@er0 ?s already s o@n in t e !irst book /Englis edition: 4ol0 1, pp0 168-6*0 >12-160 I0d01, it is precisely t e !act t at non-@orkers o@n t e means o! prod%ction @ ic t%rns labo%rers into @age-@orkers and non-@orkers into capitalists0 5 e capitalist does not care @ et er it is considered t at e ad8ances constant capital to make a pro!it o%t o! is 8ariable capital, or t at e ad8ances 8ariable capital to en ance t e 8al%e o! t e constant capital# t at e in8ests money in @ages to raise t e 8al%e o! is mac inery and ra@ materials, or t at e in8ests money in mac inery and ra@ materials to be able to exploit labo%r0 ?lt o%g it is only t e 8ariable portion o! capital @ ic creates s%rpl%s-8al%e, it does so only i! t e ot er portions, t e conditions o! prod%ction, are like@ise ad8anced0 $eeing t at t e capitalist can exploit labo%r only by ad8ancing constant capital and t at e can t%rn is constant capital to good acco%nt only by ad8ancing 8ariable capital, e l%mps t em all toget er in is imagination, and m%c more so since t e act%al rate o! is gain is not determined by its proportion to t e 8ariable, b%t to t e total capital, not by t e rate o! s%rpl%s-8al%e, b%t by t e rate o! pro!it0 ?nd t e latter, as @e s all see, may remain t e same and yet express di!!erent rates o! s%rpl%s-8al%e0 5 e costs o! t e prod%ct incl%de all t e elements o! its 8al%e paid by t e capitalist or !or @ ic e as t ro@n an eD%i8alent into prod%ction0 5 ese costs m%st be made good to preser8e t e capital or to reprod%ce it in its original magnit%de0 5 e 8al%e contained in a commodity is eD%al to t e labo%r-time expended in its prod%ction, and t e s%m o! t is labo%r consists o! paid and %npaid portions0 A%t !or t e capitalist t e costs o! t e commodity consist only o! t at portion o! t e labo%r materialised in it !or @ ic e as paid0 5 e s%rpl%s-labo%r contained in t e commodity costs t e capitalist not ing, alt o%g , like t e paid portion, it costs t e labo%rer is labo%r, and alt o%g it creates 8al%e and enters into t e commodity as a 8al%e-creating element D%ite like paid labo%r0 5 e capitalist"s pro!it is deri8ed !rom t e !act t at e as somet ing to sell !or @ ic e as paid not ing0 5 e s%rpl%s-8al%e, or pro!it, consists precisely in t e excess 8al%e o! a commodity o8er its cost-price, i0e0, t e excess o! t e total labo%r embodied in t e commodity o8er t e paid labo%r embodied in it0 5 e s%rpl%s8al%e, @ ate8er its origin, is t %s a s%rpl%s o8er t e ad8anced total capital0 5 e proportion o! t is s%rpl%s to t e total capital is t ere!ore expressed by t e !raction sN;, in @ ic ; stands !or total capital0 We t %s obtain t e rate of profitsN;RsNBcU8C, as distinct !rom t e rate o! s%rpl%s-8al%e sN80

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5 e rate o! s%rpl%s-8al%e meas%red against t e 8ariable capital is called rate o! s%rpl%s-8al%e0 5 e rate o! s%rpl%s-8al%e meas%red against t e total capital is called rate o! pro!it0 5 ese are t@o di!!erent meas%rements o! t e same entity, and o@ing to t e di!!erence o! t e t@o standards o! meas%rement t ey express di!!erent proportions or relations o! t is entity0 5 e trans!ormation o! s%rpl%s-8al%e into pro!it m%st be ded%ced !rom t e trans!ormation o! t e rate o! s%rpl%s-8al%e into t e rate o! pro!it, not 8ice 8ersa0 ?nd in !act it @as rate o! pro!it @ ic @as t e istorical point o! depart%re0 $%rpl%s-8al%e and rate o! s%rpl%s-8al%e are, relati8ely, t e in8isible and %nkno@n essence t at @ants in8estigating, @ ile rate o! pro!it and t ere!ore t e appearance o! s%rpl%s-8al%e in t e !orm o! pro!it are re8ealed on t e s%r!ace o! t e p enomenon0 $o !ar as t e indi8id%al capitalist is concerned, it is e8ident t at e is only interested in t e relation o! t e s%rpl%s-8al%e, or t e excess 8al%e at @ ic e sells is commodities, to t e total capital ad8anced !or t e prod%ction o! t e commodities, @ ile t e speci!ic relations ip and inner connection o! t is s%rpl%s @it t e 8ario%s components o! capital !ail to interest im, and it is, moreo8er, rat er in is interests to dra@ t e 8eil o8er t is speci!ic relations ip and t is intrinsic connection0 ?lt o%g t e excess 8al%e o! a commodity o8er its cost-price is s aped in t e immediate process o! prod%ction, it is realised only in t e process o! circ%lation, and appears all t e more readily to a8e arisen !rom t e process o! circ%lation, since in reality, %nder competition, in t e act%al market, it depends on market conditions @ et er or not and to @ at extent t is s%rpl%s is realised0 5 ere is no need to @aste @ords at t is point abo%t t e !act t at i! a commodity is sold abo8e or belo@ its 8al%e, t ere is merely anot er kind o! di8ision o! s%rpl%s-8al%e, and t at t is di!!erent di8ision, t is c anged proportion in @ ic 8ario%s persons s are in t e s%rpl%s-8al%e, does not in any @ay alter eit er t e magnit%de or t e nat%re o! t at s%rpl%s-8al%e0 &t is not alone t e metamorp oses disc%ssed by %s in Aook && t at take place in t e process o! circ%lation# t ey !all in @it act%al competition, t e sale and p%rc ase o! commodities abo8e or belo@ t eir 8al%e, so t at t e s%rpl%s-8al%e realised by t e indi8id%al capitalist depends as m%c on t e s arpness o! is b%siness @its as on t e direct exploitation o! labo%r0 &n t e process o! circ%lation t e time o! circ%lation comes to exert its in!l%ence alongside t e @orking-time, t ereby limiting t e amo%nt o! s%rpl%s-8al%e realisable @it in a gi8en time span0 $till ot er elements deri8ed !rom circ%lation intr%de decisi8ely into t e act%al prod%ction process0 5 e act%al process o! prod%ction and t e process o! circ%lation intert@ine and intermingle contin%ally, and t ereby in8ariably ad%lterate t eir typical distincti8e !eat%res0 5 e prod%ction o! s%rpl%s-8al%e, and o! 8al%e in general, recei8es ne@ de!inition in t e process o! circ%lation, as pre8io%sly s o@n0 ;apital passes t ro%g t e circ%it o! its metamorp oses0 Finally, stepping beyond its inner organic li!e, so to say, it enters into relations @it o%ter li!e, into relations in @ ic it is not capital and labo%r @ ic con!ront one anot er, b%t capital and capital in one case, and indi8id%als, again simply as b%yers and sellers, in t e ot er0 5 e time o! circ%lation and @orking-time cross pat s and t %s bot seem to determine t e s%rpl%s-8al%e0 5 e original !orm in @ ic capital and @age-labo%r con!ront one anot er is disg%ised t ro%g t e inter8ention o! relations ips seemingly independent o! it0 $%rpl%s-8al%e itsel! does not appear as t e prod%ct o! t e appropriation o! labo%r-time, b%t as an excess o! t e selling price o! commodities o8er t eir cost-price, t e latter t %s being easily represented as t eir act%al 8al%e B valeur intrins23ueC, @ ile pro!it appears as an excess o! t e selling price o! commodities o8er t eir immanent 8al%e0 5r%e, t e nat%re o! s%rpl%s-8al%e impresses itsel! constantly %pon t e conscio%sness o! t e capitalist d%ring t e process o! prod%ction, as is greed !or t e labo%r-time o! ot ers, etc0, as re8ealed in o%r analysis o! s%rpl%s-8al%e0 A%t: 1C 5 e act%al process o! prod%ction is only a !leeting stage @ ic contin%ally merges @it t e process o! circ%lation, H%st as t e latter merges @it t e !ormer, so t at in t e process o! prod%ction, t e more or less clearly da@ning notion o! t e so%rce o! t e gain made in it, i0e0, t e inkling o! t e nat%re o! s%rpl%s-8al%e, stands at best as a !actor eD%ally 8alid as t e idea t at t e realised s%rpl%s originates in a mo8ement t at is

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independent o! t e prod%ction process, t at it arises in circ%lation, and t at it belongs to capital irrespecti8e o! t e latter"s relation to labo%r0 E8en s%c modern economists as )amsay, Malt %s, $enior, 5orrens, etc0, identi!y t ese p enomena o! circ%lation directly as proo!s t at capital in its bare material existence, independent o! its social relation to labo%r @ ic makes capital o! it, is, as it @ere, an independent so%rce o! s%rpl%s-8al%e alongside labo%r and independent o! labo%r0 <C (nder t e item o! expenses, @ ic embrace @ages as @ell as t e price o! ra@ materials, @ear and tear o! mac inery, etc0, t e extortion o! %npaid labo%r !ig%res only as a sa8ing in paying !or an article @ ic is incl%ded in expenses, only as a smaller payment !or a certain D%antity o! labo%r, similar to t e sa8ing @ en ra@ materials are bo%g t more c eaply, or t e depreciation o! mac inery decreases0 &n t is @ay t e extortion o! s%rpl%s-labo%r loses its speci!ic c aracter0 &ts speci!ic relations ip to s%rpl%s-8al%e is obsc%red0 5 is is greatly !%rt ered and !acilitated, as s o@n in Aook & B?bsc n0 4&C /Englis edition: ,art 4&, pp0 +3+-230 I 0d01, by representing t e 8al%e o! labo%r-po@er in t e !orm o! @ages0 5 e relations ips o! capital are obsc%red by t e !act t at all parts o! capital appear eD%ally as t e so%rce o! excess 8al%e Bpro!itC0 5 e @ay in @ ic s%rpl%s-8al%e is trans!ormed into t e !orm o! pro!it by @ay o! t e rate o! pro!it is, o@e8er, a !%rt er de8elopment o! t e in8ersion o! s%bHect and obHect t at takes place already in t e process o! prod%ction0 &n t e latter, @e a8e seen, t e s%bHecti8e prod%cti8e !orces o! labo%r appear as prod%cti8e !orces o! capital0 /Englis edition: 4ol0 1, pp0 33<-330 I 0d01 3n t e one and, t e 8al%e, or t e past labo%r, @ ic dominates li8ing labo%r, is incarnated in t e capitalist0 3n t e ot er and, t e labo%rer appears as bare material labo%r-po@er, as a commodity0 E8en in t e simple relations o! prod%ction t is in8erted relations ip necessarily prod%ces certain correspondingly in8erted conceptions, a transposed conscio%sness @ ic is !%rt er de8eloped by t e metamorp oses and modi!ications o! t e act%al circ%lation process0 &t is altoget er erroneo%s, as a st%dy o! t e )icardian sc ool s o@s, to try to identi!y t e la@s o! t e rate o! pro!it @it t e la@s o! t e rate o! s%rpl%s-8al%e, or 8ice 8ersa0 5 e capitalist nat%rally does not see t e di!!erence bet@een t em0 &n t e !orm%la sN; t e s%rpl%s-8al%e is meas%red by t e 8al%e o! t e total capital ad8anced !or its prod%ction, o! @ ic a part @as totally cons%med in t is prod%ction and a part @as merely employed in it0 &n !act, t e !orm%la sN; expresses t e degree o! sel!-expansion o! t e total capital ad8anced, or, taken in con!ormity @it inner concept%al connections and t e nat%re o! s%rpl%s-8al%e, it indicates t e ratio o! t e amo%nt o! 8ariation o! 8ariable capital to t e magnit%de o! t e ad8anced total capital0 &n itsel!, t e magnit%de o! 8al%e o! total capital as no inner relations ip to t e magnit%de o! s%rpl%s-8al%e, at least not directly0 $o !ar as its material elements are concerned, t e total capital min%s t e 8ariable capital, t at is, t e constant capital, consists o! t e material reD%isites I t e means o! labo%r and materials o! labo%r I needed to materialise labo%r0 &t is necessary to a8e a certain D%antity o! means and materials o! labo%r !or a speci!ic D%antity o! labo%r to materialise in commodities and t ereby to prod%ce 8al%e0 ? de!inite tec nical relation depending on t e special nat%re o! t e labo%r applied is establis ed bet@een t e D%antity o! labo%r and t e D%antity o! means o! prod%ction to @ ic t is labo%r is to be applied0 6ence t ere is also to t at extent a de!inite relation bet@een t e D%antity o! s%rpl%s-8al%e, or s%rpl%s-labo%r, and t e D%antity o! means o! prod%ction0 For instance, i! t e labo%r necessary !or t e prod%ction o! t e @age amo%nts to a daily 6 o%rs, t e labo%rer m%st @ork 1< o%rs to do 6 o%rs o! s%rpl%s-labo%r, or prod%ce a s%rpl%s-8al%e o! 1==T0 6e %ses %p t@ice as m%c o! t e means o! prod%ction in 1< o%rs as e does in 60 .et t is is no reason !or t e s%rpl%s-8al%e prod%ced by im in 6 o%rs to be directly related to t e 8al%e o! t e means o! prod%ction %sed %p in t ose 6, or in 1< o%rs0 5 is 8al%e is ere altoget er immaterial# it is only a matter o! t e tec nically reD%ired D%antity0 &t does not matter @ et er t e ra@ materials or means o! labo%r are c eap or dear, as long as t ey a8e t e reD%ired %se-8al%e and are a8ailable in tec nically prescribed proportion to t e labo%r to be applied0 &! & kno@ t at x lbs0 o! cotton are cons%med in an o%r o! spinning and t at t ey cost a

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s illings, t en, o! co%rse, & also kno@ t at 1< o%rs" spinning cons%mes 1<x lbs0 o! cotton R 1< a s illings, and can t en calc%late t e proportion o! t e s%rpl%s-8al%e to t e 8al%e o! t e 1< as @ell as to t at o! t e 60 A%t t e relation o! li8ing labo%r to t e value o! means o! prod%ction obtains ere only to t e extent t at a s illings ser8e as a name !or x lbs0 o! cotton# beca%se a de!inite D%antity o! cotton as a de!inite price, and t ere!ore, con8ersely, a de!inite price may also ser8e as an index !or a de!inite D%antity o! cotton, so long as t e price o! cotton does not c ange0 &! & kno@ t at t e labo%rer m%st @ork 1< o%rs !or me to appropriate 6 o%rs o! s%rpl%s-labo%r, t at t ere!ore & m%st a8e a 1<- o%r s%pply o! cotton ready !or %se, and i! & kno@ t e price o! t is D%antity o! cotton needed !or 1< o%rs, t en & a8e an indirect relation bet@een t e price o! cotton Bas an index o! t e reD%ired D%antityC and t e s%rpl%s-8al%e0 A%t, con8ersely, & can ne8er concl%de t e D%antity o! t e ra@ material t at may be cons%med in, say, one o%r, and not 6, o! spinning !rom t e price o! t e ra@ material0 5 ere is, t en, no necessary inner relation bet@een t e 8al%e o! t e constant capital, nor, t ere!ore, bet@een t e 8al%e o! t e total capital BRcU8C and t e s%rpl%s8al%e0 &! t e rate o! s%rpl%s-8al%e is kno@n and its magnit%de gi8en, t e rate o! pro!it expresses not ing b%t @ at it act%ally is, namely a di!!erent @ay o! meas%ring s%rpl%s-8al%e, its meas%rement according to t e 8al%e o! t e total capital instead o! t e 8al%e o! t e portion o! capital !rom @ ic s%rpl%s-8al%e directly originates by @ay o! its exc ange !or labo%r0 A%t in reality Bi0e0, in t e @orld o! p enomenaC t e matter is re8ersed0 $%rpl%s-8al%e is gi8en, b%t gi8en as an excess o! t e selling price o! t e commodity o8er its cost-price# and it remains a mystery @ ere t is s%rpl%s originated I !rom t e exploitation o! labo%r in t e process o! prod%ction, or !rom o%t@itting t e p%rc aser in t e process o! circ%lation, or !rom bot 0 W at is also gi8en is t e proportion o! t is s%rpl%s to t e 8al%e o! t e total capital, or t e rate o! pro!it0 5 e calc%lation o! t is excess o! t e selling price o8er t e cost-price in relation to t e 8al%e o! t e ad8anced total capital is 8ery important and nat%ral, beca%se in e!!ect it yields t e ratio in @ ic total capital as been expanded, i0e0, t e degree o! its sel!-expansion0 &! @e proceed !rom t is rate o! pro!it, @e cannot t ere!ore concl%de t e speci!ic relations bet@een t e s%rpl%s and t e portion o! capital in8ested in @ages0 We s all see in a s%bseD%ent c apter /K0 Marx, 4heorien ber den Mehrwert0 K0 MarxNF0 Engels, "er-e, Aand <6, 5eil 3, $0 <+-<8 0 I 0d01 @ at am%sing somersa%lts Malt %s makes @ en e tries in t is @ay to get at t e secret o! t e s%rpl%s-8al%e and o! its speci!ic relation to t e 8ariable part o! t e capital0 W at t e rate o! pro!it act%ally s o@s is rat er a %ni!orm relation o! t e s%rpl%s to eD%al portions o! t e total capital, @ ic , !rom t is point o! 8ie@, does not s o@ any inner di!!erence at all, %nless it be bet@een t e !ixed and circ%lating capital0 ?nd it s o@s t is di!!erence, too, only beca%se t e s%rpl%s is calc%lated in t@o @ays# namely, !irst, as a simple magnit%de I as excess o8er t e cost-price0 &n t is, its initial, !orm, t e entire circ%lating capital goes into t e cost-price, @ ile o! t e !ixed capital only t e @ear and tear goes into it0 $econd, t e relation o! t is excess in 8al%e to t e total 8al%e o! t e ad8anced capital0 &n t is case, t e 8al%e o! t e total !ixed capital enters into t e calc%lation, D%ite t e same as t e circ%lating capital0 5 ere!ore, t e circ%lating capital goes in bot times in t e same @ay, @ ile t e !ixed capital goes in di!!erently t e !irst time, and in t e same @ay as circ%lating capital t e second time0 (nder t e circ%mstances t e di!!erence bet@een !ixed and circ%lating capital is t e only one @ ic obtr%des itsel!0 &!, as 6egel @o%ld p%t it, t e s%rpl%s t ere!ore re-re!lects itsel! in itsel! o%t o! t e rate o! pro!it, or, p%t di!!erently, t e s%rpl%s is more closely c aracterised by t e rate o! pro!it, it appears as a s%rpl%s prod%ced by capital abo8e its o@n 8al%e o8er a year, or in a gi8en period o! circ%lation0 ?lt o%g t e rate o! pro!it t %s di!!ers n%merically !rom t e rate o! s%rpl%s-8al%e, @ ile s%rpl%s8al%e and pro!it are act%ally t e same t ing and n%merically eD%al, pro!it is ne8ert eless a con8erted !orm o! s%rpl%s-8al%e, a !orm in @ ic its origin and t e secret o! its existence are obsc%red and exting%is ed0 &n e!!ect, pro!it is t e !orm in @ ic s%rpl%s-8al%e presents itsel! to t e 8ie@, and m%st initially be stripped by analysis to disclose t e latter0 &n s%rpl%s-8al%e, t e

31

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relation bet@een capital and labo%r is laid bare# in t e relation o! capital to pro!it, i0e0, o! capital to s%rpl%s-8al%e t at appears on t e one and as an excess o8er t e cost-price o! commodities realised in t e process o! circ%lation and, on t e ot er, as a s%rpl%s more closely determined by its relation to t e total capital, the capital appears as a relation to itself, a relation in @ ic it, as t e original s%m o! 8al%e, is disting%is ed !rom a ne@ 8al%e @ ic it generated0 3ne is conscio%s t at capital generates t is ne@ 8al%e by its mo8ement in t e processes o! prod%ction and circ%lation0 A%t t e @ay in @ ic t is occ%rs is cloaked in mystery and appears to originate !rom idden D%alities in erent in capital itsel!0 5 e !%rt er @e !ollo@ t e process o! t e sel!-expansion o! capital, t e more mysterio%s t e relations o! capital @ill become, and t e less t e secret o! its internal organism @ill be re8ealed0 &n t is part, t e rate o! pro!it is n%merically di!!erent !rom t e rate o! s%rpl%s-8al%e# @ ile pro!it and s%rpl%s-8al%e are treated as a8ing t e same n%merical magnit%de b%t only a di!!erent !orm0 &n t e next part @e s all see o@ t e alienation goes !%rt er, and o@ pro!it represents a magnit%de di!!ering also n%merically !rom s%rpl%s-8al%e0

Chapter 3. The Relation of the Rate of Profit to the Rate of Surplus-Value

6ere, as at t e close o! t e preceding c apter, and generally in t is entire !irst part, @e pres%me t e amo%nt o! pro!it !alling to a gi8en capital to be eD%al to t e total amo%nt o! s%rpl%s-8al%e prod%ced by means o! t is capital d%ring a certain period o! circ%lation0 We t %s lea8e aside !or t e present t e !act t at, on t e one and, t is s%rpl%s-8al%e may be broken %p into 8ario%s s%b!orms, s%c as interest on capital, gro%nd-rent, taxes, etc0, and t at, on t e ot er, it is not, as a r%le, identical @it pro!it as appropriated by 8irt%e o! a general rate o! pro!it, @ ic @ill be disc%ssed in t e second part0 $o !ar as t e D%antity o! pro!it is ass%med to be eD%al to t at o! s%rpl%s-8al%e, its magnit%de, and t at o! t e rate o! pro!it, is determined by ratios o! simple !ig%res gi8en or ascertainable in e8ery indi8id%al case0 5 e analysis, t ere!ore, !irst is carried on p%rely in t e mat ematical !ield0 We retain t e designations %sed in Aooks & and &&0 5otal capital ; consists o! constant capital c and 8ariable capital 8, and prod%ces a s%rpl%s-8al%e s0 5 e ratio o! t is s%rpl%s-8al%e to t e ad8anced 8ariable capital, or sN8, is called t e rate o! s%rpl%s-8al%e and designated s"0 5 ere!ore sN8 R s", and conseD%ently s R s"80 &! t is s%rpl%s-8al%e is related to t e total capital instead o! t e 8ariable capital, it is called pro!it, p, and t e ratio o! t e s%rpl%s-8al%e s to t e total capital ;, or sN;, is called t e rate o! pro!it, p"0 ?ccordingly, p" R sN; R sNBc U 8C -o@, s%bstit%ting !or s its eD%i8alent s"8, @e !ind p" R s" B8N;C R s" 8NBc U 8C @ ic eD%ation may also be expressed by t e proportion p" : s" R 8 : ; # t e rate o! pro!it is related to t e rate o! s%rpl%s-8al%e as t e 8ariable capital is to t e total capital0 &t !ollo@s !rom t is proportion t at t e rate o! pro!it, p", is al@ays smaller t an s", t e rate o! s%rpl%s-8al%e, beca%se 8, t e 8ariable capital, is al@ays smaller t an ;, t e s%m o! 8 U c, or t e 8ariable pl%s t e constant capital# t e only, practically impossible case excepted, in @ ic 8 R ;, t at is, no constant capital at all, no means o! prod%ction, b%t only @ages are ad8anced by t e capitalist0 6o@e8er, o%r analysis also considers a n%mber o! ot er !actors @ ic a8e a determining in!l%ence on t e magnit%de o! c, 8, and s, and m%st t ere!ore be brie!ly examined0 First, t e value of money0 We may ass%me t is to be constant t ro%g o%t0 $econd, t e turnover0 We s all lea8e t is !actor entirely o%t o! consideration !or t e present, since its in!l%ence on t e rate o! pro!it @ill be treated specially in a later c apter0 /6ere @e anticipate H%st one point, t at t e !orm%la p" R s" B8N;C is strictly correct only !or one period o! t%rno8er o! t e 8ariable capital0 A%t @e may correct it !or an ann%al t%rno8er by s%bstit%ting !or t e simple rate o! s%rpl%s-8al%e, s", t e ann%al rate o! s%rpl%s-8al%e, s"n0 &n t is, n is t e n%mber o! t%rno8ers o! t e 8ariable capital @it in one year0 B;!0 Aook &&, ; apter J4&, 1C I F0 E01 5 ird, d%e consideration m%st be gi8en to productivity of labour, @ ose in!l%ence on t e rate o! s%rpl%s-8al%e as been t oro%g ly disc%ssed in Aook & B?bsc nitt &4C0 /Englis edition: ,art &40 I Ed01 ,rod%cti8ity o! labo%r may also exert a direct in!l%ence on t e rate o! pro!it, at least o! an indi8id%al capital, i!, as as been demonstrated in Aook & BKap0 J, $0 3<3N3<2 / R MEW <3,

33

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$033+N3361C /Englis edition: ; 0 J&&, pp0 316-1>0 I Ed01 t is indi8id%al capital operates @it a ig er t an t e a8erage social prod%cti8ity and prod%ces commodities at a lo@er 8al%e t an t eir a8erage social 8al%e, t ereby realising an extra pro!it0 6o@e8er, t is case @ill not be considered !or t e present, since in t is part o! t e @ork @e also proceed !rom t e premise t at commodities are prod%ced %nder normal social conditions and are sold at t eir 8al%es0 6ence, @e ass%me in eac case t at t e prod%cti8ity o! labo%r remains constant0 &n e!!ect, t e 8al%e-composition o! a capital in8ested in a branc o! ind%stry, t at is, a certain proportion bet@een t e 8ariable and constant capital, al@ays expresses a de!inite degree o! labo%r prod%cti8ity0 ?s soon, t ere!ore, as t is proportion is altered by means ot er t an a mere c ange in t e 8al%e o! t e material elements o! t e constant capital, or a c ange in @ages, t e prod%cti8ity o! labo%r m%st like@ise %ndergo a corresponding c ange, and @e s all o!ten eno%g see, !or t is reason, t at c anges in t e !actors c, 8, and s also imply c anges in t e prod%cti8ity o! labo%r0 5 e same applies to t e t ree remaining !actors I t e length of the wor-ing1day, intensity of labour, and wages0 5 eir in!l%ence on t e D%antity and rate o! s%rpl%s-8al%e as been ex a%sti8ely disc%ssed in Aook & /Englis edition: 4ol0 1, pp0 +1*-3=0 I Ed01 &t @ill be %nderstood, t ere!ore, t at not@it standing t e ass%mption, @ ic @e make !or t e sake o! simplicity, t at t ese t ree !actors remain constant, t e c anges t at occ%r in 8 and s may ne8ert eless imply c anges in t e magnit%de o! t ese, t eir determining elements0 &n t is respect @e m%st brie!ly recall t at t e @age in!l%ences t e D%antity o! s%rpl%s-8al%e and t e rate o! s%rpl%s-8al%e in in8erse proportion to t e lengt o! t e @orking-day and t e intensity o! labo%r# t at an increase in @ages red%ces t e s%rpl%s-8al%e, @ ile a lengt ening o! t e @orking-day and an increase in t e intensity o! labo%r add to it0 $%ppose a capital o! 1== prod%ces a s%rpl%s-8al%e o! <= employing <= labo%rers @orking a 1=o%r day !or a total @eekly @age o! <=0 5 en @e a8e: 8=c U <=8 U <=s# s" R 1==T, p" R <=T0 -o@ t e @orking-day is lengt ened to 1+ o%rs @it o%t raising t e @ages0 5 e total 8al%e prod%ced by t e <= labo%rers @ill t ereby increase !rom 2= to 6= B1= : 1+ R 2= : 6=C0 $ince 8, t e @ages paid to t e labo%rers, remains t e same, t e s%rpl%s-8al%e rises !rom <= to 2=, and @e a8e: 8=c U <=8 U 2=s# s" R <==T, p" R 2=T0 &!, con8ersely, t e ten- o%r @orking-day remains %nc anged, @ ile @ages !all !rom <= to 1<, t e total 8al%e-prod%ct amo%nts to 2= as be!ore, b%t is di!!erently distrib%ted# 8 !alls to 1<, lea8ing a remainder o! <8 !or s0 5 en @e a8e: 8=c U <=8 U <8s# s" R <33XT, p" R <8N*< R 3= 1=N<3 T0 6ence, @e see t at a prolonged @orking-day Bor a corresponding increase in t e intensity o! labo%rC and a !all in @ages bot increase t e amo%nt, and t %s t e rate, o! s%rpl%s-8al%e0 ;on8ersely, a rise in @ages, ot er t ings being eD%al, @o%ld lo@er t e rate o! s%rpl%s-8al%e0 6ence, i! 8 rises t ro%g a rise in @ages, it does not express a greater, b%t only a dearer D%antity o! labo%r, in @ ic case s" and p" do not rise, b%t !all0 5 is indicates t at c anges in t e @orking-day, intensity o! labo%r and @ages cannot take place @it o%t a sim%ltaneo%s c ange in 8 and s and t eir ratio, and t ere!ore also p", @ ic is t e ratio o! s to t e total capital c U 80 ?nd it is also e8ident t at c anges in t e ratio o! s to 8 also imply corresponding c anges in at least one o! t e t ree abo8e-mentioned labo%r conditions0 ,recisely t is re8eals t e speci!ic organic relations ip o! 8ariable capital to t e mo8ement o! t e total capital and to its sel!-expansion, and also its di!!erence !rom constant capital0 $o !ar as generation o! 8al%e is concerned, t e constant capital is important only !or t e 8al%e it as0 ?nd it is immaterial to t e generation o! 8al%e @ et er a constant capital o! V1,+== represents 1,+== tons o! iron at, say, V1, or +== tons o! iron at V30 5 e D%antity o! act%al material, in @ ic t e 8al%e o!

32

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t e constant capital is incorporated, is altoget er irrele8ant to t e !ormation o! 8al%e and t e rate o! pro!it, @ ic 8aries in8ersely to t is 8al%e no matter @ at t e ratio o! t e increase or decrease o! t e 8al%e o! constant capital to t e mass o! material %se-8al%e @ ic it represents0 &t is di!!erent @it 8ariable capital0 &t is not t e 8al%e it as, not t e labo%r incorporated in it, t at matter at t is point, b%t t is 8al%e as a mere index o! t e total labo%r t at it sets in motion and @ ic is not expressed in it I t e total labo%r, @ ose di!!erence !rom t e labo%r expressed in t at 8al%e, ence t e paid labo%r, i0e0, t at portion o! t e total labo%r @ ic prod%ces s%rpl%s-8al%e, is all t e greater, t e less labo%r is contained in t at 8al%e itsel!0 $%ppose, a ten- o%r @orking-day is eD%al to ten s illings R ten marks0 &! t e labo%r necessary to replace t e @ages, and t %s t e 8ariable capital R + o%rs R + s illings, t en t e s%rpl%s-labo%r R + o%rs and t e s%rpl%s-8al%e R + s illings0 $ o%ld t e necessary labo%r R 2 o%rs R 2 s illings, t en t e s%rpl%s-labo%r R 6 o%rs and t e s%rpl%s-8al%e R 6 s illings0 6ence, as soon as t e 8al%e o! t e 8ariable capital ceases to be an index o! t e D%antity o! labo%r set in motion by it, and, moreo8er, t e meas%re o! t is index is altered, t e rate o! s%rpl%s-8al%e @ill c ange in t e opposite direction and in8ersely0 'et %s no@ go on to apply t e abo8e-mentioned eD%ation o! t e rate o! pro!it, p" R s" B8N;C, to t e 8ario%s possible cases0 We s all s%ccessi8ely c ange t e 8al%e o! t e indi8id%al !actors o! s" B8N;C and determine t e e!!ect o! t ese c anges on t e rate o! pro!it0 &n t is @ay @e s all obtain di!!erent series o! cases, @ ic @e may regard eit er as s%ccessi8e altered conditions o! operation !or one and t e same capital, or as di!!erent capitals existing side by side and introd%ced !or t e sake o! comparison, taken, as it @ere, !rom di!!erent branc es o! ind%stry or di!!erent co%ntries0 &n cases, t ere!ore, @ ere t e conception o! some o! o%r examples as s%ccessi8e conditions !or one and t e same capital appears to be !orced or impracticable, t is obHection !alls a@ay t e moment t ey are regarded as comparisons o! independent capitals0 6ence, @e no@ separate t e prod%ct s" B8N;C into its t@o !actors s" and 8N;0 ?t !irst @e s all treat s" as constant and analyse t e e!!ect o! t e possible 8ariations o! 8N;0 ?!ter t at @e s all treat t e !raction 8N; as constant and let s" pass t ro%g its possible 8ariations0 Finally @e s all treat all !actors as 8ariable magnit%des and t ereby ex a%st all t e cases !rom @ ic la@s concerning t e rate o! pro!it may be deri8ed0 I. s/ constant, v6C varia4le 5 is case, @ ic embraces a n%mber o! s%bordinate cases, may be co8ered by a general !orm%la0 5ake t@o capitals, ; and ; 1, @it t eir respecti8e 8ariable components, 8 and 8 1, @it a common rate o! s%rpl%s-8al%e, s", and rates o! pro!it p" and p" 10 5 en: p" R s" B8N;C # p"1 R s" B81N;1C -o@ let %s make a proportion o! ; and ; 1, and o! 8 and 810 For instance, let t e 8al%e o! t e !raction ;1N; R E, and t at o! 8 1N8 R e0 5 en ;1 R E;, and 81 R e80 $%bstit%ting in t e abo8e eD%ation t ese 8al%es !or p1, ;1 and 81, @e obtain p"1 R s" e8NE; ?gain, @e may deri8e a second !orm%la !rom t e abo8e t@o eD%ations by trans!orming t em into t e proportion: p" : p"1 R s" B8N;C : s" B81N;1C R B8N;C : 81N;1 0 $ince t e 8al%e o! a !raction is not c anged i! @e m%ltiply or di8ide its n%merator and denominator by t e same n%mber, @e may red%ce 8N; and 8 1N;1 to percentages, t at is, @e may make ; and ;1 bot R 1==0 5 en @e a8e 8N; R 8N1== and 8 1N;1 R 81N1==, and may t en drop t e denominators in t e abo8e proportion, obtaining: p" : p"1 R 8 : 81", or:

3+

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5aking any t@o capitals operating @it t e same rate o! s%rpl%s-8al%e, t e rates o! pro!it are to eac ot er as t e 8ariable portions o! t e capitals calc%lated as percentages o! t eir respecti8e total capitals0 5 ese t@o !orm%las embrace all t e possible 8ariations o! 8N;0 3ne more remark be!ore @e analyse t ese 8ario%s cases singly0 $ince ; is t e s%m o! c and 8, o! t e constant and 8ariable capitals, and since t e rates o! s%rpl%s-8al%e, as o! pro!it, are %s%ally expressed in percentages, it is con8enient to ass%me t at t e s%m o! c U 8 is also eD%al to 1==, i0e0, to express c and 8 in percentages0 For t e determination o! t e rate o! pro!it, i! not o! t e amo%nt, it is immaterial @ et er @e say t at a capital o! 1+,===, o! @ ic 1<,=== is constant and 3,=== is 8ariable, prod%ces a s%rpl%s-8al%e o! 3,===, or @ et er @e red%ce t is capital to percentages: 1+,=== ; R 1<,===c U 3,===8 B U 3,===sC 1== ; R 8=c U <=8 B U <=sC0 &n eit er case t e rate o! s%rpl%s-8al%e s" R 1==T, and t e rate o! pro!it R <=T0 5 e same is tr%e @ en @e compare t@o capitals, say, t e !oregoing capital @it anot er, s%c as 1<,=== ; R 1=,8==c U 1,<==8 B U 1,<==sC 1== ; R *=c U 1=8 B U 1=sC0 in bot o! @ ic s" R 1==T, p" R 1=T, and in @ ic t e comparison @it t e !oregoing capital is clearer in percentage !orm0 3n t e ot er and, i! it is a matter o! c anges taking place in one and t e same capital, t e !orm o! percentages is rarely to be %sed, beca%se it almost al@ays obsc%res t ese c anges0 &! a capital expressed in t e !orm o! percentages: 8=c U <=8 U <=s ass%mes t e !orm o! percentages: *=c U 1=8 U 1=s, @e cannot tell @ et er t e c anged composition in percentages, *= 8 U 1=c, is d%e to an absol%te decrease o! 8 or an absol%te increase o! c, or to bot 0 We @o%ld need t e absol%te magnit%des in !ig%res to ascertain t is0 &n t e analysis o! t e !ollo@ing indi8id%al cases o! 8ariation, o@e8er, e8eryt ing depends on o@ t ese c anges a8e come abo%t# @ et er 8= 8 U <=c c anged into *=c U 1=8 t ro%g an increase o! t e constant capital @it o%t any c ange in t e 8ariable capital, !or instance t ro%g 1<,===c U 3,===8 c anging into <>,===c U 3,===8 Bcorresponding to a percentage o! *=c U 1=8C# or @ et er t ey took t is !orm t ro%g a red%ction o! t e 8ariable capital, @it t e constant capital remaining %nc anged, t at is, t ro%g a c ange into 1<,=== c U 1,333X 8 Balso corresponding to a percentage o! *= c U 1=8C# or, lastly, @ et er bot o! t e terms c anged into 13,+==c U 1,+==8 Bcorresponding once more to a percentage o! *= c U 1=8C0 A%t it is precisely t ese cases @ ic @e s all a8e to s%ccessi8ely analyse, and in so doing dispense @it t e con8enient !orm o! percentages, or at least employ t ese only as a secondary alternati8e0 1C s5 and C constant, v variable. &! 8 c anges in magnit%de, ; can remain %naltered only i! c, t e ot er component o! ;, t at is, t e constant capital, c anges by t e same amo%nt as 8, b%t in t e opposite direction0 &! ; originally R 8=c U <=8 R 1==, and i! 8 is t en red%ced to 1=, t en ; can R 1== only i! c is increased to *=# *=c U 1=8 R 1==0 :enerally speaking, i! 8 is trans!ormed into 8 Y d, into 8 increased or decreased by d, t en c m%st be trans!ormed into c Y d, into c 8arying by t e same amo%nt, b%t in t e opposite direction, so t at t e conditions o! t e present case are satis!ied0 $imilarly, i! t e rate o! s%rpl%s-8al%e s" remains t e same, @ ile t e 8ariable capital 8 c anges, t e amo%nt o! s%rpl%s-8al%e s m%st c ange, since s R s"8, and since one o! t e !actors o! s"8, namely 8, is gi8en anot er 8al%e0

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5 e ass%mptions o! t e present case prod%ce, alongside t e original eD%ation, p" R s" B8N;C , still anot er eD%ation t ro%g t e 8ariation o! 8: p"1 R s" B81N;C in @ ic 8 as become 81 and p"1, t e res%ltant c anged rate o! pro!it, is to be !o%nd0 &t is determined by t e !ollo@ing proportion: p" : p"1 R s" B8N;C : s" B81N;C R 8 : 81 3r: @it t e rate o! s%rpl%s-8al%e and total capital remaining t e same, t e original rate o! pro!it is to t e ne@ rate o! pro!it prod%ced by a c ange in t e 8ariable capital as t e original 8ar iable capital is to t e c anged 8ariable capital0 &! t e original capital @as, as abo8e: &0 1+,=== ; R 1<,===c U 3,===8 B U 3,===sC, and i! it is no@: &&0 1+,=== ; R 13,===c U <,===8 B U <,===sC, t en ; R 1+,=== and s" R 1==T in eit er case, and t e rate o! pro!it o! &, <=T, is to t at o! &&, 13XT, as t e 8ariable capital o! &, 3,===, is to t at o! &&, <,===, i0 e0, <=T : 13XT R 3,=== : <,===0 -o@, t e 8ariable capital may eit er rise or !all0 'et %s !irst take an example in @ ic it rises0 'et a certain capital be originally constit%ted and employed as !ollo@s: &0 1==c U <=8 U 1=s# ; R 1<=, s" R +=T, p" R 8XT0 -o@ let t e 8ariable capital rise to 3=0 &n t at case, according to o%r ass%mption, t e constant capital m%st !all !rom 1== to *= so t at total capital remains %nc anged at 1<=0 5 e rate o! s%rpl%s-8al%e remaining constant at +=T, t e s%rpl%s-8al%e prod%ced @ill t en rise !rom 1= to 1+0 We s all t en a8e: &&0 *=c U 3=8 U 1+s# ; R 1<=, s" R +=T, p" R 1<ZT0 'et %s !irst proceed !rom t e ass%mption t at @ages remain %nc anged0 5 en t e ot er !actors o! t e rate o! s%rpl%s-8al%e, i0e0, t e @orking-day and t e intensity o! labo%r, m%st also remain %nc anged0 &n t at e8ent t e rise o! 8 B!rom <= to 3=C can signi!y only t at anot er al! as many labo%rers are employed0 5 en t e total 8al%e prod%ced also rises one- al!, !rom 3= to 2+, and is distrib%ted, H%st as be!ore, W !or @ages and X !or s%rpl%s-8al%e0 A%t at t e same time, @it t e increase in t e n%mber o! labo%rers, t e constant capital, t e 8al%e o! t e means o! prod%ction, as !allen !rom 1== to *=0 We a8e, t en, a case o! decreasing prod%cti8ity o! labo%r combined @it a sim%ltaneo%s s rinkage o! constant capital0 &s s%c a case economically possibleQ &n agric%lt%re and t e extracti8e ind%stries, in @ ic a decrease in labo%r prod%cti8ity and, t ere!ore, an increase in t e n%mber o! employed labo%rers is D%ite compre ensible, t is process is on t e basis and @it in t e scope o! capitalist prod%ction attended by an increase, instead o! a decrease, o! constant capital0 E8en i! t e abo8e !all o! c @ere d%e merely to a !all in prices, an indi8id%al capital @o%ld be able to accomplis t e transition !rom & to && only %nder 8ery exceptional circ%mstances0 A%t in t e case o! t@o independent capitals in8ested in di!!erent co%ntries, or in di!!erent branc es o! agric%lt%re or extracti8e ind%stry, it @o%ld be not ing o%t o! t e ordinary i! in one o! t e cases more labo%rers Band t ere!ore more 8ariable capitalC @ere employed and @orked @it less 8al%able or scantier means o! prod%ction t an in t e ot er case0 A%t let %s drop t e ass%mption t at t e @age remains t e same, and let %s explain t e rise o! t e 8ariable capital !rom <= to 3= t ro%g a rise o! @ages by one- al!0 5 en @e s all a8e an entirely di!!erent case0 5 e same n%mber o! labo%rers I say, t@enty I contin%e to @ork @it t e same or only slig tly red%ced means o! prod%ction0 &! t e @orking-day remains %nc anged I say, 1= o%rs I t en t e total 8al%e prod%ced also remains %nc anged0 &t @as and remains R 3=0 A%t all o! t is 3= is no@ reD%ired to make good t e ad8anced 8ariable capital o! 3=# t e s%rpl%s-8al%e @o%ld disappear0 We a8e ass%med, o@e8er, t at t e rate o! s%rpl%s-8al%e s o%ld remain constant, t at

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is, t e same as in &, at +=T0 5 is is possible only i! t e @orking-day is prolonged by one- al! to 1+ o%rs0 5 en t e <= labo%rers @o%ld prod%ce a total 8al%e o! 2+ in 1+ o%rs, and all conditions @o%ld be satis!ied: &&0 *=c U 3=8 U 1+s# ; R 1<=, s" R +=T, p" R 1<ZT0 &n t is case, t e <= labo%rers do not reD%ire any more means o! labo%r, tools, mac ines, etc0, t an in case &0 3nly t e ra@ materials or a%xiliary materials @o%ld a8e to be increased by one- al!0 &n t e e8ent o! a !all in t e prices o! t ese materials, t e transition !rom & to && mig t be more possible economically, e8en !or an indi8id%al capital in keeping @it o%r ass%mption0 ?nd t e capitalist @o%ld be some@ at compensated by increased pro!its !or any loss inc%rred t ro%g t e depreciation o! is constant capital0 -o@ let %s ass%me t at t e 8ariable capital !alls, instead o! rising0 5 en @e a8e b%t to re8erse o%r example, taking && as t e original capital, and passing !rom && to &0 &&0 *=c U 3=8 U 1+s, t en c anges into &0 1==c U <=8 U 1=s, and it is e8ident t at t is transposition does not in t e least alter any o! t e conditions reg%lating t e respecti8e rates o! pro!it and t eir m%t%al relation0 &! 8 !alls !rom 3= to <= beca%se X !e@er labo%rers are employed @it t e gro@ing constant capital, t en @e a8e be!ore %s t e normal case o! modern ind%stry, namely, an increasing prod%cti8ity o! labo%r, and t e operation o! a larger D%antity o! means o! prod%ction by !e@er labo%rers0 5 at t is mo8ement is necessarily connected @it a sim%ltaneo%s drop in t e rate o! pro!it @ill be de8eloped in t e t ird part o! t is book0 &!, on t e ot er and, 8 !alls !rom 3= to <=, beca%se t e same n%mber o! labo%rers is employed at lo@er @ages, t e total 8al%e prod%ced @o%ld, @it t e @orking-day %nc anged, as be!ore R 3= 8 U 1+s R 2+0 $ince 8 !ell to <=, t e s%rpl%s-8al%e @o%ld rise to <+, t e rate o! s%rpl%s-8al%e !rom +=T to 1<+T, @ ic @o%ld be contrary to o%r ass%mption0 5o comply @it t e conditions o! o%r case, t e s%rpl%s-8al%e, @it its rate at +=T, m%st rat er !all to 1=, and t e total 8al%e prod%ced m%st, t ere!ore, !all !rom 2+ to 3=, and t is is possible only i! t e @orking-day is red%ced by X0 5 en, as be!ore, @e a8e: 1==c U <=8 U 1=s# s" R +=T, p" R 8XT0 &t need ardly be said t at t is red%ction o! t e @orking-time, in t e case o! a !all in @ages, @o%ld not occ%r in practice0 A%t t at is immaterial0 5 e rate o! pro!it is a !%nction o! se8eral 8ariable magnit%des, and i! @e @is to kno@ o@ t ese 8ariables in!l%ence t e rate o! pro!it, @e m%st analyse t e indi8id%al e!!ect o! eac in t%rn, regardless o! @ et er s%c an isolated e!!ect is economically practicable @it one and t e same capital0 <C s5 constant, v variable, C changes through the variation of v. 5 is case di!!ers !rom t e preceding one only in degree0 &nstead o! decreasing or increasing by as m%c as 8 increases or decreases, c remains constant0 (nder present-day conditions in t e maHor ind%stries and agric%lt%re t e 8ariable capital is only a relati8ely small part o! t e total capital0 For t is reason, its increase or decrease, so !ar as eit er is d%e to c anges in t e 8ariable capital, are like@ise relati8ely small0 'et %s again proceed @it a capital: &0 1==c U <=8 U 1=s# ; R 1<=, s" R +=T, p" R 8XT0 @ ic @o%ld t en c ange, say, into: &&0 1==c U 3=8 U 1+s# ; R 13=, s" R +=T, p" R 11 >N13T0 5 e opposite case, in @ ic t e 8ariable capital decreases, @o%ld again be ill%strated by t e re8erse transition !rom && to &0 5 e economic conditions @o%ld be essentially t e same as in t e preceding case, and t ere!ore t ey need not be disc%ssed again0 5 e transition !rom & to && implies a decrease in t e prod%cti8ity

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o! labo%r by one- al!# !or && t e %tilisation o! 1== reD%ires an increase o! labo%r by one- al! o8er t at o! &0 5 is case may occ%r in agric%lt%re0 1 A%t @ ile t e total capital remains constant in t e preceding case, o@ing to t e con8ersion o! constant into 8ariable capital, or 8ice 8ersa, t ere is in t is case a tie-%p o! additional capital i! t e 8ariable capital increases, and a release o! pre8io%sly employed capital i! t e 8ariable capital decreases0 3C s5 and v constant, c and therefore C variable. &n t is case t e eD%ation c anges !rom: p" R s" B8N;C into p" R s" B8N;1C , and a!ter red%cing t e same !actors on bot sides, @e a8e: p"1 : p" R ; : ;1# @it t e same rate o! s%rpl%s-8al%e and eD%al 8ariable capitals, t e rates o! pro!it are in8ersely proportional to t e total capitals0 $ o%ld @e, !or example, a8e t ree capitals, or t ree di!!erent conditions o! t e same capital: &0 8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T# &&0 1==c U <=8 U <=s# ; R 1<=, s" R 1==T, p" R 16WT# &&&0 6=c U <=8 U <=s# ; R 8=, s" R 1==T, p" R <+T0 5 en @e obtain t e proportions: <=T : 16WT R 1<= : 1== and <=T : <+T R 8= : 1==0 5 e pre8io%sly gi8en general !orm%la !or 8ariations o! 8N; @it a constant s" @as: p"1 R s" e8NE; # no@ it becomes: p"1 R s" 8NE; , since 8 does not c ange, t e !actor e R 81N8 , becomes R 10 $ince s"8 R s, t e D%antity o! s%rpl%s-8al%e, and since bot s" and 8 remain constant, it !ollo@s t at s, too, is not a!!ected by any 8ariation o! ;0 5 e amo%nt o! s%rpl%s-8al%e is t e same a!ter t e c ange as it @as be!ore it0 &! c @ere to !all to Eero, p" @o%ld R s", i0e0, t e rate o! pro!it @o%ld eD%al t e rate o! s%rpl%s-8al%e0 5 e alteration o! c may be d%e eit er to a mere c ange in t e 8al%e o! t e material elements o! constant capital, or to a c ange in t e tec nical composition o! t e total capital, t at is, a c ange in t e prod%cti8ity o! labo%r in t e gi8en branc o! ind%stry0 &n t e latter case, t e prod%cti8ity o! social labo%r mo%nting d%e to t e de8elopment o! modern ind%stry and large-scale agric%lt%re @o%ld bring abo%t a transition Bin t e abo8e ill%strationC in t e seD%ence !rom &&& to & and !rom & to &&0 ? D%antity o! labo%r @ ic is paid @it <= and prod%ces a 8al%e o! 2= @o%ld !irst %tilise means o! labo%r to a 8al%e o! 6=# i! prod%cti8ity mo%nted and t e 8al%e remained t e same, t e %sed %p means o! labo%r @o%ld rise !irst to 8=, and t en to 1==0 ?n in8ersion o! t is seD%ence @o%ld imply a decrease in prod%cti8ity0 5 e same D%antity o! labo%r @o%ld p%t a smaller D%antity o! means o! prod%ction into motion and t e operation @o%ld be c%rtailed, as may occ%r in agric%lt%re, mining, etc0 ? sa8ing in constant capital increases t e rate o! pro!it on t e one and, and, on t e ot er, sets !ree capital, !or @ ic reason it is o! importance to t e capitalist0 We s all make a closer st%dy o! t is, and like@ise o! t e in!l%ence o! a c ange in t e prices o! t e elements o! constant capital, partic%larly o! ra@ materials, at a later point0 /,resent edition: ; 0 4, 4&0 I Ed01 &t is again e8ident ere t at a 8ariation o! t e constant capital eD%ally a!!ects t e rate o! pro!it, regardless o! @ et er t is 8ariation is d%e to an increase or decrease o! t e material elements o! c, or merely to a c ange in t eir 8al%e0 2C s5 constant, v, c and C all variable.

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&n t is case, t e general !orm%la !or t e c anged rate o! pro!it, gi8en at t e o%tset, remains in !orce: p"1 R s" e8NE; 0 &t !ollo@s !rom t is t at @it t e rate o! s%rpl%s-8al%e remaining t e same: aC 5 e rate o! pro!it !alls i! E is greater t an e, t at is, i! t e constant capital is a%gmented to s%c an extent t at t e total capital gro@s at a !aster rate t an t e 8ariable capital0 &! a capital o! 8= c U <=8 U <=s c anges into 1>=c U 3=8 U 3=s, t en s" remains R 1==T, b%t 8N; !alls !rom <=N1== to 3=N1==, in spite o! t e !act t at bot 8 and ; a8e gro@n, and t e rate o! pro!it !alls correspondingly !rom <=T to 1+T0 bC 5 e rate o! pro!it remains %nc anged only i! e R E, t at is, i! t e !raction 8N; retains t e same 8al%e in spite o! a seeming c ange, i0e0, i! its n%merator and denominator are m%ltiplied or di8ided by t e same !actor0 5 e capitals 8=c U <=8 U <=s and 16=c U 2=8 U 2=s ob8io%sly a8e t e same rate o! pro!it o! <=T, beca%se s" remains R 1==T and 8N; R <=N1== R 2=N<== represents t e same 8al%e in bot examples0 cC 5 e rate o! pro!it rises @ en e is greater t an E, t at is, @ en t e 8ariable capital gro@s at a !aster rate t an t e total capital0 &! 8= c U <=8 U <=s t%rns into 1<=c U 2=8 U 2=s, t e rate o! pro!it rises !rom <=T to <+T, beca%se @it an %nc anged s" B8N;C R <=N1== rises to 2=N16=, or !rom 1N+ to 1N20 &! t e c anges o! 8 and ; are in t e same direction, @e may 8ie@ t is c ange o! magnit%de as t o%g , to a certain extent, bot o! t em 8aried in t e same proportion, so t at 8N; remained %nc anged %p to t at point0 Aeyond t is point, only one o! t em @o%ld 8ary, and @e s all a8e t ereby red%ced t is complicated case to one o! t e preceding simpler ones0 $ o%ld, !or instance, 8=c U <=8 U <=s become 1==c U 3=8 U 3=s, t en t e proportion o! 8 to c, and also to ;, remains t e same in t is 8ariation %p to : 1== c U <+8 U <+s0 (p to t at point, t ere!ore, t e rate o! pro!it like@ise remains %nc anged0 We may t en take 1== c U <+8 U <+s as o%r point o! depart%re# @e !ind t at 8 increased by + to become 3= 8, so t at ; rose !rom 1<+ to 13=, t %s gi8ing %s t e second case, t at o! t e simple 8ariation o! 8 and t e conseD%ent 8ariation o! ;0 5 e rate o! pro!it, @ ic @as originally <=T, rises t ro%g t is addition o! + 8 to <3 1N13 T, pro8ided t e rate o! s%rpl%s-8al%e remains t e same0 5 e same red%ction to a simpler case can also take place i! 8 and ; c ange t eir magnit%des in opposite directions0 For instance, let %s again start @it 8= cU <=8 U <=s, and let t is become: 11=c U 1=8 U 1=s0 &n t at case, @it t e c ange going as !ar as 2= c U 1=8 U 1=s, t e rate o! pro!it @o%ld remain t e same <=T0 Ay adding >=c to t is intermediate !orm, it @ill drop to 8XT0 5 %s, @e a8e again red%ced t e case to an instance o! c ange o! one 8ariable, namely o! c0 $im%ltaneo%s 8ariation o! 8, c, and ;, does not, t ere!ore, o!!er any ne@ aspects and in t e !inal analysis leads back to a case in @ ic only one !actor is a 8ariable0 E8en t e sole remaining case as act%ally been ex a%sted, namely t at in @ ic 8 and ; remain n%merically t e same, @ ile t eir material elements %ndergo a c ange o! 8al%e, so t at 8 stands !or a c anged D%antity o! labo%r p%t in motion and c !or a c anged D%antity o! means o! prod%ction p%t in motion0 &n 8=c U <=8 U <=s, let <=8 originally represent t e @ages o! <= labo%rers @orking 1= o%rs daily0 5 en let t e @ages o! eac rise !rom 1 to 1 [0 &n t at case t e <= 8 @ill pay only 16 labo%rers instead o! <=0 A%t i! <= labo%rers prod%ce a 8al%e o! 2= in <== @orking- o%rs, 16 labo%rers @orking 1= o%rs daily @ill in 16= @orking- o%rs prod%ce a 8al%e o! only 3<0 ?!ter ded%cting <=8 !or @ages, only 1< o! t e 3< @o%ld t en remain !or s%rpl%s-8al%e0 5 e rate o! s%rpl%s-8al%e @o%ld a8e !allen !rom 1==T to 6=T0 A%t since @e a8e ass%med t e rate o! s%rpl%s-8al%e to be constant, t e @orking-day @o%ld a8e to be prolonged by one-D%arter, !rom 1= to 1<Z o%rs0 &! <= labo%rers @orking 1= o%rs daily R <== @orking- o%rs prod%ce a 8al%e o! 2=, t en 16

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labo%rers @orking 1<Z o%rs daily R <== o%rs @ill prod%ce t e same 8al%e, and t e capital o! 8=c U <=8 @o%ld as be!ore yield t e same s%rpl%s-8al%e o! <=0 ;on8ersely, i! @ages @ere to !all to s%c an extent t at <=8 @o%ld represent t e @ages o! 3= labo%rers, t en s @o%ld remain constant only i! t e @orking-day @ere red%ced !rom 1= to 6W o%rs0 For <= \ 1= R 3= \ 6W R <== @orking- o%rs0 We a8e already in t e main disc%ssed to @ at extent c may in t ese di8ergent examples remain %nc anged in terms o! 8al%e expressed in money and yet represent di!!erent D%antities o! means o! prod%ction c anged in accordance @it c anging conditions0 &n its p%re !orm t is case @o%ld be possible only by @ay o! an exception0 ?s !or a c ange in t e 8al%e o! t e elements o! c @ ic increases or decreases t eir mass b%t lea8es t e s%m o! t e 8al%e o! c %nc anged, it does not a!!ect eit er t e rate o! pro!it or t e rate o! s%rpl%s-8al%e, so long as it does not lead to a c ange in t e magnit%de o! 80 We a8e ere@it ex a%sted all t e possible cases o! 8ariation o! 8, c, and ; in o%r eD%ation0 We a8e seen t at t e rate o! pro!it may !all, remain %nc anged, or rise, @ ile t e rate o! s%rpl%s8al%e remains t e same, @it t e least c ange in t e proportion o! 8 to c or to ;, being s%!!icient to c ange t e rate o! pro!it as @ell0 We a8e seen, !%rt ermore, t at in 8ariations o! 8 t ere is a certain limit e8ery@ ere beyond @ ic it is economically impossible !or s" to remain constant0 $ince e8ery one-sided 8ariation o! c m%st also reac a certain limit @ ere 8 can no longer remain %nc anged, @e !ind t at t ere are limits !or e8ery possible 8ariation o! 8N;, beyond @ ic s" m%st like@ise become 8ariable0 &n t e 8ariations o! s" @ ic @e s all no@ disc%ss, t is interaction o! t e di!!erent 8ariables o! o%r eD%ation @ill stand o%t still clearer0 II. s/ varia4le We obtain a general !orm%la !or t e rates o! pro!it @it di!!erent rates o! s%rpl%s-8al%e, no matter @ et er 8N; remains constant or not, by con8erting t e eD%ation: p" R s" B8N;C into p"1 R s"1 B81N;1C , in @ ic p"1, s"1, 81 and ;1 denote t e c anged 8al%es o! p", s", 8 and ;0 5 en @e a8e: p" : p"1 R s"1 B8N;C : s"1 B81N;1C , and ence: p"1 R Bs"1Ns1C \ 81N8 \ ;N;1 \ p"0 1C s5 variable, v6C constant. &n t is case @e a8e t e eD%ations: p" R s" B8N;C# p"1 R s" B8N;C , in bot o! @ ic 8N; is eD%al0 5 ere!ore: p" : p"1 R s" : s"1 5 e rates o! pro!it o! t@o capitals o! t e same composition are to eac ot er as t e t@o corresponding rates o! s%rpl%s-8al%e0 $ince in t e !raction 8N; it is not a D%estion o! t e absol%te magnit%des o! 8 and ;, b%t only o! t eir ratio, t is applies to all capitals o! eD%al composition @ ate8er t eir absol%te magnit%de0 8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T 16=c U 2=8 U <=s# ; R <==, s" R +=T, p" R 1=T 1==T : +=T R <=T : 1=T0

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&! t e absol%te magnit%des o! 8 and ; are t e same in bot cases, t e rates o! pro!it are moreo8er also related to one anot er as t e amo%nts o! s%rpl%s-8al%e: p" : p"1 R s"8 : s"18 R s : s10 For instance: 8=c U <=8 U <=s# s" R 1==T, p" R <=T 8=c U <=8 U 1=s# s" R +=T, p" R 1=T <=T : 1=T R 1== \ <= : += \ <= R <=s : 1=s0 &t is no@ clear t at @it capitals o! eD%al absol%te or percentage composition t e rate o! s%rpl%s8al%e can di!!er only i! eit er t e @ages, or t e lengt o! t e @orking-day, or t e intensity o! labo%r, di!!er0 &n t e !ollo@ing t ree cases: &0 8=c U <=8 U 1=s# s" R +=T, p" R 1=T &&0 8=c U <=8 U <=s# s" R 1==T, p" R <=T &&&0 8=c U <=8 U 2=s# s" R <==T, p" R 2=T t e total 8al%e prod%ced in & is 3= B<=8 U 1=sC# in && it is 2=# in &&& it is 6=0 5 is may come abo%t in t ree di!!erent @ays0 'irst, i! t e @ages are di!!erent, and <= 8 stands !or a di!!erent n%mber o! labo%rers in e8ery indi8id%al case0 $%ppose capital & employs 1+ labo%rers 1= o%rs daily at a @age o! V1X, @ o prod%ce a 8al%e o! V3=, o! @ ic V<= replace t e @ages and V1= are s%rpl%s-8al%e0 &! @ages !all to V1, t en <= labo%rers may be employed !or 1= o%rs# t ey @ill prod%ce a 8al%e o! V2=, o! @ ic V<= @ill replace t e @ages and V<= @ill be s%rpl%s-8al%e0 $ o%ld @ages !all still more, to VW, t irty labo%rers may be employed !or 1= o%rs0 5 ey @ill prod%ce a 8al%e o! V6=, o! @ ic V<= @ill be ded%cted !or @ages and V2= @ill represent s%rpl%s-8al%e0 5 is case I a constant composition o! capital in per cent, a constant @orking-day and constant intensity o! labo%r, and t e rate o! s%rpl%s-8al%e 8arying beca%se o! 8ariation in @ages I is t e only one in @ ic )icardo"s ass%mption is correct: K,ro!it @o%ld be ig or lo@, e actly in proportion as @ages @ere lo@ or ig 0L B&rinciples, ; 0 &, $ect0 &&&, p0 18 o! t e "or-s o! 70 )icardo, ed0 by Mac;%lloc , 18+<0C 3r second, i! t e intensity o! labo%r 8aries0 &n t at case, say, <= labo%rers @orking 1= o%rs daily @it t e same means o! prod%ction prod%ce 3= pieces o! a certain commodity in &, 2= in &&, and 6= in &&&, o! @ ic e8ery piece, aside !rom t e 8al%e o! t e means o! prod%ction incorporated in it, represents a ne@ 8al%e o! V10 $ince e8ery <= pieces R V<= make good t e @ages, t ere remain 1= pieces R V1= !or s%rpl%s-8al%e in &, <= pieces R V<= in &&, and 2= pieces R V2= in &&&0 3r third, t e @orking-day di!!ers in lengt 0 &! <= labo%rers @ork @it t e same intensity !or * o%rs in &, 1< o%rs in &&, and 18 o%rs in &&&, t eir total prod%cts, 3= : 2= : 6= 8ary as * : 1< : 180 ?nd since @ages R <= in e8ery case, 1=, <=, and 2= respecti8ely again remain as s%rpl%s-8al%e0 ? rise or !all in @ages, t ere!ore, in!l%ences t e rate o! s%rpl%s-8al%e in8ersely, and a rise or !all in t e intensity o! labo%r, and a lengt ening or s ortening o! t e @orking-day, act t e same @ay on t e rate o! s%rpl%s-8al%e and t ereby, @it 8N; constant, on t e rate o! pro!it0 <C s5 and v variable, C constant. 5 e !ollo@ing proportion applies in t is case: p" : p"1 R s" B8N;C : s" B81N;C R s"8 : s"181 R s : s10 5 e rates o! pro!it are related to one anot er as t e respecti8e amo%nts o! s%rpl%s-8al%e0

2<

; apter &&&

; anges in t e rate o! s%rpl%s-8al%e @it t e 8ariable capital remaining constant meant a c ange in t e magnit%de and distrib%tion o! t e prod%ced 8al%e0 ? sim%ltaneo%s 8ariation o! 8 and s" also al@ays implies a di!!erent distrib%tion, b%t not al@ays a c ange in t e magnit%de o! t e prod%ced 8al%e0 5 ree cases are possible: aC 4ariation o! 8 and s" takes place in opposite directions, b%t by t e same amo%nt# !or instance: 8=c U <=8 U 1=s# s" R +=T, p" R 1=T *=c U 1=8 U <=s# s" R <==T, p" R <=T 5 e prod%ced 8al%e is eD%al in bot cases, ence also t e D%antity o! labo%r per!ormed# <= 8 U 1=s R 1=8 U <=s R 3=0 5 e only di!!erence is t at in t e !irst case <= is paid o%t !or @ages and 1= remains as s%rpl%s-8al%e, @ ile in t e second case @ages are only 1= and s%rpl%s-8al%e is t ere!ore <=0 5 is is t e only case in @ ic t e n%mber o! labo%rers, t e intensity o! labo%r, and t e lengt o! t e @orking-day remain %nc anged, @ ile 8 and s" 8ary sim%ltaneo%sly0 bC 4ariation o! s" and 8 also takes place in opposite directions, b%t not by t e same amo%nt0 &n t at case t e 8ariation o! eit er 8 or s" o%t@eig s t e ot er0 &0 8=c U <=8 U <=s# s" R 1==T, p" R <=T &&0 ><c U <88 U <=s# s" R >1 3N>T, p" R <=T &&&0 82c U 168 U <=s# s" R 1<+T, p" R <=T0 ;apital & pays !or prod%ced 8al%e amo%nting to 2= @it <=8, && a 8al%e o! 28 @it <8 8, and &&& a 8al%e o! 36 @it 1680 Aot t e prod%ced 8al%e and t e @ages a8e c anged0 A%t a c ange in t e prod%ced 8al%e means a c ange in t e amo%nt o! labo%r per!ormed, ence a c ange eit er in t e n%mber o! labo%rers, t e o%rs o! labo%r, t e intensity o! labo%r, or in more t an one o! t ese0 cC 4ariation o! s" and 8 takes place in t e same direction0 &n t at case t e one intensi!ies t e e!!ect o! t e ot er0 *=c U 1=8 U 1=s# s" R 1==T, p" R 1=T 8=c U <=8 U 3=s# s" R 1+=T, p" R 3=T *<c U 88 U 6s# s" R >+T, p" R 6T0 6ere too t e t ree 8al%es prod%ced are di!!erent, namely <=, +=, and 120 ?nd t is di!!erence in t e magnit%de o! t e respecti8e D%antities o! labo%r red%ces itsel! once more to a di!!erence in t e n%mber o! labo%rers, t e o%rs o! labo%r, and t e intensity o! labo%r, or se8eral or all o! t ese !actors0 3C s5, v and C variable. 5 is case o!!ers no ne@ aspects and is sol8ed by t e general !orm%la gi8en %nder &&, in @ ic s" is 8ariable0 5 e e!!ect o! a c ange in t e magnit%de o! t e rate o! s%rpl%s-8al%e on t e rate o! pro!it ence yields t e !ollo@ing cases: 1C p" increases or decreases in t e same proportion as s" i! 8N; remains constant0 8=c U <=8 U <=s# s" R 1==T, p" R <=T 8=c U <=8 U 1=s# s" R +=T, p" R 1=T 1==T : +=T R <=T : 1=T0 <C p" rises or !alls at a !aster rate t an s" i! 8N; mo8es in t e same direction as s", t at is, i! it increases or decreases @ en s" increases or decreases0 8=c U <=8 U 1=s# s" R +=T, p" R 1=T >=c U 3=8 U <=s# s" R 66WT, p" R 1=T +=T : 66WT ] 1=T : <=T0

23

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3C p" rises or !alls at a slo@er rate t an s" i! 8N; c anges in8ersely to s", b%t at a slo@er rate0 8=c U <=8 U 1=s# s" R +=T, p" R 1=T *=c U 1=8 U 1+s# s" R 1+=T, p" R 1+T +=T : 1+=T ^ 1=T : 1+T0 2C p" rises @ ile s" !alls, or !alls @ ile s" rises i! 8N; c anges in8ersely to, and at, a !aster rate t an, s"0 8=c U <=8 U <=s# s" R 1==T, p" R <=T *=c U 1=8 U 1+s# s" R 1+=T, p" R 1+T0 s" as risen !rom 1==T to 1+=T, p" as !allen !rom <=T to 1+T0 +C Finally, p" remains constant @ ereas s" rises or !alls, @ ile 8N; c anges in8ersely to, b%t in exactly t e same proportion as, s"0 &t is only t is last case @ ic still reD%ires some explanation0 We a8e obser8ed earlier in t e 8ariations o! 8N; t at one and t e same rate o! s%rpl%s-8al%e may be expressed in 8ery m%c di!!erent rates o! pro!it0 -o@ @e see t at one and t e same rate o! pro!it may be based on 8ery m%c di!!erent rates o! s%rpl%s-8al%e0 A%t @ ile any c ange in t e proportion o! 8 to ; is s%!!icient to prod%ce a di!!erence in t e rate o! pro!it so long as s is constant, a c ange in t e magnit%de o! s m%st lead to a corresponding in8erse c ange o! 8N; in order t at t e rate o! pro!it remains t e same0 &n t e case o! one and t e same capital, or in t at o! t@o capitals in one and t e same co%ntry t is is possible b%t in exceptional cases0 ?ss%me, !or example, t at @e a8e a capital o! 8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T# and let %s s%ppose t at @ages !all to s%c an extent t at t e same n%mber o! labo%rers is obtainable !or 168 instead o! <=80 5 en, ot er t ings being eD%al, and 28 being released, @e s all a8e: 8=c U 168 U <2s# ; R *6, s" R 1+=T, p" R <+T0 &n order t at p" may no@ R <=T as be!ore, t e total capital @o%ld a8e to increase to 1<=, t e constant capital t ere!ore rising to 1=2: 1=2c U 168 U <2s# ; R 1<=, s" R 1+=T, p" R <=T0 5 is @o%ld only be possible i! t e !all in @ages @ere attended sim%ltaneo%sly by a c ange in t e prod%cti8ity o! labo%r @ ic reD%ired s%c a c ange in t e composition o! capital0 3r, i! t e 8al%e in money o! t e constant capital increased !rom 8= to 1=20 &n s ort, it @o%ld reD%ire an accidental coincidence o! conditions s%c as occ%rs in exceptional cases0 &n !act, a 8ariation o! s" t at does not call !or t e sim%ltaneo%s 8ariation o! 8, and t %s o! 8N;, is concei8able only %nder 8ery de!inite conditions, namely in s%c branc es o! ind%stry in @ ic only !ixed capital and labo%r are employed, @ ile t e materials o! labo%r are s%pplied by -at%re0 A%t t is is not so @ en t e rates o! pro!it o! t@o di!!erent co%ntries are compared0 For in t at case t e same rate o! pro!it is, in e!!ect, based largely on di!!erent rates o! s%rpl%s-8al%e0 &t !ollo@s !rom all o! t ese !i8e cases, t ere!ore, t at a rising rate o! pro!it may correspond to a !alling or rising rate o! s%rpl%s-8al%e, a !alling rate o! pro!it to a rising or !alling rate o! s%rpl%s8al%e, and a constant rate o! pro!it to a rising or !alling rate o! s%rpl%s-8al%e0 ?nd @e a8e seen in & t at a rising, !alling, or constant rate o! pro!it may also accord @it a constant rate o! s%rpl%s8al%e0 5 e rate o! pro!it, t ere!ore, depends on t@o main !actors I t e rate o! s%rpl%s-8al%e and t e 8al%e-composition o! capital0 5 e e!!ects o! t ese t@o !actors may be brie!ly s%mmed %p as !ollo@s, by gi8ing t e composition in per cent, !or it is immaterial @ ic o! t e t@o portions o! t e capital ca%ses t e 8ariation:

22

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5 e rates o! pro!it o! t@o di!!erent capitals, or o! one and t e same capital in t@o s%ccessi8e di!!erent conditions, are e3ual 1C i! t e per cent composition o! t e capitals is t e same and t eir rates o! s%rpl%s-8al%e are eD%al# <C i! t eir per cent composition is not t e same, and t e rates o! s%rpl%s-8al%e are %neD%al, pro8ided t e prod%cts o! t e rates o! s%rpl%s-8al%e by t e percentages o! t e 8ariable portions o! capitals Bs" by 8C are t e same, i0e0, i! t e masses o! s%rpl%s-8al%e Bs R s"8C calc%lated in per cent o! t e total capital are eD%al# in ot er @ords, i! t e !actors s" and 8 are in8ersely proportional to one anot er in bot cases0 4hey are une3ual 1C i! t e per cent composition is eD%al and t e rates o! s%rpl%s-8al%e are %neD%al, in @ ic case t ey are related as t e rates o! s%rpl%s-8al%e# <C i! t e rates o! s%rpl%s-8al%e are t e same and t e per cent composition is %neD%al, in @ ic case t ey are related as t e 8ariable portions o! t e capitals# 3C i! t e rates o! s%rpl%s-8al%e are %neD%al and t e per cent composition not t e same, in @ ic case t ey are related as t e prod%cts s"8, i0e0, as t e D%antities o! s%rpl%s-8al%e calc%lated in per cent o! t e total capital0 <

Chapter 4. The Effect of the Turnover on the Rate of Profit

5 e e!!ect o! t e t%rno8er on t e prod%ction o! s%rpl%s-8al%e, and conseD%ently o! pro!it, as been disc%ssed in Aook &&0 Arie!ly s%mmarised it signi!ies t at o@ing to t e time span reD%ired !or t%rno8er, not all t e capital can be employed all at once in prod%ction# some o! t e capital al@ays lies idle, eit er in t e !orm o! money-capital, o! ra@ material s%pplies, o! !inis ed b%t still %nsold commodity-capital, or o! o%tstanding claims# t at t e capital in acti8e prod%ction, i0e0, in t e prod%ction and appropriation o! s%rpl%s-8al%e, is al@ays s ort by t is amo%nt, and t at t e prod%ced and appropriated s%rpl%s-8al%e is al@ays c%rtailed to t e same extent0 5 e s orter t e period o! t%rno8er, t e smaller t is idle portion o! capital as compared @it t e @ ole, and t e larger, t ere!ore, t e appropriated s%rpl%s-8al%e, pro8ided ot er conditions remain t e same0 &t as already been s o@n in detail in Aook && /Englis edition: 4ol0 &&, pp0 <*3-*80 I 0d01 o@ t e D%antity o! prod%ced s%rpl%s-8al%e is a%gmented by red%ctions in t e period o! t%rno8er, or o! one o! its t@o sections, in t e time o! prod%ction and t e time o! circ%lation0 A%t since t e rate o! pro!it only expresses t e relation o! t e prod%ced D%antity o! s%rpl%s-8al%e to t e total capital employed in its prod%ction, it is e8ident t at any s%c red%ction increases t e rate o! pro!it0 W ate8er as been said earlier in ,art && o! Aook && in regard to s%rpl%s-8al%e, applies eD%ally to pro!it and t e rate o! pro!it and needs no repetition ere0 We @is only to stress a !e@ o! t e principal points0 5 e c ie! means o! red%cing t e time o! prod%ction is ig er labo%r prod%cti8ity, @ ic is commonly called ind%strial progress0 &! t is does not in8ol8e a sim%ltaneo%s considerable increase in t e o%tlay o! total capital res%lting !rom t e installation o! expensi8e mac inery, etc0, and t %s a red%ction o! t e rate o! pro!it, @ ic is calc%lated on t e total capital, t is rate m%st rise0 ?nd t is is decidedly tr%e in t e case o! many o! t e latest impro8ements in metall%rgy and in t e c emical ind%stry0 5 e recently disco8ered met ods o! prod%cing iron and steel, s%c as t e processes o! Aessemer, $iemens, :ilc rist-5 omas, etc0, c%t to a minim%m at relati8ely small costs t e !ormerly ard%o%s processes0 5 e making o! aliEarin, a red dye-st%!! extracted !rom coaltar, reD%ires b%t a !e@ @eeks, and t is by means o! already existing coal-tar dye-prod%cing installations, to yield t e same res%lts @ ic !ormerly reD%ired years0 &t took a year !or t e madder to mat%re, and it @as c%stomary to let t e roots gro@ a !e@ years more be!ore t ey @ere processed0 5 e c ie! means o! red%cing t e time o! circ%lation is impro8ed comm%nications0 5 e last !i!ty years a8e bro%g t abo%t a re8ol%tion in t is !ield, comparable only @it t e ind%strial re8ol%tion o! t e latter al! o! t e 18t cent%ry0 3n land t e macadamised road as been displaced by t e rail@ay, on sea t e slo@ and irreg%lar sailing 8essel as been p%s ed into t e backgro%nd by t e rapid and dependable steamboat line, and t e entire globe is being girdled by telegrap @ires0 5 e $%eE ;anal as !%lly opened East ?sia and ?%stralia to steamer tra!!ic0 5 e time o! circ%lation o! a s ipment o! commodities to East ?sia, at least t@el8e mont s in 182> Bc!0 A%c &&, $0 <3+ /Englis edition: Karl Marx, Capital, 4ol0 &&, pp0 <+1-+<0 I 0d01C, as no@ been red%ced to almost as many @eeks0 5 e t@o large centres o! t e crises o! 18<+-+>, ?merica and &ndia, a8e been bro%g t !rom >= to *= per cent nearer to t e E%ropean ind%strial co%ntries by t is re8ol%tion in transport, and a8e t ereby lost a good deal o! t eir explosi8e nat%re0 5 e period o! t%rno8er o! t e total @orld commerce as been red%ced to t e same extent, and t e e!!icacy o! t e capital in8ol8ed in it as been more t an do%bled or trebled0 &t goes @it o%t saying t at t is as not been @it o%t e!!ect on t e rate o! pro!it0

26

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5o single o%t t e e!!ect o! t e t%rno8er o! total capital on t e rate o! pro!it @e m%st ass%me all ot er conditions o! t e capitals to be compared as eD%al0 ?side !rom t e rate o! s%rpl%s-8al%e and t e @orking-day it is also notably t e per cent composition @ ic @e m%st ass%me to be t e same0 -o@ let %s take a capital ? composed o! 8= c U <=8 R 1== ;, @ ic makes t@o t%rno8ers yearly at a rate o! s%rpl%s-8al%e o! 1==T0 5 e ann%al prod%ct is t en: 16=c U 2=8 U 2=s0 6o@e8er, to determine t e rate o! pro!it @e do not calc%late t e 2=s on t e t%rned-o8er capital-8al%e o! <==, b%t on t e ad8anced capital o! 1==, and t %s obtain p" R 2=T0 -o@ let %s compare t is @it a capital A R 16= c U 2=8 R <== ;, @ ic as t e same rate o! s%rpl%s-8al%e o! 1==T, b%t @ ic is t%rned o8er only once a year0 5 e ann%al prod%ct o! t is capital is, t ere!ore, t e same as t at o! ?: 16=c U 2=8 U 2=s0 A%t t is time t e 2=s are to be calc%lated on an ad8ance o! capital amo%nting to <==, @ ic yields a rate o! pro!it o! only <=T, or one- al! t at o! ?0 We !ind, t en, t at !or capitals @it an eD%al per cent composition, @it eD%al rates o! s%rpl%s8al%e and eD%al @orking-days, t e rates o! pro!it o! t e t@o capitals are related in8ersely as t eir periods o! t%rno8er0 &! eit er t e composition, t e rates o! s%rpl%s-8al%e, t e @orking-day, or t e @ages, are %neD%al in t e t@o compared cases, t is @o%ld nat%rally prod%ce !%rt er di!!erences in t e rates o! pro!it# b%t t ese are independent o! t e t%rno8er and, !or t is reason, do not concern %s at t is point0 5 ey a8e already been disc%ssed in ; apter &&&0 5 e direct e!!ect o! a red%ced period o! t%rno8er on t e prod%ction o! s%rpl%s-8al%e, and conseD%ently o! pro!it, consists o! an increased e!!iciency imparted t ereby to t e 8ariable portion o! capital, as s o@n in Aook &&, ; apter J4&, K5 e 5%rno8er o! 4ariable ;apitalL0 5 is c apter demonstrated t at a 8ariable capital o! +== t%rned o8er ten times a year prod%ces as m%c s%rpl%s-8al%e in t is time as a 8ariable capital o! +,=== @it t e same rate o! s%rpl%s-8al%e and t e same @ages, t%rned o8er H%st once a year0 5ake capital &, consisting o! 1=,=== !ixed capital @ ose ann%al depreciation is 1=T R 1,===, o! +== circ%lating constant and +== 8ariable capital0 'et t e 8ariable capital t%rn o8er ten times per year at a 1==T rate o! s%rpl%s-8al%e0 For t e sake o! simplicity @e ass%me in all t e !ollo@ing examples t at t e circ%lating constant capital is t%rned o8er in t e same time as t e 8ariable, @ ic is generally t e case in practice0 5 en t e prod%ct o! one s%c period o! t%rno8er @ill be: 1==c BdepreciationC U +==c U +==8 U +==s R 1,6== and t e prod%ct o! one entire year, @it ten s%c t%rno8ers, @ill be 1,===c BdepreciationC U +,===c U +,===8 U +,===s R 16,===, ; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11 T0 -o@ let %s take capital &&: *,=== !ixed capital, 1,=== ann%al @ear and tear, 1,=== circ%lating constant capital, 1,=== 8ariable capital, 1==T rate o! s%rpl%s-8al%e, + t%rno8ers o! 8ariable capital per year0 5 en t e prod%ct o! eac o! t e t%rno8ers o! t e 8ariable capital @ill be: <==c BdepreciationC U 1,===c U 1,===8 U 1,===s R 3,<==, and t e total ann%al prod%ct a!ter !i8e t%rno8ers: 1,===c BdepreciationC U +,===c U +,===8 U +,===s R 16,===, ; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11 T F%rt er, take capital &&& @it no !ixed capital, 6,=== circ%lating constant capital and +,=== 8ariable capital0 'et t ere be one t%rno8er per year at a 1==T rate o! s%rpl%s-8al%e0 5 en t e total ann%al prod%ct is: 6,===c U +,===8 U +,===s R 16,===, ; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11T0

2>

; apter &4

&n all t e t ree cases @e t ere!ore a8e t e same ann%al D%antity o! s%rpl%s-8al%e R +,===, and, since t e total capital is like@ise eD%al in all t ree cases, namely R 11,===, also t e same rate o! pro!it o! 2+ +N11T0 A%t s o%ld capital & a8e only + instead o! 1= t%rno8ers o! its 8ariable part per year, t e res%lt @o%ld be di!!erent0 5 e prod%ct o! one t%rno8er @o%ld t en be: <==c BdepreciationC U +==c U +==8 U +==s R 1,>==0 ?nd t e ann%al prod%ct: 1,===c BdepreciationC U <,+==c U <,+==8 U <,+==s R 8,+==, ; R 11,===, s R <,+==# p" R <,+==N11,=== R << 8N11T0 5 e rate o! pro!it as !allen one- al!, beca%se t e period o! t%rno8er as do%bled0 5 e D%antity o! s%rpl%s-8al%e appropriated in one year is t ere!ore eD%al to t e D%antity o! s%rpl%s-8al%e appropriated in one t%rno8er o! t e variablecapital m%ltiplied by t e n%mber o! s%c t%rno8ers per year0 $%ppose @e call t e s%rpl%s-8al%e, or pro!it, appropriated in one year $, t e s%rpl%s-8al%e appropriated in one period o! t%rno8er s, t e n%mber o! t%rno8ers o! t e 8ariable capital in one year n, t en $ R sn, and t e ann%al rate o! s%rpl%s-8al%e $" R s"n, as already demonstrated in Aook &&, ; apter J4&, &0 /Englis edition: 4ol0 &&, p0 3=+0 I 0d01 &t goes @it o%t saying t at t e !orm%la p" R s" B8N;C R s" 8NBc U 8C is correct only so long as t e 8 in t e n%merator is t e same as t at in t e denominator0 &n t e denominator 8 stands !or t e entire portion o! t e total capital %sed on an a8erage as 8ariable capital !or t e payment o! @ages0 5 e 8 o! t e n%merator is primarily only determined by t e !act t at a certain D%antity o! s%rpl%s-8al%e R s is prod%ced and appropriated by it, @ ose relation to it sN8, is m", t e rate o! s%rpl%s-8al%e0 &t is only along t ese lines t at t e !orm%la p" R sNBc U 8C is trans!ormed into t e ot er: p" R s" 8NBc U 8C0 5 e 8 o! t e n%merator @ill no@ be more acc%rately determined by t e !act t at it m%st eD%al t e 8 o! t e denominator, t at is, t e entire 8ariable portion o! capital ;0 &n ot er @ords, t e eD%ation p" R BsN;C may be correctly trans!ormed into t e eD%ation p" R s" 8NBc U 8C only i! s stands !or s%rpl%s-8al%e prod%ced in one t%rno8er o! t e 8ariable capital0 $ o%ld s be only a portion o! t is s%rpl%s-8al%e, t en s R s"8 is still correct, b%t t is 8 is t en smaller t an t e 8 in ; R c U 8, beca%se it is smaller t an t e entire 8ariable capital expended !or @ages0 A%t s o%ld s stand !or more t an t e s%rpl%s-8al%e o! one t%rno8er o! 8, t en a portion o! t is 8, or per aps t e @ ole o! it, ser8es t@ice, namely in t e !irst and in t e second t%rno8er, and e8ent%ally in s%bseD%ent t%rno8ers0 5 e 8 @ ic prod%ces t e s%rpl%s-8al%e and represents t e s%m o! all paid @ages, is t ere!ore greater t an t e 8 in c U 8 and t e calc%lation !alls into error0 5o make t e !orm%la precise !or t e ann%al rate o! pro!it, @e m%st s%bstit%te t e ann%al rate o! s%rpl%s-8al%e !or t e simple rate o! s%rpl%s-8al%e, t at is, s%bstit%te $" or s"n !or s"0 &n ot er @ords, @e m%st m%ltiply t e rate o! s%rpl%s-8al%e s", or, @ at amo%nts to t e same t ing, t e 8ariable capital 8 contained in ;, by n, t e n%mber o! t%rno8ers o! t is 8ariable capital in one year0 5 %s @e obtain p" R s"n B8N;C, @ ic is t e !orm%la !or t e ann%al rate o! pro!it0 5 e amo%nt o! 8ariable capital in8ested in is b%siness is somet ing t e capitalist imsel! does not kno@ in most cases0 We a8e seen in ; apter 4&&& o! Aook &&, and s all see !%rt er along, t at t e only essential distinction @it in is capital @ ic impresses itsel! %pon t e capitalist is t at o! !ixed and circ%lating capital0 6e takes money to pay @ages !rom is cas -box containing t e part o! t e circ%lating capital e as on and in t e !orm o! money, so !ar as it is not deposited in a bank# e takes money !rom t e same cas -box !or ra@ and a%xiliary materials, and credits bot items to t e same cas -acco%nt0 ?nd e8en i! e s o%ld keep a separate acco%nt !or @ages, at t e close o! t e year t is @o%ld only s o@ t e s%m paid o%t !or t is item, ence 8n, b%t not t e 8ariable capital 8 itsel!0 &n order to ascertain t is, e @o%ld a8e to make a special calc%lation, o! @ ic @e propose ere to gi8e an ill%stration0

28

; apter &4

For t is p%rpose @e select t e cotton spinnery o! 1=,=== m%le spindles described in Aook & B$0 <=*N<=1C /Englis edition: p0 <1*0 I 0d01 and ass%me t at t e data gi8en t ere !or one @eek o! ?pril 18>1, are in !orce d%ring t e @ ole year0 5 e !ixed capital incorporated in t e mac inery @as V1=,===0 5 e circ%lating capital @as not gi8en0 We ass%me it to a8e been V<,+==0 5 is is a rat er ig estimate, b%t H%sti!ied by t e ass%mption, @ ic @e m%st al@ays make ere, t at no credit operations @ere e!!ected, ence no permanent or temporary employment o! ot er people"s capital0 5 e 8al%e o! t e @eekly prod%ct @as composed o! V<= !or depreciation o! mac inery, V3+8 circ%lating constant ad8anced capital Brent V6# cotton V32<# coal, gas, oil, V1=C, V+< 8ariable capital paid o%t !or @ages, and V8= s%rpl%s-8al%e0 5 ere!ore, <=c BdepreciationC U 3+8c U +<8 U 8=s R +1=0 5 e @eekly ad8ance o! circ%lating capital t ere!ore @as 3+8 c U +<8 R 21=0 &n terms o! per cent t is @as 8>03c U 1<0>80 For t e entire circ%lating capital o! V<,+== t is @o%ld be V<,18< constant and V318 8ariable capital0 $ince t e total expendit%re !or @ages in one year @as +< times V+<, or V<,>=2, it !ollo@s t at in a year t e 8ariable capital o! V318 @as t%rned o8er almost exactly 8Z times0 5 e rate o! s%rpl%s-8al%e @as 8=N+< R 1+3 11N130 We calc%late t e rate o! pro!it on t e basis o! t ese elements by inserting t e abo8e 8al%es in t e !orm%la p" R s"n B8N;C : s" R 1+3 11N13, n R 8Z, 8 R 318, ; R 1<,+==# ence: p" R 1+3 11N13 \ 8Z \ 318N1<,+== R 330<>T0 We test t is by means o! t e simple !orm%la p" R BsN;C0 5 e total ann%al s%rpl%s-8al%e or pro!it amo%nts to +< times V8=, or V2,16=, and t is di8ided by t e total capital o! V1<,+== gi8es %s 330<8T, or almost an identical res%lt0 5 is is an abnormally ig rate o! pro!it, @ ic may only be explained by extraordinarily !a8o%rable conditions o! t e moment B8ery lo@ prices o! cotton along @it 8ery ig prices o! yarnC, and co%ld certainly not a8e obtained t ro%g o%t t e year0 5 e s"n in t e !orm%la p" R s"n B8N;C stands, as as been said, !or t e t ing called in Aook && /Englis edition: 4ol0 &&, p0 <*+0 I 0d01 t e ann%al rate o! s%rpl%s-8al%e0 &n t e abo8e case it is 1+3 11N13T m%ltiplied by 8Z or in exact !ig%res, 1,3=> *N18T0 5 %s, i! a certain Aiedermann /Aiedermann I , ilistine0 ? p%n, being also t e name o! t e editor o! t e Deutsche +llgemeine %eitung0 I 0d01 @as s ocked by t e abnormity o! an ann%al rate o! s%rpl%s-8al%e o! 1,===T %sed as an ill%stration in Aook &&, e @ill no@ per aps be paci!ied by t is ann%al rate o! s%rpl%s-8al%e o! more t an 1,3==T taken !rom t e li8ing experience o! Manc ester0 &n times o! greatest prosperity, s%c as @e a8e not indeed seen !or a long time, s%c a rate is by no means a rarity0 For t at matter @e a8e ere an ill%stration o! t e act%al composition o! capital in modern largescale ind%stry0 5 e total capital is broken %p into V1<,18< constant and V318 8ariable capital, a s%m o! V1<,+==0 &n terms o! percent t is is *>Zc U <Z8 R 1== ;0 3nly one-!ortiet o! t e total, b%t in more t an an eig t-!old ann%al t%rno8er, ser8es !or t e payment o! @ages0 $ince 8ery !e@ capitalists e8er t ink o! making calc%lations o! t is sort @it re!erence to t eir o@n b%siness, statistics is almost completely silent abo%t t e relation o! t e constant portion o! t e total social capital to its 8ariable portion0 3nly t e ?merican cens%s gi8es @ at is possible %nder modern conditions, namely t e s%m o! @ages paid in eac line o! b%siness and t e pro!its realised0 M%estionable as t ey may be, being based on t e capitalist"s o@n %ncontrolled statements, t ey are ne8ert eless 8ery 8al%able and t e only records a8ailable to %s on t is s%bHect0 /&n E%rope @e are !ar too delicate to expect s%c re8elations !rom o%r maHor capitalists0 I '.001

Chapter 5. Econo ! in the E plo! ent of Constant Capital

I. In General
5 e increase o! absol%te s%rpl%s-8al%e, or t e prolongation o! s%rpl%s-labo%r, and t %s o! t e @orking-day, @ ile t e 8ariable capital remains t e same and t %s employs t e same n%mber o! labo%rers at t e same nominal @ages, regardless o! @ et er o8ertime is paid or not, red%ces t e relati8e 8al%e o! t e constant capital as compared to t e total and t e 8ariable capital, and t ereby increases t e rate o! pro!it, again irrespecti8e o! t e gro@t o! t e D%antity o! s%rpl%s-8al%e and a possibly rising rate o! s%rpl%s-8al%e0 5 e 8ol%me o! t e !ixed portion o! constant capital, s%c as !actory b%ildings, mac inery, etc0, remains t e same, no matter @ et er t ese ser8e t e labo%rprocess 16 or 1< o%rs0 ? prolongation o! t e @orking-day does not entail any !res expendit%res in t is, t e most expensi8e portion o! constant capital0 F%rt ermore, t e 8al%e o! t e !ixed capital is t ereby reprod%ced in a smaller n%mber o! t%rno8er periods, so t at t e time !or @ ic it m%st be ad8anced to make a certain pro!it is abbre8iated0 ? prolongation o! t e @orking-day t ere!ore increases t e pro!it, e8en i! o8ertime is paid, or e8en i!, %p to a certain point, it is better paid t an t e normal o%rs o! labo%r0 5 e e8er-mo%nting need to increase !ixed capital in modern ind%stry @as t ere!ore one o! t e main reasons prompting pro!it-mad capitalists to lengt en t e @orkingday0 1 5 e same conditions do not obtain i! t e @orking-day is constant0 5 en it is necessary eit er to increase t e n%mber o! labo%rers, and @it t em to a certain extent t e amo%nt o! !ixed capital, t e b%ildings, mac inery, etc0, in order to exploit a greater D%antity o! labo%r B!or @e lea8e aside ded%ctions !rom @ages or t e depression o! @ages belo@ t eir normal le8elC, or, i! t e intensity and, conseD%ently, t e prod%cti8ity o! labo%r, increase and, generally, more relati8e s%rpl%s-8al%e is prod%ced, t e magnit%de o! t e circ%lating portion o! constant capital increases in s%c ind%strial branc es @ ic %se ra@ materials, since more ra@ material, etc0, is processed in a gi8en time# and, secondly, t e amo%nt o! mac inery set in motion by t e same n%mber o! labo%rers, t ere!ore also t is part o! constant capital, increases as @ell0 6ence, an increase in s%rpl%s-8al%e is accompanied by an increase in constant capital, and t e gro@ing exploitation o! labo%r by greater o%tlays o! t e means o! prod%ction t ro%g @ ic labo%r is exploited, i0e0, by a greater in8estment o! capital0 5 ere!ore, t e rate o! pro!it is t ereby red%ced on t e one and @ ile it increases on t e ot er0 M%ite a n%mber o! c%rrent expenses remain almost or entirely t e same @ et er t e @orking-day is longer or s orter0 5 e cost o! s%per8ision is less !or +== @orking-men d%ring 18 @orking- o%rs t an !or >+= @orking-men d%ring 1< @orking- o%rs0 K5 e expense o! @orking a !actory 1= o%rs almost eD%als t at o! @orking it 1<0L B)eports o! &nsp0 o! Fact0, 3ctober 1828, p0 3>0C $tate and m%nicipal taxes, !ire ins%rance, @ages o! 8ario%s permanent employees, depreciation o! mac inery, and 8ario%s ot er expenses o! a !actory, remain %nc anged @ et er t e @orking-time is long or s ort0 5o t e extent to @ ic prod%ction decreases, t ese expenses rise as compared to t e pro!it0 B)eports o! &nsp0 o! Fact0, 3ctober 186<, p0 1*0C 5 e period in @ ic t e 8al%e o! t e mac inery and o! t e ot er components o! !ixed capital is reprod%ced is determined in practice not by t eir mere li!etime, b%t by t e d%ration o! t e entire labo%r-process d%ring @ ic t ey ser8e and @ear o%t0 &! t e labo%rers m%st @ork 18 instead o! 1< o%rs, t is makes a di!!erence o! t ree days more per @eek, so t at one @eek is stretc ed into one and a al!, and t@o years into t ree0 &! t is o8ertime is %npaid t e labo%rers gi8e a@ay gratis a

+=

; apter 4

@eek o%t o! e8ery t ree and a year o%t o! e8ery t ree on top o! t e normal s%rpl%s-labo%r time0 &n t is @ay, t e reprod%ction o! t e 8al%e o! t e mac inery is speeded %p +=T and accomplis ed in W o! t e %s%ally reD%ired time0 5o a8oid %seless complications, @e proceed in t is analysis, and in t at o! price !l%ct%ations !or ra@ materials B; ap0 4&C, !rom t e ass%mption t at t e mass and rate o! s%rpl%s-8al%e are gi8en0 ?s already s o@n in t e presentation o! co-operation, di8ision o! labo%r and mac inery, t e economy o! prod%ction conditions /Englis edition: 4ol0 &, pp0 3<2-<+ I 0d01 !o%nd in large-scale prod%ction is essentially d%e to t e !act t at t ese conditions pre8ail as conditions o! social, or socially combined, labo%r, and t ere!ore as social conditions o! labo%r0 5 ey are commonly cons%med in t e process o! prod%ction by t e aggregate labo%rer, instead o! being cons%med in small !ractions by a mass o! labo%rers operating disconnectedly or, at best, directly co-operating on a small scale0 &n a large !actory @it one or t@o central motors t e cost o! t ese motors does not increase in t e same ratio as t eir orse-po@er and, ence, t eir possible sp ere o! acti8ity0 5 e cost o! t e transmission eD%ipment does not gro@ in t e same ratio as t e total n%mber o! @orking mac ines @ ic it sets in motion0 5 e !rame o! a mac ine does not become dearer in t e same ratio as t e mo%nting n%mber o! tools @ ic it employs as its organs, etc0 F%rt ermore, t e concentration o! means o! prod%ction yields a sa8ing on b%ildings o! 8ario%s kinds not only !or t e act%al @orks ops, b%t also !or storage, etc0 5 e same applies to expendit%res !or !%el, lig ting, etc0 3t er conditions o! prod%ction remain t e same, @ et er %sed by many or by !e@0 5 is total economy, arising as it does !rom t e concentration o! means o! prod%ction and t eir %se en masse, imperati8ely reD%ires, o@e8er, t e acc%m%lation and co-operation o! labo%rers, i0e0, a social combination o! labo%r0 6ence, it originates D%ite as m%c !rom t e social nat%re o! labo%r, H%st as s%rpl%s-8al%e originates !rom t e s%rpl%s-labo%r o! t e indi8id%al labo%rer considered singly0 E8en t e contin%al impro8ements, @ ic are ere possible and necessary, are d%e solely to t e social experience and obser8ation ens%red and made possible by prod%ction o! aggregate labo%r combined on a large scale0 5 e same is tr%e o! t e second big so%rce o! economy in t e conditions o! prod%ction0 We re!er to t e recon8ersion o! t e excretions o! prod%ction, t e so-called @aste, into ne@ elements o! prod%ction, eit er o! t e same, or o! some ot er line o! ind%stry# to t e processes by @ ic t is so-called excretion is t ro@n back into t e cycle o! prod%ction and, conseD%ently, cons%mption, @ et er prod%cti8e or indi8id%al0 5 is line o! sa8ings, @ ic @e s all later examine more closely, is like@ise t e res%lt o! large-scale social labo%r0 &t is t e attendant ab%ndance o! t is @aste @ ic renders it a8ailable again !or commerce and t ereby t%rns it into ne@ elements o! prod%ction0 &t is only as @aste o! combined prod%ction, t ere!ore, o! large-scale prod%ction, t at it becomes important to t e prod%ction process and remains a bearer o! exc ange-8al%e0 5 is @aste, aside !rom t e ser8ices @ ic it per!orms as ne@ element o! prod%ction, red%ces t e cost o! t e ra@ material to t e extent to @ ic it is again saleable, !or t is cost al@ays incl%des t e normal @aste, namely t e D%antity ordinarily lost in processing0 5 e red%ction o! t e cost o! t is portion o! constant capital increases pro tanto t e rate o! pro!it, ass%ming t e magnit%de o! t e 8ariable capital and t e rate o! s%rpl%s-8al%e to be gi8en0 &! t e s%rpl%s-8al%e is gi8en, t e rate o! pro!it can be increased only by red%cing t e 8al%e o! t e constant capital reD%ired !or commodity-prod%ction0 $o !ar as constant capital enters into t e prod%ction o! commodities, it is not its exc ange-8al%e, b%t its %se-8al%e alone, @ ic matters0 5 e D%antity o! labo%r @ ic !lax can absorb in a spinnery does not depend on its 8al%e, b%t on its D%antity, ass%ming t e prod%cti8ity o! labo%r, i0e0, t e le8el o! tec nical de8elopment, to be gi8en0 &n like manner t e assistance rendered by a mac ine to, say, t ree labo%rers does not depend on its 8al%e, b%t on its %se-8al%e as a mac ine0 3n one le8el o! tec nical de8elopment a bad mac ine may be expensi8e and on anot er a good mac ine may be c eap0

+1

; apter 4

5 e increased pro!it recei8ed by a capitalist t ro%g t e c eapening o!, say, cotton and spinning mac inery, is t e res%lt o! ig er labo%r prod%cti8ity# not in t e spinnery, to be s%re, b%t in cotton c%lti8ation and constr%ction o! mac inery0 &t reD%ires smaller o%tlays o! t e conditions o! labo%r to incorporate a gi8en D%antity o! labo%r, and ence to extract a gi8en D%antity o! s%rpl%s-labo%r0 5 e costs reD%ired to appropriate a certain D%antity o! s%rpl%s-labo%r diminis 0 We a8e already mentioned sa8ings yielded in t e prod%ction process t ro%g co-operati8e %se o! means o! prod%ction by t e aggregate, or socially combined, labo%r0 3t er sa8ings o! constant capital arising !rom t e s ortening o! t e time o! circ%lation in @ ic t e de8elopment o! means o! comm%nication is a dominant material !actor @ill be disc%ssed later0 ?t t is point @e s all deal @it t e sa8ings yielded by contin%o%s impro8ements o! mac inery, namely 1C o! its material, e0g0, t e s%bstit%tion o! iron !or @ood# <C t e c eapening o! mac inery d%e to t e general impro8ement o! mac ine-b%ilding# so t at, alt o%g t e 8al%e o! t e !ixed portion o! constant capital increases contin%ally @it t e de8elopment o! labo%r on a large scale, it does not increase at t e same rate<# 3C special impro8ements enabling existing mac inery to @ork more c eaply and e!!ecti8ely# !or instance, impro8ements o! steam-boilers, etc0, @ ic @ill be disc%ssed later on in greater detail# 2C red%ction o! @aste t ro%g better mac inery0 W ate8er red%ces t e @ear o! mac inery, and o! !ixed capital in general, !or any gi8en period o! prod%ction, c eapens not only t e indi8id%al commodity, in 8ie@ o! t e !act t at in its price e8ery indi8id%al commodity reprod%ces its aliD%ot s are o! t is depreciation, b%t red%ces also t e aliD%ot portion o! t e in8ested capital !or t is period0 )epair @ork, etc0, to t e extent t at it becomes necessary, is added to t e original cost o! t e mac inery0 ? red%ction in repair costs, d%e to greater d%rability o! t e mac inery, lo@ers pro tanto t e price o! t is mac inery0 &t may again be said o! all t ese sa8ings t at t ey are largely possible only !or combined labo%r, and are o!ten not realised %ntil prod%ction is carried !or@ard on a still larger scale, so t at t ey reD%ire an e8en greater combination o! labo%r in t e immediate process o! prod%ction0 6o@e8er, on t e ot er and t e de8elopment o! t e prod%cti8e po@er o! labo%r in any one line o! prod%ction, e0g0, t e prod%ction o! iron, coal, mac inery, in arc itect%re, etc0, @ ic may again be partly connected @it progress in t e !ield o! intellect%al prod%ction, notably nat%ral science and its practical application, appears to be t e premise !or a red%ction o! t e 8al%e, and conseD%ently o! t e cost, o! means o! prod%ction in other lines o! ind%stry, e0g0, t e textile ind%stry, or agric%lt%re0 5 is is sel!-e8ident, since a commodity @ ic is t e prod%ct o! a certain branc o! ind%stry enters anot er as a means o! prod%ction0 &ts greater or lesser price depends on t e prod%cti8ity o! labo%r in t e line o! prod%ction !rom @ ic it iss%es as a prod%ct, and is at t e same time a !actor t at not only c eapens t e commodities into @ ose prod%ction it goes as a means o! prod%ction, b%t also red%ces t e 8al%e o! t e constant capital @ ose element it ere becomes, and t ereby one t at increases t e rate o! pro!it0 5 e c aracteristic !eat%re o! t is kind o! sa8ing o! constant capital arising !rom t e progressi8e de8elopment o! ind%stry is t at t e rise in t e rate o! pro!it in one line o! ind%stry depends on t e de8elopment o! t e prod%cti8e po@er o! labo%r in another0 W ate8er !alls to t e capitalist"s ad8antage in t is case is once more a gain prod%ced by social labo%r, i! not a prod%ct o! t e labo%rers e imsel! exploits0 $%c a de8elopment o! prod%cti8e po@er is again traceable in t e !inal analysis to t e social nat%re o! t e labo%r engaged in prod%ction# to t e di8ision o! labo%r in society# and to t e de8elopment o! intellect%al labo%r, especially in t e nat%ral sciences0 W at t e capitalist t %s %tilises are t e ad8antages o! t e entire system o! t e social di8ision o! labo%r0 &t is t e de8elopment o! t e prod%cti8e po@er o! labo%r in its exterior department, in t at department @ ic s%pplies it @it means o! prod%ction, @ ereby t e 8al%e o! t e constant capital employed by t e capitalist is relati8ely lo@ered and conseD%ently t e rate o! pro!it is raised0 ?not er rise in t e rate o! pro!it is prod%ced, not by sa8ings in t e labo%r creating t e constant capital, b%t by sa8ings in t e application o! t is capital itsel!0 3n t e one and, t e concentration

+<

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o! labo%rers, and t eir large-scale co-operation, sa8es constant capital0 5 e same b%ildings, and eating and lig ting appliances, etc0, cost relati8ely less !or t e large-scale t an !or small-scale prod%ction0 5 e same is tr%e o! po@er and @orking mac inery0 ?lt o%g t eir absol%te 8al%e increases, it !alls in comparison to t e increasing extension o! prod%ction and t e magnit%de o! t e 8ariable capital, or t e D%antity o! labo%r-po@er set in motion0 5 e economy realised by a certain capital @it in its o@n line o! prod%ction is !irst and !oremost an economy in labo%r, i0 e0, a red%ction o! t e paid labo%r o! its o@n labo%rers0 5 e pre8io%sly mentioned economy, on t e ot er and, is disting%is ed !rom t is one by t e !act t at it accomplis es t e greatest possible appropriation o! ot er people"s %npaid labo%r in t e most economical @ay, i0 e0, @it as little expense as t e gi8en scale o! prod%ction @ill permit0 &nasm%c as t is economy does not rest @it t e pre8io%sly mentioned exploitation o! t e prod%cti8ity o! t e social labo%r employed in t e prod%ction o! constant capital, b%t @it t e economy in t e constant capital itsel!, it springs eit er directly !rom t e co-operation and social !orm o! labo%r @it in a certain branc o! prod%ction, or !rom t e prod%ction o! mac inery, etc0, on a scale in @ ic its 8al%e does not gro@ at t e same rate as its %se-8al%e0 5@o points m%st be borne in mind ere: &t t e 8al%e o! c R Eero, t en p" R s", and t e rate o! pro!it @o%ld be at its maxim%m0 $econd, o@e8er, t e most important t ing !or t e direct exploitation o! labo%r itsel! is not t e 8al%e o! t e employed means o! exploitation, be t ey !ixed capital, ra@ materials or a%xiliary s%bstances0 &n so !ar as t ey ser8e as means o! absorbing labo%r, as media in or by @ ic labo%r and, ence, s%rpl%s-labo%r are materialised, t e exc ange-8al%e o! mac inery, b%ildings, ra@ materials, etc0, is D%ite immaterial0 W at is %ltimately essential is, on t e one and, t e D%antity o! t em tec nically reD%ired !or combination @it a certain D%antity o! li8ing labo%r, and, on t e ot er, t eir s%itability, i0e0, not only good mac inery, b%t also good ra@ and a%xiliary materials0 5 e rate o! pro!it depends partly on t e good D%ality o! t e ra@ material0 :ood material prod%ces less @aste0 'ess ra@ materials are t en needed to absorb t e same D%antity o! labo%r0 F%rt ermore, t e resistance to be o8ercome by t e @orking mac ine is also less0 5 is partly a!!ects e8en t e s%rpl%s-8al%e and t e rate o! s%rpl%s-8al%e0 5 e labo%rer needs more time @ en %sing bad ra@ materials to process t e same D%antity0 ?ss%ming @ages remain t e same, t is ca%ses a red%ction in s%rpl%s-labo%r0 5 is also s%bstantially a!!ects t e reprod%ction and acc%m%lation o! capital, @ ic depend more on t e prod%cti8ity t an on t e amo%nt o! labo%r employed, as s o@n in Aook & B$0 6<>N61*!!0C /Englis edition: p0 6=30 I 0d010 5 e capitalist"s !anatical insistence on economy in means o! prod%ction is t ere!ore D%ite %nderstandable0 5 at not ing is lost or @asted and t e means o! prod%ction are cons%med only in t e manner reD%ired by prod%ction itsel!, depends partly on t e skill and intelligence o! t e labo%rers and partly on t e discipline en!orced by t e capitalist !or t e combined labo%r0 5 is discipline @ill become s%per!l%o%s %nder a social system in @ ic t e labo%rers @ork !or t eir o@n acco%nt, as it as already become practically s%per!l%o%s in piece-@ork0 5 is !anatical insistence comes to t e s%r!ace also con8ersely in t e ad%lteration o! t e elements o! prod%ction, @ ic is one o! t e principal means o! lo@ering t e relation o! t e 8al%e o! t e constant capital to t e 8ariable capital, and t %s o! raising t e rate o! pro!it0 W ereby t e sale o! t ese elements o! prod%ction abo8e t eir 8al%e, so !ar as t is reappears in t e prod%ct, acD%ires a marked element o! c eating0 5 is practice plays an essential part partic%larly in :erman ind%stry, @ ose maxim is: ,eople @ill s%rely appreciate i! @e send t em good samples at !irst, and t en in!erior goods a!ter@ard0 6o@e8er, as t ese matters belong to t e sp ere o! competition t ey do not concern %s ere0 &t s o%ld be noted t at t is raising o! t e rate o! pro!it by means o! lo@ering t e 8al%e o! t e constant capital, i0 e0, by red%cing its expensi8eness, does not in any @ay depend on @ et er t e branc o! ind%stry in @ ic it takes place prod%ces l%x%ries, or necessities !or t e cons%mption o! labo%rers, or means o! prod%ction generally0 5 is last circ%mstance @o%ld only be o! material importance i! it @ere a D%estion o! t e rate o! s%rpl%s-8al%e, @ ic depends essentially on t e

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8al%e o! labo%r-po@er, i0 e0, on t e 8al%e o! t e c%stomary necessities o! t e labo%rer0 A%t in t e present case t e s%rpl%s-8al%e and t e rate o! s%rpl%s-8al%e a8e been ass%med as gi8en0 5 e relation o! s%rpl%s-8al%e to total capital I and t is determines t e rate o! pro!it I depends %nder t ese circ%mstances excl%si8ely on t e 8al%e o! t e constant capital, and in no @ay on t e %se8al%e o! t e elements o! @ ic it is composed0 ? relati8e c eapening o! t e means o! prod%ction does not, o! co%rse, excl%de t e possible increase o! t eir absol%te aggregate 8al%e, !or t e absol%te 8ol%me in @ ic t ey are employed gro@s tremendo%sly @it t e de8elopment o! t e prod%cti8e po@er o! labo%r and t e attendant gro@t o! t e le8el o! prod%ction0 Economy in t e %se o! constant capital, !rom @ ate8er angle it may be 8ie@ed, is, in part, t e excl%si8e res%lt o! t e !act t at t e means o! prod%ction !%nction and are cons%med as Hoint means o! prod%ction o! t e combined labo%rer, so t at t e res%lting sa8ing appears as a prod%ct o! t e social nat%re o! directly prod%cti8e labo%r# in part, o@e8er, it is t e res%lt o! de8eloping prod%cti8ity o! labo%r in sp eres @ ic s%pply capital @it its means o! prod%ction, so t at i! @e 8ie@ t e total labo%r in relation to total capital, and not simply t e labo%rers employed by capitalist J in relation to capitalist ., t is economy presents itsel! once more as a prod%ct o! t e de8elopment o! t e prod%cti8e !orces o! social labo%r, @it t e only di!!erence t at capitalist J enHoys t e ad8antage not only o! t e prod%cti8ity o! labo%r in is o@n establis ment, b%t also o! t at in ot er establis ments0 .et t e capitalist 8ie@s economy o! is constant capital as a condition @ olly independent o!, and entirely alien to, is labo%rers0 6e is al@ays @ell a@are, o@e8er, t at t e labo%rer as somet ing to do @it t e employer b%ying m%c or little labo%r @it t e same amo%nt o! money B!or t is is o@ t e transaction bet@een t e capitalist and labo%rer appears in is mindC0 5 is economy in t e application o! t e means o! prod%ction, t is met od o! obtaining a certain res%lt @it a minim%m o%tlay appears more t an any ot er inner po@er o! labo%r as an in erent po@er o! capital and a met od pec%liar and c aracteristic o! t e capitalist mode o! prod%ction0 5 is conception is so m%c t e less s%rprising since it appears to accord @it !act, and since t e relations ip o! capital act%ally conceals t e inner connection be ind t e %tter indi!!erence, isolation, and alienation in @ ic t ey place t e labo%rer 8is-O-8is t e means incorporating is labo%r0 'irst, t e means o! prod%ction t at make %p t e constant capital represent only t e money belonging to t e capitalist BH%st as t e body o! t e )oman debtor represented t e money o! is creditor, according to 'ing%et / 4h7orie des loi civiles, ou principes fondamentau de la soci7t7 , tome &&, 'ondres, 1>6>, li8re 4, c apitre JJ0 I 0d01C and are related to im alone, @ ile t e labo%rer, @ o comes in contact @it t em only in t e direct process o! prod%ction, deals @it t em as %se-8al%es o! prod%ction only as means o! labo%r and materials o! prod%ction0 &ncrease or decrease o! t eir 8al%e, t ere!ore, as as little bearing on is relations to t e capitalist as t e circ%mstance @ et er e may be @orking @it copper or iron0 For t at matter, t e capitalist likes to 8ie@ t is point di!!erently, as @e s all later indicate, @ ene8er t e means o! prod%ction gain in 8al%e and t ereby red%ce is rate o! pro!it0 Second, in so !ar as t ese means o! prod%ction in t e capitalist prod%ction process are at t e same time means o! exploiting labo%r, t e labo%rer is no more concerned @it t eir relati8e dearness or c eapness t an a orse is concerned @it t e dearness or c eapness o! its bit and bridle0 'inally, @e a8e earlier /Englis edition: 4ol0 1, p0 3<+0 I 0d01 seen t at, in !act, t e labo%rer looks at t e social nat%re o! is labo%r, at its combination @it t e labo%r o! ot ers !or a common p%rpose, as e @o%ld at an alien po@er# t e condition o! realising t is combination is alien property, @ ose dissipation @o%ld be totally indi!!erent to im i! e @ere not compelled to economise @it it0 5 e sit%ation is D%ite di!!erent in !actories o@ned by t e labo%rers t emsel8es, as in )oc dale, !or instance0

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&t scarcely needs to be mentioned, t en, t at as !ar as concerns t e prod%cti8ity o! labo%r in one branc o! ind%stry as a le8er !or c eapening and impro8ing t e means o! prod%ction in anot er, and t ereby raising t e rate o! pro!it, t e general interconnection o! social labo%r a!!ects t e labo%rers as a matter alien to t em, a matter t at act%ally concerns t e capitalist alone, since it is e @ o b%ys and appropriates t ese means o! prod%ction0 5 e !act t at e b%ys t e prod%ct o! labo%rers in anot er branc o! ind%stry @it t e prod%ct o! labo%rers in is o@n, and t at e t ere!ore disposes o! t e prod%ct o! t e labo%rers o! anot er capitalist only by grat%ito%sly appropriating t at o! is o@n, is a de8elopment t at is !ort%nately concealed by t e process o! circ%lation, etc0 Moreo8er, since prod%ction on a large scale de8elops !or t e !irst time in its capitalist !orm, t e t irst !or pro!its on t e one and, and competition on t e ot er, @ ic compels t e c eapest possible prod%ction o! commodities, make t is economy in t e employment o! constant capital appear as somet ing pec%liar to t e capitalist mode o! prod%ction and t ere!ore as a !%nction o! t e capitalist0 P%st as t e capitalist mode o! prod%ction promotes t e de8elopment o! t e prod%cti8e po@ers o! social labo%r, on t e one and, so does it @ ip on to economy in t e employment o! constant capital on t e ot er0 6o@e8er, it is not only t e alienation and indi!!erence t at arise bet@een t e labo%rer, t e bearer o! li8ing labo%r, and t e economical, i0e0, rational and t ri!ty, %se o! t e material conditions o! is labo%r0 &n line @it its contradictory and antagonistic nat%re, t e capitalist mode o! prod%ction proceeds to co%nt t e prodigio%s dissipation o! t e labo%rer"s li!e and ealt , and t e lo@ering o! is li8ing conditions, as an economy in t e %se o! constant capital and t ereby as a means o! raising t e rate o! pro!it0 $ince t e labo%rer passes t e greater portion o! is li!e in t e process o! prod%ction, t e conditions o! t e prod%ction process are largely t e conditions o! is acti8e li8ing process, or is li8ing conditions, and economy in t ese li8ing conditions is a met od o! raising t e rate o! pro!it# H%st as @e sa@ earlier /Englis edition: 4ol0 &, pp0 <31-3=<0 I 0d01 t at o8er@ork, t e trans!ormation o! t e labo%rer into a @ork orse, is a means o! increasing capital, or speeding %p t e prod%ction o! s%rpl%s-8al%e0 $%c economy extends to o8ercro@ding close and %nsanitary premises @it labo%rers, or, as capitalists p%t it, to space sa8ing# to cro@ding dangero%s mac inery into close D%arters @it o%t %sing sa!ety de8ices# to neglecting sa!ety r%les in prod%ction processes pernicio%s to ealt , or, as in mining, bo%nd %p @it danger, etc0 -ot to mention t e absence o! all pro8isions to render t e prod%ction process %man, agreeable, or at least bearable0 From t e capitalist point o! 8ie@ t is @o%ld be D%ite a %seless and senseless @aste0 5 e capitalist mode o! prod%ction is generally, despite all its niggardliness, altoget er too prodigal @it its %man material, H%st as, con8ersely, t anks to its met od o! distrib%tion o! prod%cts t ro%g commerce and manner o! competition, it is 8ery prodigal @it its material means, and loses !or society @ at it gains !or t e indi8id%al capitalist0 P%st as capital as t e tendency to red%ce t e direct employment o! li8ing labo%r to no more t an t e necessary labo%r, and al@ays to c%t do@n t e labo%r reD%ired to prod%ce a commodity by exploiting t e social prod%cti8eness o! labo%r and t %s to sa8e a maxim%m o! directly applied li8ing labo%r, so it as also t e tendency to employ t is labo%r, red%ced to a minim%m, %nder t e most economical conditions, i0e0, to red%ce to its minim%m t e 8al%e o! t e employed constant capital0 &! it is t e necessary labo%r-time @ ic determines t e 8al%e o! commodities, instead o! all t e labo%r-time contained in t em, so it is t e capital @ ic realises t is determination and, at t e same time, contin%ally red%ces t e labo%r-time socially necessary to prod%ce a gi8en commodity0 5 e price o! t e commodity is t ereby lo@ered to its minim%m since e8ery portion o! t e labo%r reD%ired !or its prod%ction is red%ced to its minim%m0

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We m%st make a distinction in economy as regards %se o! constant capital0 &! t e D%antity, and conseD%ently t e s%m o! t e 8al%e o! employed capital, increases, t is is primarily only a concentration o! more capital in a single and0 .et it is precisely t is greater D%antity applied by a single so%rce I attended, as a r%le, by an absol%tely greater b%t relati8ely smaller amo%nt o! employed labo%r I @ ic permits economy o! constant capital0 5o take an indi8id%al capitalist, t e 8ol%me o! t e necessary in8estment o! capital, especially o! its !ixed portion, increases0 A%t its 8al%e decreases relati8e to t e mass o! @orked-%p materials and exploited labo%r0 5 is is no@ to be brie!ly ill%strated by a !e@ examples0 We s all begin at t e end I t e economy in t e conditions o! prod%ction, in so !ar as t ese also constit%te t e li8ing conditions o! t e labo%rer0

II. Savings In Labour Conditions At The !pense "f The Labourers.

Coal mines. $eglect of indisputable outlays.
K(nder t e competition @ ic exists among t e coalo@ners and coal-proprietors 000 no more o%tlay is inc%rred t an is s%!!icient to o8ercome t e most ob8io%s p ysical di!!ic%lties# and %nder t at @ ic pre8ails among t e labo%ring colliers, @ o are ordinarily more n%mero%s t an t e @ork to be done reD%ires, a large amo%nt o! danger and expos%re to t e most noxio%s in!l%ences @ill gladly be enco%ntered !or @ages a little in ad8ance o! t e agric%lt%ral pop%lation ro%nd t em, in an occ%pation, in @ ic t ey can moreo8er make a pro!itable %se o! t eir c ildren0 5 is do%ble competition is D%ite s%!!icient 000 to ca%se a large proportion o! t e pits to be @orked @it t e most imper!ect drainage and 8entilation# ill-constr%cted s a!ts, bad gearing, o!ten @it

incompetent engineers, and ill-constr%cted and illprepared bays and road@ays# ca%sing a destr%ction o! li!e, and limb, and ealt , t e statistics o! @ ic @o%ld present an appalling pict%re0L BFirst )eport on ; ildren"s Employment in Mines and ;ollieries, etc0, ?pril <1, 18<*, p0 1=<0C ?bo%t 186=, a @eekly a8erage o! 1+ men lost t eir li8es in t e Englis collieries0 ?ccording to t e report on ;oal Mines ?ccidents BFebr%ary 6, 186<C, a total o! 8,266 @ere killed in t e ten years 18+<-610 A%t t e report admits t at t is n%mber is !ar too lo@, beca%se in t e !irst !e@

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years, @ en t e inspectors ad H%st been installed and t eir districts @ere !ar too large, a great many accidents and deat s @ere not reported0 5 e 8ery !act t at t e n%mber o! accidents, t o%g still 8ery ig , as decreased markedly since t e inspection system @as establis ed, and t is in spite o! t e limited po@ers and ins%!!icient n%mbers o! t e inspectors, demonstrates t e nat%ral tendency o! capitalist exploitation0I 5 ese %man sacri!ices are mostly d%e to t e inordinate a8arice o! t e mine o@ners0 4ery o!ten t ey ad only one s a!t s%nk, so t at apart !rom t e lack o! e!!ecti8e 8entilation t ere @as no escape @ere t is s a!t to become obstr%cted0 ;apitalist prod%ction, @ en considered in isolation !rom t e process o! circ%lation and t e excesses o! competition, is 8ery economical @it t e materialised labo%r incorporated in commodities0 .et, more t an any ot er mode o! prod%ction, it sD%anders %man li8es, or li8inglabo%r, and not only blood and !les , b%t also ner8e and brain0 &ndeed, it is only by dint o! t e most extra8agant @aste o! indi8id%al de8elopment t at t e de8elopment o! t e %man race is at all sa!eg%arded and maintained in t e epoc o! istory immediately preceding t e conscio%s reorganisation o! society0 $ince all o! t e economising ere disc%ssed arises !rom t e social nat%re o! labo%r, it is indeed H%st t is directly social nat%re o! labo%r @ ic ca%ses t e @aste o! li!e and ealt 0 5 e !ollo@ing D%estion s%ggested by !actory inspector )0 Aaker is c aracteristic in t is respect: K5 e @ ole D%estion is one !or serio%s consideration, and in @ at @ay this sacrifice of infant life occasioned by congregational labour can be best a8ertedQL B)eports o! &nsp0 o! Fact0, 3ctober 1863, p0 1+>0C 'actories0 (nder t is eading t ere is co8ered t e disregard !or sa!ety meas%res to ens%re t e sec%rity, com!ort, and ealt o! labo%rers also in t e act%al !actories0 &t is to blame !or a large portion o! t e cas%alty lists containing t e @o%nded and killed ind%strial @orkers Bc!0 t e ann%al !actory reportsC0 $imilarly, lack o! space, 8entilation, etc0 ?s !ar back as 3ctober 18++, 'eonard 6orner complained abo%t t e resistance o! 8ery many man%!act%rers to t e legal reD%irements concerning sa!ety de8ices on oriEontal s a!ts, alt o%g t e danger @as contin%ally emp asised by accidents, many o! t em !atal, and alt o%g t ese sa!ety de8ices did not cost m%c and did not inter!ere @it prod%ction0 B)eports o! &nsp0 o! Fact0, 3ctober 18++, p0 60C &n t eir resistance against t ese and ot er legal reD%irements t e man%!act%rers @ere openly seconded by t e %npaid H%stices o! t e peace, @ o @ere t emsel8es mostly man%!act%rers or !riends o! man%!act%rers, and anded do@n t eir decisions accordingly0 W at sort o! 8erdicts t ese gentlemen anded do@n @as re8ealed by $%perior P%dge ;ampbell, @ o said @it re!erence to one o! t em, against @ ic an appeal ad been made to im: K&t is not an interpretation o! t e ?ct o! ,arliament, it is a repeal o! t e ?ct o! ,arliamentL Bloc. cit0, p0 11C0 6orner states in t e same report t at in many !actories labo%rers are not @arned @ en mac inery is abo%t to be started %p0 $ince t ere is al@ays somet ing to be done abo%t mac inery e8en @ en it is not operating, !ingers and ands are al@ays occ%pied @it it, and accidents appen contin%ally d%e to t e mere omission o! a @arning signal B loc. cit0, p0 22C0 5 e man%!act%rers ad a trades-%nion at t e time to oppose !actory legislation, t e so-called -ational ?ssociation !or t e ?mendment o! t e Factory 'a@s in Manc ester, @ ic in Marc 18++ collected more t an V+=,=== by assessing < s illings per orse-po@er, to pay !or t e co%rt proceedings against its members started by !actory inspectors, and to cond%ct t e cases in t e name o! t e %nion0 &t @as a matter o! pro8ing t at killing @as no m%rder /?ll%sion to t e pamp let "Killing no M%rder" @ ic

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appeared in England in 16+>0 &ts a%t or @as t e le8eller Ed@ard $exby0 I 0d01 @ en it occ%rred !or t e sake o! pro!it0 ? !actory inspector !or $cotland, $ir Po n Kincaid, tells abo%t a certain !irm in :lasgo@ @ ic %sed t e iron scrap at its !actory to make protecti8e s ields !or all its mac inery, t e cost amo%nting to V* 1s0 Poining t e man%!act%rers" %nion @o%ld a8e cost it an assessment o! V11 !or its 11= orse-po@er, @ ic @as more t an t e cost o! all its protecti8e appliances0 A%t t e -ational ?ssociation ad been organised in 18+2 !or t e express p%rpose o! opposing t e la@ @ ic prescribed s%c protection0 5 e man%!act%rers ad not paid t e least eed to it d%ring t e @ ole period !rom 1822 to 18+20 W en t e !actory inspectors, at instr%ctions !rom ,almerston, t en in!ormed t e man%!act%rers t at t e la@ @o%ld be en!orced in earnest, t e man%!act%rers instantly !o%nded t eir association, many o! @ ose most prominent members @ere t emsel8es H%stices o! t e peace and in t is capacity @ere s%pposed to en!orce t e la@0 W en in ?pril 18++ t e ne@ Minister o! t e &nterior, $ir :eorge :rey, o!!ered a compromise %nder @ ic t e go8ernment @o%ld be content @it practically nominal sa!ety appliances t e ?ssociation indignantly reHected e8en t is0 &n 8ario%s la@s%its t e !amo%s engineer William Fairbairn t re@ t e @eig t o! is rep%tation be ind t e principle o! economy and in de!ence o! t e !reedom o! capital @ ic ad been 8iolated0 5 e ead o! !actory inspection, 'eonard 6orner, @as persec%ted and maligned by t e man%!act%rers in e8ery concei8able manner0 A%t t e man%!act%rers did not rest %ntil t ey obtained a @rit o! t e ;o%rt o! M%een"s Aenc , according to @ ic t e 'a@ o! 1822 did not prescribe protecti8e de8ices !or oriEontal s a!ts installed more t an se8en !eet abo8e t e gro%nd and, !inally, in 18+6 t ey s%cceeded in sec%ring an ?ct o! ,arliament entirely satis!actory to t em in t e circ%mstances, t ro%g t e ser8ices o! t e bigot Wilson ,atten, one o! t ose pio%s so%ls @ ose display o! religion is al@ays ready to do t e dirty @ork !or t e knig ts o! t e money-bag0 5 is ?ct practically depri8ed t e labo%rers o! all special protection and re!erred t em to t e common co%rts !or compensation in t e e8ent o! ind%strial accidents Bs eer mockery in 8ie@ o! t e excessi8e cost o! Englis la@s%itsC, @ ile it made it almost impossible !or t e man%!act%rer to lose t e la@s%it by pro8iding in a !inely@orded cla%se !or expert testimony0 5 e res%lt @as a rapid increase o! accidents0 &n t e six mont s !rom May to 3ctober 18+8, &nspector Aaker reported t at accidents increased by <1T compared @it t e preceding al!-year0 &n is opinion 360>T o! t ese accidents mig t a8e been a8oided0 &t is tr%e t at t e n%mber o! accidents in 18+8 and 18+* @as considerably belo@ t at o! 182+ and 18260 &t @as act%ally <*T less alt o%g t e n%mber o! labo%rers in t e ind%stries s%bHect to inspection ad increased <=T0 A%t @ at @as t e reason !or t isQ &n so !ar as t is iss%e as been settled no@ B186+C, it @as mainly accomplis ed t ro%g t e introd%ction o! ne@ mac inery already pro8ided @it sa!ety de8ices to @ ic t e man%!act%rer did not obHect beca%se t ey cost im no extra expense0 F%rt ermore, a !e@ labo%rers s%cceeded in sec%ring ea8y damages !or t eir lost arms, and ad t is H%dgement %p eld e8en by t e ig est co%rts0 B)eports o! &nsp0 o! Fact0, ?pril 3=, 1861, p0 31, ditto ?pril 186<, p0 1>0C $o m%c !or economy in de8ices protecting t e li!e and limbs o! labo%rers Bamong @ om many c ildrenC against t e dangers o! andling and operating mac inery0 "or- in enclosed places generally 0 &t is @ell kno@n to @ at extent economy o! space, and t %s o! b%ildings, cro@ds labo%rers into close D%arters0 &n addition, t ere is also economy in means o! 8entilation0 ;o%pled @it t e long @orking- o%rs, t e t@o ca%se a large increase in diseases o! t e respiratory organs, and an attendant increase in t e deat -rate0 5 e !ollo@ing ill%strations a8e been taken !rom )eports on ,%blic 6ealt , 6t report, 18630 5 is report @as compiled by 7r0 Po n $imon, @ell kno@n !rom o%r Aook &0 P%st as combination and co-operation o! labo%r permits large-scale employment o! mac inery, concentration o! means o! prod%ction, and economy in t eir %se, it is t is 8ery @orking toget er en masse in enclosed places and %nder conditions rat er determined by ease o! man%!act%re t an by ealt reD%irements I it is t is mass concentration in one and t e same @orks op t at acts, on t e one and, as a so%rce o! greater pro!its !or t e capitalist and, on t e ot er, %nless co%nteracted

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by a red%ced n%mber o! o%rs and special preca%tions, as t e ca%se o! t e sD%andering o! t e li8es and ealt o! t e labo%rers0 7r0 $imon !orm%lates t e !ollo@ing r%le and backs it %p @it ab%ndant statistics: K&n proportion as t e people o! a district are attracted to any collecti8e indoor occ%pation, in s%c proportion, ot er t ings being eD%al, t e district deat -rate by l%ng diseases @ill be increasedL Bp0 <3C0 5 e ca%se is bad 8entilation0 K?nd probably in all England t ere is no exception to t e r%le, t at, in e8ery district @ ic as a large indoor ind%stry, t e increased mortality o! t e @orkpeople is s%c as to colo%r t e deat -ret%rn o! t e @ ole district @it a marked excess o! l%ng diseaseL Bp0 <3C0 Mortality !ig%res !or ind%stries carried on in enclosed places, collected by t e Aoard o! 6ealt in 186= and 1861, indicate t at !or t e same n%mber o! men bet@een t e ages o! 1+ and ++, !or @ ic t e deat -rate !rom cons%mption and ot er p%lmonary diseases in Englis agric%lt%ral districts is 1==, t e deat -rate in ;o8entry is 163, in Alackb%rn and $kipton 16>, ;ongleton and Arad!ord 168, 'eicester 1>1, 'eek 18<, Maccles!ield 182, Aolton 1*=, -otting am 1*<, )oc dale 1*3, 7erby 1*8, $al!ord and ?s ton-%nder-'yne <=3, 'eeds <18, ,reston <<=, and Manc ester <63 Bp0 <2C0 5 e !ollo@ing table presents a still more striking ill%stration0 7istrict ; ie! ind%stry 7eat s !rom p%lmonary diseases bet@een t e ages o! 1+ and <+, per 1==,=== pop%lation Men Aerk ampstead $tra@ plaiting B@omenC <1* Women +>8 ++2 61> +>> 2=* 8+6 >*= 8*=

'eig ton A%EEard $tra@ plaiting B@omenC 3=* -e@port ,agnell 5o@cester .eo8il 'eek ;ongleton Maccles!ield 'ace B@omenC 'ace B@omenC man%!act%re 3=1 man%!act%re <3*

Man%!act%re o! glo8es <8= Bmainly @omenC $ilk ind%stry 23> Bpredominantly @omenC $ilk ind%stry +66 Bpredominantly @omenC $ilk ind%stry +*3

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Bpredominantly @omenC 6ealt y district co%ntry ?gric%lt%re 331 333

&t s o@s t e deat -rate !or p%lmonary diseases separately !or bot sexes bet@een t e ages o! 1+ and <+ comp%ted !or e8ery 1==,=== pop%lation0 &n t e districts selected only @omen are employed in ind%stries carried on in enclosed places, @ ile men @ork in all ot er possible lines0 &n t e silk districts, @ ere more men are employed in t e !actory, t eir mortality is also ig er0 5 e deat -rate !rom cons%mption, etc0, !or bot sexes, re8eals, as t e report says, Kt e atrocio%s sanitary circ%mstances %nder @ ic m%c o! o%r silk ind%stry is cond%ctedL0 ?nd it is in t is same silk ind%stry t at t e man%!act%rers, pleading exceptionally !a8o%rable and sanitary conditions in t eir establis ments, demanded by @ay o! an exception, and partially obtained, long @orking- o%rs !or c ildren %nder 13 years o! age BA%c &, Kap0 4&&&, 6, $0 <*6N<86C /Englis edition: ; 0 J, 6, p0 <*30 I 0d01 K,robably no ind%stry @ ic as yet been in8estigated 7r0 as a!!orded a @orse pict%re t an t at @ ic

$mit gi8es o! tailoring: I "$ ops 8ary m%c in t eir sanitary conditions, b%t almost %ni8ersally are o8ercro@ded and ill-8entilated, and in a ig degree %n!a8o%rable to ealt 0000 $%c rooms are necessarily @arm# b%t @ en t e gas is lit, as d%ring t e day-time on !oggy days, and at nig t d%ring t e @inter, t e eat increases to 8=_ and e8en to %p@ards o! *=_, ca%sing pro!%se perspiration, and condensation o! 8apo%r %pon t e panes o! glass, so t at it r%ns do@n in streams or drops !rom t e roo!, and t e operati8es are compelled to keep some @indo@s open, at @ ate8er risk to t emsel8es o! taking cold0" ?nd e gi8es t e !ollo@ing acco%nt o! @ at e !o%nd in 16 o! t e most important West End s ops0I "5 e largest c%bic space in t ese ill-8entilated rooms allo@ed to eac operati8e is <>= !eet, and t e least 1=+ !eet, and in t e @ ole a8erages only 1+6 !eet per man0 &n one room, @it a gallery r%nning ro%nd it, and lig ted only !rom t e roo!, !rom *< to %p@ards o! 1== men are employed, @ ere a large n%mber o! gaslig ts b%rn, and @ ere t e %rinals are in t e closest proximity, t e c%bic space

6=

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does not exceed 1+= !eet per man0 &n anot er room, @ ic can only be called a kennel in a yard, lig ted !rom t e roo!, and 8entilated by a small skylig t opening, !i8e to six men @ork in a space o! 11< c%bic !eet per man0" 000 5ailors, in t ose atrocio%s @orks ops @ ic 7r0 $mit describes, @ork generally !or abo%t 1< or 13 o%rs a day, and at some times t e @ork @ill be contin%ed !or 1+ or 16 o%rsL Bpp0 <+, <6, <8C -%mbers o! persons Aranc es o! ind%stry and 7eat -rate per 1==,=== bet@een employed locality t e ages o! <+-3+ *+8,<6+ <<,3=1 men and 1<,3>> @omen 13,8=3 5ype-setters printers, 'ondon and 8*2 1,>2> <,36> ?gric%lt%re, England and >23 Wales 5ailoring, 'ondon *+8 3+-2+ 8=+ 1,<6< 2+-++ 1,12+ <,=*3

Bp0 3=C0 &t m%st be noted, and as in !act been remarked by Po n $imon, c ie! o! t e Medical 7epartment and a%t or o! t e report, t at t e mortality-rate !or tailors, type-setters, and printers o! 'ondon bet@een t e ages o! <+ and 3+ @as cited lo@er t an t e real !ig%re, beca%se 'ondon employers in bot lines o! b%siness a8e a large n%mber o! yo%ng people Bprobably %p to 3= years o! ageC !rom t e co%ntry engaged as apprentices and Kimpro8ersL, i0e0, men getting additional training0 5 ese s@ell t e n%mber o! ands !or @ ic t e 'ondon ind%strial deat -rates are comp%ted0 A%t t ey do not proportionally contrib%te to t e n%mber o! deat s in 'ondon beca%se t eir stay t ere is only temporary0 &! t ey !all ill d%ring t is period, t ey ret%rn to t eir omes in t e co%ntry, @ ere t eir deat is registered i! t ey die0 5 is circ%mstance a!!ects t e earlier ages still more and renders t e 'ondon deat -rates !or t ese age gro%ps completely 8al%eless as indexes o! t e ill-e!!ects o! ind%stry on ealt Bp0 3=C0 5 e case o! t e type-setters is similar to t at o! t e tailors0 &n addition to lack o! 8entilation, to poisoned air, etc0, t ere is still nig t-@ork to be mentioned0 5 eir reg%lar @orking-time is 1< to 13 o%rs, sometimes 1+ to 160 K:reat eat and !o%lness @ ic begin @ en t e gasHets are lit0 000 &t not in!reD%ently appens t at !%mes !rom a !o%ndry, or !o%l odo%rs !rom mac inery or sinks, rise !rom t e lo@er room, and aggra8ate t e e8ils o! t e %pper one0 5 e eated air o! t e lo@er rooms al@ays tends to eat t e %pper by @arming t e

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!loor, and @ en t e rooms are lo@, and t e cons%mption o! gas great, t is is a serio%s e8il, and one only s%rpassed in t e case @ ere t e steamboilers are placed in t e lo@er room, and s%pply %n@is ed-!or eat to t e @ ole o%se0000 ?s a general expression, it may be stated t at %ni8ersally t e 8entilation is de!ecti8e, and D%ite ins%!!icient to remo8e t e eat and t e prod%cts o! t e comb%stion o! gas in t e e8ening and d%ring t e nig t, and t at in many o!!ices, and partic%larly in t ose made !rom d@elling- o%ses, t e condition is most deplorable0 000 ?nd in some o!!ices Bespecially t ose o! @eekly ne@spapersC t ere @ill be @ork I @ork too, in @ ic boys bet@een 1< and 16 years o! age take eD%al part o! or almost %ninterr%pted periods o! t@o days and a nig t at a time# I @ ile, in ot er printing-o!!ices @ ic lay t emsel8es o%t !or t e doing o! "%rgent" b%siness, $%nday gi8es no relaxation to t e @orkman, and is @orking-days become se8en instead o! six in e8ery @eekL Bpp0 <6, <8C0 5 e milliners and dress-makers a8e already attracted o%r attention in Aook & BKap0 4&&&, 3, $0 <2*N<21C /Englis edition: ; 0 J, 3, pp0 <+2-++0 I 0d01 in respect to o8er@ork0 5 eir @orks ops are described in o%r report by 7r0 3rd0 E8en i! better d%ring t e day, t ey become o8er eated, !o%l, and %n ealt y d%ring t e o%rs in @ ic gas is b%rned0 7r0 3rd !o%nd in 32 s ops o! t e better sort t at t e a8erage n%mber o! c%bic !eet per @orker @as as !ollo@s: K000 &n !o%r cases more t an +==, in !o%r ot er cases !rom 2== to +==, 000 in se8en ot ers !rom <== to <+=, in !o%r ot ers !rom 1+= to <==, and in nine ot ers only !rom 1== to 1+=0 5 e largest o! t ese allo@ances @o%ld b%t be scanty !or contin%o%s @ork, %nless t e space @ere t oro%g ly @ell 8entilated# and, except @it extraordinary 8entilation, its atmosp ere co%ld not be tolerably @ olesome d%ring gas-lig t0L ?nd ere is 7r0 3rd"s remark abo%t one o! t e minor @orks ops @ ic acco%nt o! a middleman: e 8isited, operated !or t e

K3ne room area in c%bical !eet, 1,<8=# persons present, 12# area to eac , in c%bical !eet, *10+0 5 e

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@omen ere @ere @eary-looking and sD%alid# t eir earnings @ere stated to be >s0 to 1+s0 a @eek, and t eir tea0 000 6o%rs 8 a0 m0 to 8 p0 m0 5 e small room into @ ic t ese 12 persons @ere cro@ded @as ill8entilated0 5 ere @ere t@o mo8able @indo@s and a !ire-place, b%t t e latter @as blocked %p and t ere @as no special 8entilation o! any kindL Bp0 <>C0 5 e same report states @it re!erence to t e o8er@ork o! milliners and dress-makers: K000 5 e o8er@ork o! t e yo%ng @omen in !as ionable dress-making establis ments does not, !or more t an abo%t !o%r mont s o! t e year, pre8ail in t at monstro%s degree @ ic as on many occasions excited momentary p%blic s%rprise and indignation# b%t !or t e indoor ands d%ring t ese mont s it @ill, as a r%le, be o! !%ll 12 o%rs a day, and @ill, @ en t ere is press%re, be, !or days toget er, o! 1> or e8en 18 o%rs0 ?t ot er times o! t e year t e @ork o! t e indoor ands ranges probably !rom 1= to 12 o%rs# and %ni!ormly t e o%rs !or o%tdoor ands are 1< or 130 For mantle-makers, collar-makers, s irt-makers, and 8ario%s ot er classes o! needle@orkers Bincl%ding persons @ o @ork at t e se@ing-mac ineC t e o%rs spent in t e common @orkroom are !e@er I generally not more t an 1= to 1< o%rs# b%t, says 7r0 3rd, t e reg%lar o%rs o! @ork are s%bHect to considerable extension in certain o%ses at certain times, by t e practice o! @orking extra o%rs !or extra pay, and in ot er o%ses by t e practice o! taking @ork a@ay !rom o%ses o! b%siness, to be done a!ter o%rs at ome, bot practices being, it may be added, o!ten comp%lsoryL Bp0 <8C0 Po n $imon remarks in a !ootnote to t is page: KMr0 )adcli!!e, 000 t e 6onorary $ecretary o! t e Epidemiological $ociety, 000 appening to a8e %n%s%al opport%nities !or D%estioning t e yo%ng

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@omen employed in !irst-class o%ses o! b%siness 000 as !o%nd t at in only one o%t o! t@enty girls examined @ o called t emsel8es "D%ite @ell" co%ld t e state o! ealt be prono%nced good# t e rest ex ibiting in 8ario%s degrees e8idences o! depressed p ysical po@er, ner8o%s ex a%stion, and n%mero%s !%nctional disorders t ere%pon dependent0 6e attrib%tes t ese conditions in t e !irst place to t e lengt o! t e o%rs o! @ork I t e minim%m o! @ ic e estimates at 1< o%rs a day o%t o! t e season# and secondarily to 000 cro@ding and bad 8entilation o! @orkrooms, gas8apo%rs, ins%!!iciency or bad D%ality o! !ood, and inattention to domestic com!ort0L 5 e concl%sion arri8ed at by t e c ie! o! t e Englis Aoard o! 6ealt is t at Kit is practically impossible !or @orkpeople to insist %pon t at @ ic in t eory is t eir !irst sanitary rig t I t e rig t t at @ ate8er @ork t eir employer assembles t em to do, s all, so !ar as depends %pon im, be, at is cost, di8ested o! all needlessly %n@ olesome circ%mstances# 000 @ ile @orkpeople are practically %nable to exact t at sanitary H%stice !or t emsel8es, t ey also Bnot@it standing t e pres%med intentions o! t e la@C cannot expect any e!!ect%al assistance !rom t e appointed administrators o! t e -%isances )emo8al ?ctsL Bp0 <*C0I K7o%btless t ere may be some small tec nical di!!ic%lty in de!ining t e exact line at @ ic employers s all become s%bHect to reg%lation0 A%t 000 in principle, t e sanitary claim is %ni8ersal0 ?nd in t e interest o! myriads o! labo%ring men and @omen, @ ose li8es are no@ needlessly a!!licted and s ortened by t e in!inite p ysical s%!!ering @ ic t eir mere employment engenders, & @o%ld 8ent%re to express my ope, t at %ni8ersally t e sanitary circ%mstances o! labo%r may, at least so !ar, be bro%g t @it in appropriate pro8isions o! la@,

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t at t e e!!ecti8e 8entilation o! all indoor @orkplaces may be ens%red, and t at in e8ery nat%rally insal%brio%s occ%pation t e speci!ic ealt endangering in!l%ence may as !ar as practicable be red%cedL Bp0 31C0

III. conom# In The Generation And Transmission "f Po$er% And In &uildings
&n is 3ctober 18+< report '0 6orner D%otes a letter o! t e !amo%s engineer Pames -asmyt o! ,atricro!t, t e in8entor o! t e steam- ammer, @ ic , among ot er t ings, contains t e !ollo@ing: K0005 e p%blic are little a@are o! t e 8ast increase in dri8ing po@er @ ic as been obtained by s%c c anges o! system and impro8ements Bo! steamenginesC as & all%de to0 5 e engine po@er o! t is district B'ancas ireC lay %nder t e inc%b%s o! timid and preH%diced traditions !or nearly !orty years, b%t no@ @e are appily emancipated0 7%ring t e last !i!teen years, b%t more especially in t e co%rse o! t e last !o%r years Bsince 1828C, some 8ery important c anges a8e taken place in t e system o! @orking condensing steam-engines0 000 5 e res%lt 000 as been to realise a m%c greater amo%nt o! d%ty or @ork per!ormed by t e identical engines, and t at again at a 8ery considerable red%ction o! t e expendit%re o! !%el0 000 For a great many years a!ter t e introd%ction o! steam-po@er into t e mills and man%!actories o! t e abo8e-named districts, t e 8elocity o! @ ic , it @as considered proper to @ork condensing steam-engines @as abo%t <<= !eet per min%te o! t e piston# t at is to say, an engine @it a +-!eet stroke @as restricted by "r%le" to make << re8ol%tions o! t e cranks a!t per min%te0 Aeyond t is speed it @as not considered pr%dent or desirable to @ork t e engine# and as all t e mill gearing 000 @ere made s%itable to t is <<= !eet per min%te speed o! piston, t is slo@ and abs%rdly restricted 8elocity r%led t e @orking o! s%c engines

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!or many years0 6o@e8er, at lengt , eit er t ro%g !ort%nate ignorance o! t e "r%le", or by better reasons on t e part o! some bold inno8ator, a greater speed @as tried, and as t e res%lt @as ig ly !a8o%rable, ot ers !ollo@ed t e example, by, as it is termed, "letting t e engine a@ay", namely, by so modi!ying t e proportions o! t e !irst motion @ eels o! t e mill gearing as to permit t e engine to r%n at 3== !eet and %p@ards per min%te, @ ile t e mill gearing generally @as kept at its !ormer speed0000 5 is "letting t e engine a@ay"000 as led to t e almost %ni8ersal "speeding" o! engines, beca%se it @as pro8ed t at not only @as t ere a8ailable po@er gained !rom t e identical engines, b%t also as t e ig er 8elocity o! t e engine yielded a greater moment%m in t e !ly-@ eel t e motion @as !o%nd to be m%c more reg%lar0000 We 000 obtain more po@er !rom a steam-engine by simply permitting its piston to mo8e at a ig er 8elocity Bpress%re o! steam and 8ac%%m in t e condenser remaining t e sameC0000 5 %s, !or example, s%ppose any gi8en engine yields 2= orse-po@er @ en its piston is tra8elling at <== !eet per min%te, i! by s%itable arrangement or modi!ication @e can permit t is same engine to r%n at s%c a speed as t at its piston @ill tra8el t ro%g space at 2== !eet per min%te Bpress%re o! steam and 8ac%%m, as be!ore said, remaining t e sameC, @e s all t en a8e H%st do%ble t e po@er 000 and as t e press%re by steam and 8ac%%m is t e same in bot cases, t e strain %pon t e parts o! t is engine @ill be no greater at 2== t an at <== !eet speed o! piston, so t at t e risk o! "break-do@n" does not materially increase @it t e increase o! speed0 ?ll t e di!!erence is, t at @e s all in s%c case cons%me steam at a rate proportional to t e speed o! piston, or nearly so# and t ere @ill e some small increase in t e @ear and tear o! "t e brasses" or r%bbing-parts, b%t so slig t as to be

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scarcely @ort

notice0000 A%t in order to obtain

increase o! po@er !rom t e same engine by permitting its piston to tra8el at a ig er 8elocity it is reD%isite 000 to b%m more coal per o%r %nder t e same boiler, or employ boilers o! greater e8aporating capabilities, i0e0, greater steam-generating po@ers0 5 is accordingly @as done, and boilers o! greater steamgenerating or @ater-e8aporating po@ers @ere s%pplied to t e old "speeded" engines, and in many cases near 1== per cent more @ork @as got o%t o! t e identical engines by means o! s%c c anges as abo8e named0 ?bo%t ten years ago t e extraordinary economical prod%ction o! po@er as realised by t e engines employed in t e mining operations o! ;orn@all began to attract attention# and as competition in t e spinning trade !orced man%!act%rers to look to "sa8ings" as t e c ie! so%rce o! pro!its, t e remarkable di!!erence in t e cons%mption o! coal per orsepo@er per o%r, as indicated by t e per!ormance o! t e ;ornis engines, as also t e extraordinary economical per!ormance o! Wool!"s do%ble-cylinder engines, began to attract increased attention to t e s%bHect o! economy o! !%el in t is district, and as t e ;ornis and do%ble-cylinder engines ga8e a orse-po@er !or e8ery 3Z to 2 lbs o! coal per o%r, @ ile t e generality o! cotton-mill engines @ere cons%ming 8 or 1< po%nds per orse per o%r, so remarkable a di!!erence ind%ced mill-o@ners and engine-makers in t is district to endea8o%r to realise, by t e adoption o! similar means, s%c extraordinary economical res%lts as @ere pro8ed to be common in ;orn@all and France, @ ere t e more s arply to s%c ig price o! coal ad compelled man%!act%rers to look costly departments o! t eir establis ments0 5 e res%lt o! t is increased attention to economy o! !%el as been most important in many respects0 &n t e !irst place, many boilers, t e al! o!

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@ ose s%r!ace ad been in t e good old times o! ig pro!its le!t exposed D%ite naked to t e cold air, began to get co8ered @it t ick blankets o! !elt, and brick and plaster, and ot er modes and means @ ereby to pre8ent t e escape o! t at eat !rom t eir exposed s%r!ace @ ic ad cost so m%c !%el to maintain0 $team-pipes began to be "protected" in t e same manner, and t e o%tside o! t e cylinder o! t e engine !elted and cased in @it @ood in like manner0 -ext came t e %se o! " ig steam", namely, instead o! a8ing t e sa!ety-8al8e loaded so as to blo@ o!! at 2, 6, or 8 lbs to t e sD%are inc , it @as !o%nd t at by raising t e press%re to 12 or <= lbs 000 a 8ery decided economy o! !%el res%lted# in ot er @ords, t e @ork o! t e mill @as per!ormed by a 8ery notable red%ced cons%mption o! coals, 000 and t ose @ o ad t e means and t e boldness carried t e increased press%re and "expansion system" o! @orking to t e !%ll extent, by employing properly constr%cted boilers to s%pply steam o! 3=, 2=, +=, 6=, and >= lbs to t e sD%are inc # press%res @ ic @o%ld a8e !rig tened an engineer o! t e old sc ool o%t o! is @its0 A%t as t e economic res%lts o! so increasing t e press%re o! steam000 soon appeared in most %nmistakable V s0 d0 !orms, t e %se o! ig -press%re steam-boilers !or @orking condensing engines became almost general0 ?nd t ose @ o desired to go to t e !%ll extent 000 soon adopted t e employment o! t e Wool! engine in its !%ll integrity, and most o! o%r mills lately b%ilt are @orked by t e Wool! engines, namely, t ose on @ ic t ere are t@o cylinders to eac engine, in one o! @ ic t e ig -press%re steam !rom t e boiler exerts or yields po@er by its excess o! press%re o8er t at o! t e atmosp ere, @ ic , instead o! t e said ig -press%re steam being let pass o!! at t e end o! eac stroke !ree into t e atmosp ere, is ca%sed to pass

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into a lo@-press%re cylinder o! abo%t !o%r times t e area o! t e !ormer, and a!ter d%e expansion passes to t e condenser, t e economic res%lt obtained !rom engines o! t is class is s%c t at t e cons%mption o! !%el is at t e rate o! !rom 3Z to 2 lbs0 o! coal per orse per o%r# @ ile in t e engines o! t e old system t e cons%mption %sed to be on t e a8erage !rom 1< to 12 lbs0 per orse per o%r0 Ay an ingenio%s as been arrangement, t e Wool! system o! do%ble cylinder or combined lo@- and ig -press%re engine introd%ced extensi8ely to already existing engines, @ ereby t eir per!ormance as been increased bot as to po@er and economy o! !%el0 5 e same res%lt 000 as been in %se t ese eig t or ten years, by a8ing a ig press%re engine so connected @it a condensing engine as to enable t e @aste steam o! t e !ormer to pass on to and @ork t e latter0 5 is system is in many cases 8ery con8enient0 K&t @o%ld not be 8ery easy to get an exact ret%rn as to t e increase o! per!ormance or @ork done by t e identical engines to @ ic impro8ements some or all o! t ese a8e been applied# & am con!ident,

o@e8er, 000 t at !rom t e same @eig t o! steamengine mac inery @e are no@ obtaining at least += per cent more d%ty or @ork per!ormed on t e a8erage, and t at in many cases, t e identical steam-engines @ ic in t e days o! t e restricted speed o! <<= !eet per min%te yielded += orse-po@er, are no@ yielding %p@ards o! 1==0 5 e 8ery economical res%lts deri8ed !rom t e employment o! m%c ig -press%re steam in @orking condensing steam-engines, toget er @it t e ig er po@er reD%ired by mill extensions !rom t e same engines, as @it in t e last t ree years led to t e adoption o! t%b%lar boilers, yielding a m%c more economical res%lt t an t ose !ormerly employed in

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generating steam !or mill engines0L B)eports o! &nsp0 o! Fact0, 3ctober 18+<, pp0 <3-<>0C W at applies to po@er generation also applies to po@er transmission and @orking mac inery0 K5 e rapid strides @it @ ic impro8ement in mac inery as ad8anced @it in t ese !e@ years a8e enabled man%!act%rers to increase prod%ction @it o%t additional mo8ing po@er0 5 e more economical application o! labo%r as been rendered necessary by t e diminis ed lengt o! t e @orking-day, and in most @ell-reg%lated mills an intelligent mind is al@ays considering in @ at manner prod%ction can be increased @it decreased expendit%re0 & a8e be!ore me a statement, kindly prepared by a 8ery intelligent gentleman in my district, s o@ing t e n%mber o! ands employed, t eir ages, t e mac ines at @ork, and t e @ages paid !rom 182= to t e present time0 &n 3ctober 182=, is !irm employed 6== ands, o! @ om <== @ere %nder 13 years o! age0 &n 3ctober last, 3+= ands @ere employed, o! @ om 6= only @ere %nder 13# t e same n%mber o! mac ines, @it in 8ery !e@, @ere at @ork, and t e same s%m in @ages @as paid at bot periods0 K B)edgra8e"s )eport in )eports o! &nsp0 o! Fact0, 3ct0 18+<, pp0 +8-+*0C 5 ese impro8ements o! t e mac inery do not s o@ t eir !%ll e!!ect %ntil t ey are %sed in ne@, appropriately arranged !actories0 K?s regards t e impro8ement made in mac inery, & may say in t e !irst place t at a great ad8ance as been made in t e constr%ction o! mills adapted to recei8e impro8ed mac inery0000 &n t e bottom room & do%ble all my yarn, and %pon t at single !loor & s all p%t <*,=== do%bling spindles0 & e!!ect a sa8ing o! labo%r in t e room and s ed o! at least 1= per cent, not so m%c !rom any impro8ement in t e principle o! do%bling yarn, b%t !rom a concentration o! mac inery %nder a single management# and & am enabled to dri8e t e said n%mber o! spindles by one single s a!t, a

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sa8ing in s a!ting, compared @it @ at ot er !irms a8e to %se to @ork t e same n%mber o! spindles, o! 6= per cent, in some cases 8= per cent0 5 ere is a large sa8ing in oil, and s a!ting, and in grease0000 Wit s%perior mill arrangements and impro8ed mac inery, at t e lo@est estimate & a8e e!!ected a sa8ing in labo%r o! 1= per cent, a great sa8ing in po@er, coal, oil, tallo@, s a!ting and strapping0L BE8idence o! a cotton spinner, )eports o! &nsp0 o! Fact0, 3ct0 1863, pp0 1=*, 11=0C

IV. 'tilisation "f The !cretions "f Production

5 e capitalist mode o! prod%ction extends t e %tilisation o! t e excretions o! prod%ction and cons%mption0 Ay t e !ormer @e mean t e @aste o! ind%stry and agric%lt%re, slid by t e latter partly t e excretions prod%ced by t e nat%ral exc ange o! matter in t e %man body and partly t e !orm o! obHects t at remains a!ter t eir cons%mption0 &n t e c emical ind%stry, !or instance, excretions o! prod%ction are s%c by-prod%cts as are @asted in prod%ction on a smaller scale# iron !ilings acc%m%lating in t e man%!act%re o! mac inery and ret%rning into t e prod%ction o! iron as ra@ material, etc0 Excretions o! cons%mption are t e nat%ral @aste matter disc arged by t e %man body, remains o! clot ing in t e !orm o! rags, etc0 Excretions o! cons%mption are o! t e greatest importance !or agric%lt%re0 $o !ar as t eir %tilisation is concerned, t ere is an enormo%s @aste o! t em in t e capitalist economy0 &n 'ondon, !or instance, t ey !ind no better %se !or t e excretion o! !o%r and a al! million %man beings t an to contaminate t e 5 ames @it it at ea8y expense0 )ising prices o! ra@ materials nat%rally stim%late t e %tilisation o! @aste prod%cts0 5 e general reD%irements !or t e re-employment o! t ese excretions are: large D%antities o! s%c @aste, s%c as are a8ailable only in large-scale prod%ction# impro8ed mac inery @ ereby materials, !ormerly %seless in t eir pre8ailing !orm, are p%t into a state !it !or ne@ prod%ction# scienti!ic progress, partic%larly o! c emistry, @ ic re8eals t e %se!%l properties o! s%c @aste0 &t is tr%e t at great sa8ings o! t is sort are also obser8ed in small-scale agric%lt%re, as pre8ails in, say, 'ombardy, so%t ern ; ina, and Papan0 A%t on t e @ ole, t e prod%cti8ity o! agric%lt%re %nder t is system obtains !rom t e prodigal %se o! %man labo%r-po@er, @ ic is @it eld !rom ot er sp eres o! prod%ction0 5 e so-called @aste plays an important role in almost e8ery ind%stry0 5 %s, t e Factory )eport !or 7ecember 1863 mentions as one o! t e principal reasons @ y t e Englis and many o! t e &ris !armers do not like to gro@ !lax, or do so b%t rarely, Kt e great @aste 000 @ ic @ater sc%tc as taken place at t e little mills 000 t e @aste in cotton is

comparati8ely small, b%t in !lax 8ery large0 5 e e!!iciency o! @ater steeping and o! good mac ine sc%tc ing @ill red%ce t is disad8antage 8ery considerably0000 Flax, sc%tc ed in &reland in a most

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s ame!%l @ay, and a large percentage act%ally lost by it, eD%al to <8 or 3= per centL B)eports o! &nsp0 o! Fact0, 7ec0 1863, pp0 13*, 12<C @ ereas all t is mig t be a8oided t ro%g t e %se o! better mac inery0 $o m%c to@ !ell by t e @ayside t at t e !actory inspector reports: K& a8e been in!ormed @it regard to some o! t e sc%tc mills in &reland, t at t e @aste made at t em as o!ten been %sed by t e sc%tc ers to b%rn on t eir !ires at ome, and yet it is 8ery 8al%ableL Bp0 12= o! t e abo8e reportC0 We s all speak o! cotton @aste later, @ en @e deal @it t e price !l%ct%ations o! ra@ materials0 5 e @ool ind%stry @as s re@der t an t e !lax man%!act%rers0 K&t @as once t e common practice to decry t e preparation o! @aste and @oollen rags !or reman%!act%re, b%t t e preH%dice as entirely s%bsided as regards t e s oddy trade, @ ic as become an important branc o! t e @oollen trade o! .orks ire, and do%btless t e cotton @aste trade @ill be recognised in t e same manner as s%pplying an admitted @ant0 5 irty years since, @oollen rags, i0e0, pieces o! clot , old clot es, etc0, o! not ing b%t @ool, @o%ld a8erage abo%t V2 2s0 per ton in price: @it in t e last !e@ years t ey a8e become @ort V22 per ton, and t e demand !or t em as so increased t at means a8e been !o%nd !or %tilising t e rags o! !abrics o! cotton and @ool mixed by destroying t e cotton and lea8ing t e @ool intact, and no@ t o%sands o! operati8es are engaged in t e man%!act%re o! s oddy, !rom @ ic t e cons%mer as greatly bene!ited in being able to p%rc ase clot o! a !air and a8erage D%ality at a 8ery moderate price0L B)eports o! &nsp0 o! Fact0, 3ct0 1863, p0 1=>0C Ay t e end o! 186< t e reH%8enated s oddy made %p as m%c as one-t ird o! t e entire cons%mption o! @ool in Englis ind%stry0 B)eports o! &nsp0 o! Fact0, 3ctober 186<, p0 810C 5 e Kbig bene!itL !or t e Kcons%merL is t at is s oddy clot es @ear o%t in H%st one-t ird o! t e pre8io%s time and t%rn t readbare in one-sixt o! t is time0

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5 e Englis silk ind%stry mo8ed along t e same do@n@ard pat 0 5 e cons%mption o! gen%ine ra@ silk decreased some@ at bet@een 183* and 186<, @ ile t at o! silk @aste do%bled0 &mpro8ed mac inery elped to man%!act%re a silk %se!%l !or many p%rposes !rom t is ot er@ise rat er @ort less st%!!0 5 e most striking example o! %tilising @aste is !%rnis ed by t e c emical ind%stry0 &t %tilises not only its o@n @aste, !or @ ic it !inds ne@ %ses, b%t also t at o! many ot er ind%stries0 For instance, it con8erts t e !ormerly almost %seless gas-tar into aniline dyes, aliEarin, and, more recently, e8en into dr%gs0 5 is economy o! t e excretions o! prod%ction t ro%g t eir re-employment is to be disting%is ed !rom economy t ro%g t e pre8ention o! @aste, t at is to say, t e red%ction o! excretions o! prod%ction to a minim%m, and t e immediate %tilisation to a maxim%m o! all ra@ and a%xiliary materials reD%ired in prod%ction0 )ed%ction o! @aste depends in part on t e D%ality o! t e mac inery in %se0 Economy in oil, soap, etc0, depends on o@ @ell t e mec anical parts are mac ined and polis ed0 5 is re!ers to t e a%xiliary materials0 &n part, o@e8er, and t is is most important, it depends on t e D%ality o! t e employed mac ines and tools @ et er a larger or smaller portion o! t e ra@ material is t%rned into @aste in t e prod%ction process0 Finally, t is depends on t e D%ality o! t e ra@ material itsel!0 5 is, in t%rn, depends partly on t e de8elopment o! t e extracti8e ind%stry and agric%lt%re @ ic prod%ce t e ra@ material Bstrictly speaking on t e progress o! ci8ilisationC, and partly on t e impro8ement o! processes t ro%g @ ic ra@ materials pass be!ore t ey enter into man%!act%re0 K,armentier as demonstrated t at t e art o! grinding grain as impro8ed 8ery materially in France since a none too distant epoc , !or instance t e time o! 'o%is J&4, so t at t e ne@ mills, compared to t e old, can make %p to al! as m%c more bread !rom t e same amo%nt o! grain0 5 e ann%al cons%mption o! a ,arisian, indeed, as !irst been estimated at 2 setiers o! grain, t en at 3, !inally at <, @ ile no@adays it is only 1X setiers, or abo%t 32< lbs per capita0000 &n t e ,erc e, @ ere & a8e li8ed !or a long time, t e cr%de mills o! granite and trap rock millstones a8e been mostly reb%ilt according to t e r%les o! mec anics @ ic as made s%c rapid progress in t e last 3= a8e gro%nd t e grain t@ice, t e years0 5 ey a8e been pro8ided @it good millstones !rom 'a FertF, milling sack as been gi8en a circ%lar motion, and t e o%tp%t o! !lo%r !rom t e same amo%nt o! grain as increased 1N60 5 e enormo%s discrepancy bet@een t e daily grain cons%mption o! t e )omans and o%rsel8es is t ere!ore easily explained0 &t is d%e simply to

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imper!ect met ods o! milling and bread-making0 5 is is t e @ay & !eel & m%st explain a remarkable obser8ation made by ,liny, J4&&&, ; 0 <=, <: 00, "5 e !lo%r @as sold in )ome, depending on its D%ality, at 2=, 28 or *6 as per modi%s0 5 ese prices, so ig in proportion to t e contemporaneo%s grain prices, are d%e to t e imper!ect state o! t e mills o! t at period, @ ic @ere still in t eir in!ancy, and t e res%ltant ea8y cost o! milling0L" B7%rea% de la Malle, 8conomie &oliti3ue des 9omains, ,aris, 182=, &, pp0 <8=-810C

V. conom# Through Inventions

5 ese sa8ings in t e application o! !ixed capital are, @e repeat, d%e to t e employment o! t e conditions o! labo%r on a large scale# in s ort, are d%e to t e !act t at t ese ser8e as conditions o! directly social, or socialised labo%r or direct co-operation @it in t e process o! prod%ction0 3n t e one and, t is is t e indispensable reD%irement !or t e %tilisation o! mec anical and c emical in8entions @it o%t increasing t e price o! t e commodity, and t is is al@ays t e conditio sine 3ua non0 3n t e ot er and, only prod%ction on a large scale permits t e sa8ings deri8ed !rom cooperati8e prod%cti8e cons%mption0 Finally, it is only t e experience o! t e combined labo%rer @ ic disco8ers and re8eals t e @ ere and o@ o! sa8ing, t e simplest met ods o! applying t e disco8eries, and t e @ays to o8ercome t e practical !rictions arising !rom carrying o%t t e t eory I in its application to t e prod%ction process I etc0 &ncidentally, a distinction s o%ld be made bet@een %ni8ersal labo%r and co-operati8e labo%r0 Aot kinds play t eir role in t e process o! prod%ction, bot !lo@ one into t e ot er, b%t bot are also di!!erentiated0 (ni8ersal labo%r is all scienti!ic labo%r, all disco8ery and all in8ention0 5 is labo%r depends partly on t e co-operation o! t e li8ing, and partly on t e %tilisation o! t e labo%rs o! t ose @ o a8e gone be!ore0 ;o-operati8e labo%r, on t e ot er and, is t e direct co-operation o! indi8id%als0 5 e !oregoing is corroborated by !reD%ent obser8ation, to @it: 1C 5 e great di!!erence in t e cost o! t e !irst model o! a ne@ mac ine and t at o! its reprod%ction Bregarding @ ic , see (re / 4he &hilosophy of Manufactures, $econd edition, 'ondon, 18++0 I 0d01 and Aabbage /:n the 0conomy of Machinery and Manufactures, 'ondon, 183<, pp0 <8=-810 I 0d01C0 <C 5 e !ar greater cost o! operating an establis ment based on a ne@ in8ention as compared to later establis ments arising e suis ossibus0 5 is is so 8ery tr%e t at t e trailblaEers generally go bankr%pt, and only t ose @ o later b%y t e b%ildings, mac inery, etc0, at a c eaper price, make money o%t o! it0 &t is, t ere!ore, generally t e most @ort less and miserable sort o! money-capitalists @ o dra@ t e greatest pro!it o%t o! all ne@ de8elopments o! t e %ni8ersal labo%r o! t e %man spirit and t eir social application t ro%g combined labo%r0

Chapter ". The Effect of Price #luctuation

I. (luctuations in the Price of )a$ *aterials% and their +irect ffects on the )ate of Profit
5 e ass%mption in t is case, as in pre8io%s ones, is t at no c ange takes place in t e rate o! s%rpl%s-8al%e0 &t is necessary to analyse t e case in its p%re !orm0 6o@e8er, it mig t be possible !or a speci!ic capital, @ ose rate o! s%rpl%s-8al%e remains %nc anged, to employ an increasing or decreasing n%mber o! labo%rers, in conseD%ence o! contraction or expansion ca%sed by s%c !l%ct%ations in t e price o! ra@ materials as @e are to analyse ere0 &n t at case t e D%antity o! s%rpl%s-8al%e mig t 8ary, @ ile t e rate o! s%rpl%s-8al%e remains t e same0 .et t is s o%ld also be disregarded ere as a side-iss%e0 &! impro8ements o! mac inery and c anges in t e price o! ra@ materials sim%ltaneo%sly in!l%ence eit er t e n%mber o! labo%rers employed by a de!inite capital, or t e le8el o! @ages, one as b%t to p%t toget er 1C t e e!!ect ca%sed by t e 8ariations o! constant capital on t e rate o! pro!it, and <C t e e!!ect ca%sed by 8ariations in @ages on t e rate o! pro!it0 5 e res%lt is t en obtained o! itsel!0 A%t in general, it s o%ld be noted ere, as in t e pre8io%s case, t at i! 8ariations take place, eit er d%e to sa8ings in constant capital, or d%e to !l%ct%ations in t e price o! ra@ materials, t ey al@ays a!!ect t e rate o! pro!it, e8en i! t ey lea8e t e @age, ence t e rate and amo%nt o! s%rpl%s-8al%e, %nto%c ed0 5 ey c ange t e magnit%de o! ; in s" B8N;C, and t %s t e 8al%e o! t e @ ole !raction0 &t is t ere!ore immaterial, in t is case as @ell I in contrast to @ at @e !o%nd in o%r analysis o! s%rpl%s-8al%e I in @ ic sp ere o! prod%ction t ese 8ariations occ%r# @ et er or not t e prod%ction branc es a!!ected by t em prod%ce necessities !or labo%rers, or constant capital !or t e prod%ction o! s%c necessities0 5 e ded%ctions made ere are eD%ally 8alid !or 8ariations occ%rring in t e prod%ction o! l%x%ry articles, and by l%x%ry articles @e ere mean all prod%ction t at does not ser8e t e reprod%ction o! labo%r-po@er0 5 e ra@ materials ere incl%de a%xiliary materials as @ell, s%c as indigo, coal, gas, etc0 F%rt ermore, so !ar as mac inery is concerned %nder t is ead, its o@n ra@ material consists o! iron, @ood, leat er, etc0 &ts o@n price is t ere!ore a!!ected by !l%ct%ations in t e price o! ra@ materials %sed in its constr%ction0 5o t e extent t at its price is raised t ro%g !l%ct%ations, eit er in t e price o! t e ra@ materials o! @ ic it consists, or o! t e a%xiliary materials cons%med in its operation, t e rate o! pro!it !alls pro tanto0 ?nd 8ice 8ersa0 &n t e !ollo@ing analysis @e s all con!ine o%rsel8es to !l%ct%ations in t e price o! ra@ materials, not so !ar as t ey go to make %p t e ra@ materials o! mac inery ser8ing as means o! labo%r or as a%xiliary materials applied in its operation, b%t in so !ar as t ey enter t e process in @ ic commodities are prod%ced0 5 ere is H%st one t ing to be noted ere: t e nat%ral @ealt in iron, coal, @ood, etc0, @ ic are t e principal elements %sed in t e constr%ction and operation o! mac inery, presents itsel! ere as a nat%ral !ertility o! capital and is a !actor determining t e rate o! pro!it irrespecti8e o! t e ig or lo@ le8el o! @ages0 $ince t e rate o! pro!it is sN;, or sNBc U 8C, it is e8ident t at e8ery t ing ca%sing a 8ariation in t e magnit%de o! c, and t ereby o! ;, m%st also bring abo%t a 8ariation in t e rate o! pro!it, e8en i! s and 8, and t eir m%t%al relation, remain %naltered0 -o@, ra@ materials are one o! t e principal components o! constant capital0 E8en in ind%stries @ ic cons%me no act%al ra@ materials, t ese enter t e pict%re as a%xiliary materials or components o! mac inery, etc0, and t eir price !l%ct%ations t %s accordingly in!l%ence t e rate o! pro!it0 $ o%ld t e price o! ra@ material !all by an amo%nt R d, t en sN;, or sNBc U 8C becomes sNB; - dC, or sNBBc - dC U 8C0 5 %s, t e rate o! pro!it rises0 ;on8ersely, i! t e price o! ra@ material rises, t en sN;, or sNBc U 8C, becomes sNB; U dC, or sN

>+

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BBc U dC U 8C, and t e rate o! pro!it !alls0 3t er conditions being eD%al, t e rate o! pro!it, t ere!ore, !alls and rises in8ersely to t e price o! ra@ material0 5 is s o@s, among ot er t ings, o@ important t e lo@ price o! ra@ material is !or ind%strial co%ntries, e8en i! !l%ct%ations in t e price o! ra@ materials are not accompanied by 8ariations in t e sales sp ere o! t e prod%ct, and t %s D%ite aside !rom t e relation o! demand to s%pply0 &t !ollo@s !%rt ermore t at !oreign trade in!l%ences t e rate o! pro!it, regardless o! its in!l%ence on @ages t ro%g t e c eapening o! t e necessities o! li!e0 5 e point is t at it a!!ects t e prices o! ra@ or a%xiliary materials cons%med in ind%stry and agric%lt%re0 &t is d%e to an as yet imper!ect %nderstanding o! t e nat%re o! t e rate o! pro!it and o! its speci!ic di!!erence !rom t e rate o! s%rpl%s-8al%e t at, on t e one and, economists Blike 5orrens /)0 5orrens, +n 0ssay on the &roduction of "ealth, 'ondon, 18<1, p0 <8 et seD0 I 0d01C @rongly explain t e marked in!l%ence o! t e prices o! ra@ material on t e rate o! pro!it, @ ic t ey note t ro%g practical experience, and t at, on t e ot er, economists like )icardo /70 )icardo, :n the &rinciples of &olitical 0conomy, and 4a ation , 5 ird edition, 'ondon, 18<1, pp0 131-1380 I 0d01, @ o cling to general principles, do not recognise t e in!l%ence o!, say, @orld trade on t e rate o! pro!it0 5 is makes clear t e great importance to ind%stry o! t is elimination or red%ction o! c%stoms d%ties on ra@ materials0 5 e rational de8elopment o! t e protecti8e tari!! system made t e %tmost red%ction o! import d%ties on ra@ materials one o! its cardinal principles0 5 is, and t e abolition o! t e d%ty on corn, @as t e main obHect o! t e Englis !ree-traders, @ o @ere primarily concerned @it a8ing t e d%ty on cotton li!ted as @ell0 5 e %se o! !lo%r in t e cotton ind%stry may ser8e as an ill%stration o! t e importance o! a price red%ction !or an article @ ic is not strictly a ra@ material b%t an a%xiliary and at t e same time one o! t e principal elements o! no%ris ment0 ?s !ar back as 183>, )0 60 :reg 1 calc%lated t at t e 1==,=== po@er-looms and <+=,=== and-looms t en operating in t e cotton-mills o! :reat Aritain ann%ally cons%med 21 million lbs o! !lo%r to smoot t e @arp0 6e added a t ird o! t is D%antity !or bleac ing and ot er processes, and estimated t e total ann%al 8al%e o! t e !lo%r so cons%med at V32<,=== !or t e preceding ten years0 ? comparison @it !lo%r prices on t e continent s o@ed t at t e ig er !lo%r price !orced %pon man%!act%rers by corn tari!!s alone amo%nted to V1>=,=== per year0 :reg estimated t e s%m at a minim%m o! V<==,=== !or 183> and cited a !irm !or @ ic t e !lo%r price di!!erence amo%nted to V1,=== ann%ally0 ?s a res%lt, Kgreat man%!act%rers, t o%g t!%l, calc%lating men o! b%siness, a8e said t at ten o%rs" labo%r @o%ld be D%ite s%!!icient, i! t e ;orn 'a@s @ere repealedL0 B)eports o! &nsp0 o! Fact0, 3ct0 1828, p0 *80C 5 e ;orn 'a@s @ere repealed0 $o @ere t e d%ties on cotton and ot er ra@ materials0 A%t no sooner ad t is been accomplis ed t an t e opposition o! t e man%!act%rers to t e 5en 6o%rs" Aill became more 8iolent t an e8er0 ?nd @ en t e ten- o%r !actory day ne8ert eless became a la@ soon a!ter, t e !irst res%lt @as a general attempt to red%ce @ages0 5 e 8al%e o! ra@ and a%xiliary materials passes entirely and all at one time into t e 8al%e o! t e prod%ct in t e man%!act%re o! @ ic t ey are cons%med, @ ile t e elements o! !ixed capital trans!er t eir 8al%e to t e prod%ct only grad%ally in proportion to t eir @ear and tear0 &t !ollo@s t at t e price o! t e prod%ct is in!l%enced !ar more by t e price o! ra@ materials t an by t at o! !ixed capital, alt o%g t e rate o! pro!it is determined by t e total 8al%e o! t e capital applied no matter o@ m%c o! it is cons%med in t e making o! t e prod%ct0 A%t it is e8ident I alt o%g @e merely mention it in passing, since @e ere still ass%me t at commodities are sold at t eir 8al%es, so t at price !l%ct%ations ca%sed by competition do not as yet concern %s I t at t e expansion or contraction o! t e market depends on t e price o! t e indi8id%al commodity and is in8ersely proportional to t e rise or !all o! t is price0 &t act%ally de8elops, t ere!ore, t at t e price o! t e

>6

; apter 4&&

prod%ct does not rise in proportion to t at o! t e ra@ material, and t at it does not !all in proportion to t at o! ra@ material0 ;onseD%ently, t e rate o! pro!it !alls lo@er in one instance, and rises ig er in t e ot er t an @o%ld a8e been t e case i! prod%cts @ere sold at t eir 8al%e0 F%rt er, t e D%antity and 8al%e o! t e employed mac inery gro@s @it t e de8elopment o! labo%r prod%cti8ity b%t not in t e same proportion as t is prod%cti8ity, i0 e0, not in t e proportion in @ ic t is mac inery increases its o%tp%t0 &n t ose branc es o! ind%stry, t ere!ore, @ ic do cons%me ra@ materials, i0 e0, in @ ic t e s%bHect o! labo%r is itsel! a prod%ct o! pre8io%s labo%r, t e gro@ing prod%cti8ity o! labo%r is expressed precisely in t e proportion in @ ic a larger D%antity o! ra@ material absorbs a de!inite D%antity o! labo%r, ence in t e increasing amo%nt o! ra@ material con8erted in, say, one o%r into prod%cts, or processed into commodities0 5 e 8al%e o! ra@ material, t ere!ore, !orms an e8er-gro@ing component o! t e 8al%e o! t e commodityprod%ct in proportion to t e de8elopment o! t e prod%cti8ity o! labo%r, not only beca%se it passes @ olly into t is latter 8al%e, b%t also beca%se in e8ery aliD%ot part o! t e aggregate prod%ct t e portion representing depreciation o! mac inery and t e portion !ormed by t e ne@ly added labo%r I bot contin%ally decrease0 3@ing to t is !alling tendency, t e ot er portion o! t e 8al%e representing ra@ material increases proportionally, %nless t is increase is co%nterbalanced by a proportionate decrease in t e 8al%e o! t e ra@ material arising !rom t e gro@ing prod%cti8ity o! t e labo%r employed in its o@n prod%ction0 F%rt er, ra@ and a%xiliary materials, H%st like @ages, !orm parts o! t e circ%lating capital and m%st, t ere!ore, be contin%ally replaced in t eir entirety t ro%g t e sale o! t e prod%ct, @ ile only t e depreciation is to be rene@ed in t e case o! mac inery, and !irst o! all in t e !orm o! a reser8e !%nd0 &t is, moreo8er, in no @ay essential !or eac indi8id%al sale to contrib%te its s are to t is reser8e !%nd, so long as t e total ann%al sales contrib%te t eir ann%al s are0 5 is s o@s again o@ a rise in t e price o! ra@ material can c%rtail or arrest t e entire process o! reprod%ction i! t e price realised by t e sale o! t e commodities s o%ld not s%!!ice to replace all t e elements o! t ese commodities0 3r, it may make it impossible to contin%e t e process on t e scale reD%ired by its tec nical basis, so t at only a part o! t e mac inery @ill remain in operation, or all t e mac inery @ill @ork !or only a !raction o! t e %s%al time0 Finally, t e expense inc%rred t ro%g @aste 8aries in direct proportion to t e price !l%ct%ations o! t e ra@ material, rising, @ en t ey rise and !alling @ en t ey !all0 A%t t ere is a limit ere as @ell0 5 e Factory )eport !or ?pril 18+= maintained: K3ne so%rce o! considerable loss arising !rom an ad8ance in t e price o! t e ra@ material @o%ld ardly occ%r to any one b%t a practical spinner, 8iE0, t at !rom @aste0 & am in!ormed t at @ en cotton ad8ances, t e cost to t e spinner, o! t e lo@er D%alities especially, is increased in a ratio beyond t e ad8ance act%ally paid, beca%se t e @aste made in spinning coarse yarns is !%lly 1+ per cent# and t is rate, @ ile it ca%ses a loss o! Zd0 per lb0 on cotton at 3Zd0 per lb0, brings %p t e loss to 1d0 per lb0 @ en cotton ad8ances to >d0L B)eports o! &nsp0 o! Fact0, ?pril 18+=, p0 1>0C A%t @ en, as a res%lt o! t e ?merican ;i8il War, t e price o! cotton rose to a le8el %neD%alled in almost 1== years, t e report read di!!erently:

>>

; apter 4&&

K5 e price no@ gi8en !or @aste, and its reintrod%ction in t e !actory in t e s ape o! cotton @aste, go some @ay to compensate !or t e di!!erence in t e loss by @aste, bet@een $%rat cotton and ?merican cotton, abo%t 1<Z per cent0 K5 e @aste in @orking $%rat cotton being <+ per cent, t e cost o! t e cotton to t e spinner is en anced one!o%rt be!ore e as man%!act%red it0 5 e loss by @aste %sed not to be o! m%c moment @ en ?merican cotton @as +d0 or 6d0 per lb0, !or it did not exceed `d0 per lb0, b%t it is no@ o! great importance @ en %pon e8ery lb0 o! cotton @ ic costs <s0 t ere is a loss by @aste eD%al to 6d0L <B)eports o! &nsp0 o! Fact0, 3ct0 1863, p0 1=60C

II. Appreciation% +epreciation% )elease And Tie,'p "f Capital

5 e p enomena analysed in t is c apter reD%ire !or t eir !%ll de8elopment t e credit system and competition on t e @orld-market, t e latter being t e basis and t e 8ital element o! capitalist prod%ction0 5 ese more de!inite !orms o! capitalist prod%ction can only be compre ensi8ely presented, o@e8er, a!ter t e general nat%re o! capital is %nderstood0 F%rt ermore, t ey do not come @it in t e scope o! t is @ork and belong to its e8ent%al contin%ation0 -e8ert eless t e p enomena listed in t e abo8e title may be disc%ssed in a general @ay at t is stage0 5 ey are interrelated, !irst @it one anot er and, secondly, also @it t e rate and amo%nt o! pro!it0 5 ey are to be brie!ly disc%ssed ere i! only beca%se t ey create t e impression t at not only t e rate, b%t also t e amo%nt o! pro!it I @ ic is act%ally identical @it t e amo%nt o! s%rpl%s-8al%e I co%ld increase or decrease independently o! t e mo8ements o! t e D%antity or rate o! s%rpl%s8al%e0 ?re @e to consider release and tie-%p o! capital, on t e one and, and its appreciation and depreciation, on t e ot er, as di!!erent p enomenaQ 5 e D%estion is @ at @e mean by release and tie-%p o! capitalQ ?ppreciation and depreciation are sel!-explanatory0 ?ll t ey mean is t at a gi8en capital increases or decreases in 8al%e as a res%lt o! certain general economic conditions, !or @e are not disc%ssing t e partic%lar !ate o! an indi8id%al capital0 ?ll t ey mean, t ere!ore, is t at t e 8al%e o! a capital in8ested in prod%ction rises or !alls, irrespecti8e o! its sel!-expansion by 8irt%e o! t e s%rpl%s-labo%r employed by it0 Ay tie-%p o! capital @e mean t at certain portions o! t e total 8al%e o! t e prod%ct m%st be recon8erted into elements o! constant and 8ariable capital i! prod%ction is to proceed on t e same scale0 Ay release o! capital @e mean t at a portion o! t e total 8al%e o! t e prod%ct @ ic ad to be recon8erted into constant or 8ariable capital %p to a certain time, becomes disposable and s%per!l%o%s, s o%ld prod%ction contin%e on t e pre8io%s scale0 5 is release or tie-%p o! capital is di!!erent !rom t e release or tie-%p o! re8en%e0 &! t e ann%al s%rpl%s-8al%e o! an indi8id%al capital ; is, let %s say, eD%al to x, t en a red%ction in t e price o! commodities cons%med by t e capitalists @o%ld make x I a s%!!icient to proc%re t e same enHoyments, etc0, as be!ore0 ? portion o! t e re8en%e R a is released, t ere!ore, and may ser8e eit er to increase cons%mption or to be

>8

; apter 4&&

recon8erted into capital B!or t e p%rpose o! acc%m%lationC0 ;on8ersely, i! x U a is needed to contin%e to li8e as be!ore, t en t is standard o! li8ing m%st eit er be red%ced or a portion o! t e pre8io%sly acc%m%lated income R a, expended as re8en%e0 ?ppreciation and depreciation may a!!ect eit er constant or 8ariable capital, or bot , and in t e case o! constant capital it may, in t%rn, a!!ect eit er t e !ixed, or t e circ%lating portion, or bot 0 (nder constant capital @e m%st consider t e ra@ and a%xiliary materials, incl%ding semi-!inis ed prod%cts, all o! @ ic @e ere incl%de %nder t e term o! ra@ materials, mac inery, and ot er !ixed capital0 &n t e preceding analysis @e re!erred especially to 8ariations in t e price, or t e 8al%e, o! ra@ materials in respect to t eir in!l%ence on t e rate o! pro!it, and determined t e general la@ t at @it ot er conditions being eD%al, t e rate o! pro!it is in8ersely proportional to t e 8al%e o! t e ra@ materials0 5 is is absol%tely tr%e !or capital ne@ly in8ested in a b%siness enterprise, in @ ic t e in8estment, i0 e0, t e con8ersion o! money into prod%cti8e capital, is only H%st taking place0 A%t aside !rom t is capital, @ ic is being ne@ly in8ested, a large portion o! t e already !%nctioning capital is in t e sp ere o! circ%lation, @ ile anot er portion is in t e sp ere o! prod%ction0 3ne portion is in t e market in t e s ape o! commodities @aiting to be con8erted into money# anot er is on and as money, in @ ate8er !orm, @aiting to be recon8erted into elements o! prod%ction# !inally, a t ird portion is in t e sp ere o! prod%ction, partly in its original !orm o! means o! prod%ction s%c as ra@ and a%xiliary materials, semi-!inis ed prod%cts p%rc ased in t e market, mac inery and ot er !ixed capital, and partly in t e !orm o! prod%cts @ ic are in t e process o! man%!act%re0 5 e e!!ect o! appreciation or depreciation depends ere to a great extent on t e relati8e proportion o! t ese component parts0 'et %s, !or t e sake o! simplicity, lea8e aside all !ixed capital and consider only t at portion o! constant capital @ ic consists o! ra@ and a%xiliary materials, and semi-!inis ed prod%cts, and bot !inis ed commodities in t e market and commodities still in t e process o! prod%ction0 &! t e price o! ra@ material, !or instance o! cotton, rises, t en t e price o! cotton goods I bot semi-!inis ed goods like yarn and !inis ed goods like cotton !abrics I man%!act%red @ ile cotton @as c eaper, rises also0 $o does t e 8al%e o! t e %nprocessed cotton eld in stock, and o! t e cotton in t e process o! man%!act%re0 5 e latter beca%se it comes to represent more labo%r-time in retrospect and t %s adds more t an its original 8al%e to t e prod%ct @ ic it enters, and more t an t e capitalist paid !or it0 6ence, i! t e price o! ra@ materials rises, and t ere is a considerable D%antity o! a8ailable !inis ed commodities in t e market, no matter @ at t e stage o! t eir man%!act%re, t e 8al%e o! t ese commodities rises, t ereby en ancing t e 8al%e o! t e existing capital0 5 e same is tr%e !or t e s%pply o! ra@ materials, etc0, in t e ands o! t e prod%cer0 5 is appreciation o! 8al%e may compensate, or more t an compensate, t e indi8id%al capitalist, or e8en an entire separate sp ere o! capitalist prod%ction, !or t e drop in t e rate o! pro!it attending a rise in t e price o! ra@ materials0 Wit o%t entering into t e detailed e!!ects o! competition, @e mig t state !or t e sake o! t oro%g ness t at 1C i! a8ailable s%pplies o! ra@ material are considerable, t ey tend to co%nteract t e price increase @ ic occ%rred at t e place o! t eir origin# <C i! t e semi-!inis ed and !inis ed goods press 8ery ea8ily %pon t e market, t eir price is t ereby pre8ented !rom rising proportionately to t e price o! t eir ra@ materials0 5 e re8erse takes place @ en t e price o! ra@ material !alls0 3t er circ%mstances remaining t e same, t is increases t e rate o! pro!it0 5 e commodities in t e market, t e articles in t e process o! prod%ction, and t e a8ailable s%pplies o! ra@ material, depreciate in 8al%e and t ereby co%nteract t e attendant rise in t e rate o! pro!it0 5 e e!!ect o! price 8ariations !or ra@ materials is t e more prono%nced, t e smaller t e s%pplies a8ailable in t e sp ere o! prod%ction and in t e market at, say, t e close o! a b%siness year, i0e0, a!ter t e ar8est in agric%lt%re, @ en great D%antities o! ra@ materials are deli8ered ane@0

>*

; apter 4&&

We proceed in t is entire analysis !rom t e ass%mption t at t e rise or !all in prices expresses act%al !l%ct%ations in 8al%e0 A%t since @e are ere concerned @it t e e!!ects s%c price 8ariations a8e on t e rate o! pro!it, it matters little @ at is at t e bottom o! t em0 5 e present statements apply eD%ally i! prices rise or !all %nder t e in!l%ence o! t e credit system, competition, etc0, and not on acco%nt o! !l%ct%ations in 8al%e0 $ince t e rate o! pro!it eD%als t e ratio o! t e excess o8er t e 8al%e o! t e prod%ct to t e 8al%e o! t e total capital ad8anced, a rise ca%sed in t e rate o! pro!it by a depreciation o! t e ad8anced capital @o%ld be associated @it a loss in t e 8al%e o! capital0 $imilarly, a drop ca%sed in t e rate o! pro!it by an appreciation o! t e ad8anced capital mig t possibly be associated @it a gain0 ?s !or t e ot er portion o! constant capital, s%c as mac inery and !ixed capital in general, t e appreciation o! 8al%e taking place in it @it respect mainly to b%ildings, real estate, etc0, cannot be disc%ssed @it o%t t e t eory o! gro%nd-rent, and does not t ere!ore belong in t is c apter0 A%t o! a general importance to t e D%estion o! depreciation are: 5 e contin%al impro8ements @ ic lo@er t e %se-8al%e, and t ere!ore t e 8al%e, o! existing mac inery, !actory b%ildings, etc0 5 is process as a partic%larly dire e!!ect d%ring t e !irst period o! ne@ly introd%ced mac inery, be!ore it attains a certain stage o! mat%rity, @ en it contin%ally becomes antiD%ated be!ore it as time to reprod%ce its o@n 8al%e0 5 is is one o! t e reasons !or t e !lagrant prolongation o! t e @orking-time %s%al in s%c periods, !or alternating day and nig ts i!ts, so t at t e 8al%e o! t e mac inery may be reprod%ced in a s orter time @it o%t a8ing to place t e !ig%res !or @ear and tear too ig 0 &!, on t e ot er and, t e s ort period in @ ic t e mac inery is e!!ecti8e Bits s ort li!e 8is-O-8is t e anticipated impro8ementsC is not compensated in t is manner, it gi8es %p so m%c o! its 8al%e to t e prod%ct t ro%g moral depreciation t at it cannot compete e8en @it and-labo%r03 ?!ter mac inery, eD%ipment o! b%ildings, and !ixed capital in general, attain a certain mat%rity, so t at t ey remain %naltered !or some lengt o! time at least in t eir basic constr%ction, t ere arises a similar depreciation d%e to impro8ements in t e met ods o! reprod%cing t is !ixed capital0 5 e 8al%e o! t e mac inery, etc0, !alls in t is case not so m%c beca%se t e mac inery is rapidly cro@ded o%t and depreciated to a certain degree by ne@ and more prod%cti8e mac inery, etc0, b%t beca%se it can be reprod%ced more c eaply0 5 is is one o! t e reasons @ y large enterprises !reD%ently do not !lo%ris %ntil t ey pass into ot er ands, i0 e0, a!ter t eir !irst proprietors a8e been bankr%pted, and t eir s%ccessors, @ o b%y t em c eaply, t ere!ore begin !rom t e o%tset @it a smaller o%tlay o! capital0 &t leaps to t e eye, partic%larly in t e case o! agric%lt%re, t at t e ca%ses @ ic raise or lo@er t e price o! a prod%ct, also raise or lo@er t e 8al%e o! capital, since t e latter consists to a large degree o! t is prod%ct, @ et er as grain, cattle, etc0 B)icardo /70 )icardo, :n the &rinciples of &olitical 0conomy, and 4a ation, 5 ird edition, 'ondon, 18<1, ; apter &&0 I 0d01C0 5 ere is still 8ariable capital to be considered0 &nasm%c as t e 8al%e o! labo%r-po@er rises beca%se t ere is a rise in t e 8al%e o! t e means o! s%bsistence reD%ired !or its reprod%ction, or !alls beca%se t ere is a red%ction in t eir 8al%e I and t e appreciation and depreciation o! 8ariable capital are really not ing more t an expressions o! t ese t@o cases I a drop in s%rpl%s-8al%e corresponds to s%c appreciation and an increase in s%rpl%s-8al%e to s%c depreciation, pro8ided t e lengt o! t e @orking-day remains t e same0 A%t ot er circ%mstances I t e release and tie-%p o! capital I may also be associated @it s%c cases, and since @e a8e not analysed t em so !ar, @e s all brie!ly mention t em no@0 &! @ages !all in conseD%ence o! a depreciation in t e 8al%e o! labo%r-po@er B@ ic may e8en be attended by a rise in t e real price o! labo%rC, a portion o! t e capital it erto in8ested in @ages is released0 4ariable capital is set !ree0 &n t e case o! ne@ in8estments o! capital, t is as simply t e e!!ect o! its operating @it a ig er rate o! s%rpl%s-8al%e0 &t takes less money t an be!ore to set in motion t e same amo%nt o! labo%r, and in t is @ay t e %npaid portion o! labo%r increases at t e

8=

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expense o! t e paid portion0 A%t in t e case o! already in8ested capital, not only does t e rate o! s%rpl%s-8al%e rise b%t a portion o! t e capital pre8io%sly in8ested in @ages is also released0 (ntil t is time it @as tied %p and !ormed a reg%lar portion @ ic ad to be ded%cted !rom t e proceeds !or t e prod%ct and ad8anced !or @ages, acting as 8ariable capital i! t e b%siness @ere to contin%e on its !ormer scale0 -o@ t is portion is set !ree and may be %sed as a ne@ in8estment, be it to extend t e same b%siness or to operate in some ot er sp ere o! prod%ction0 'et %s ass%me, !or instance, t at V+== per @eek @ere reD%ired at !irst to employ +== labo%rers, and t at no@ only V2== are needed !or t e same p%rpose0 &! t e D%antity o! 8al%e prod%ced in eit er case R V1,===, t e amo%nt o! @eekly s%rpl%s-8al%e in t e !irst case R V+== and t e rate o! s%rpl%s-8al%e +==N+== R 1==T0 A%t a!ter t e @age red%ction t e D%antity o! s%rpl%s-8al%e V1,=== - V2== R V6==, and its rate 6==N2== R 1+=T0 ?nd t is increase in t e rate o! s%rpl%s-8al%e is t e only e!!ect !or one @ o starts a ne@ enterprise in t is sp ere o! prod%ction @it a 8ariable capital o! V2== and a corresponding constant capital0 A%t @ en t is takes place in a b%siness already in operation, t e depreciation o! t e 8ariable capital does not only increase t e D%antity o! s%rpl%s8al%e !rom V+== to V6==, and t e rate o! s%rpl%s-8al%e !rom 1== to 1+=T, b%t releases V1== o! t e 8ariable capital !or t e !%rt er exploitation o! labo%r0 6ence, t e same amo%nt o! labo%r is exploited to greater ad8antage, and, @ at is more, t e release o! V1== makes it possible to exploit more labo%rers t an be!ore at t e ig er rate @it t e same 8ariable capital o! V+==0 -o@ t e re8erse sit%ation0 $%ppose, @it +== employed labo%rers, t e original proportion in @ ic t e prod%ct is di8ided R 2==8 U 6==s R 1,===, making t e rate o! s%rpl%s-8al%e R 1+=T0 &n t at case, t e labo%rer recei8es V2N+ , or 16 s illings per @eek0 $ o%ld +== labo%rers cost V+== per @eek, d%e to an appreciation o! 8ariable capital, eac one o! t em @ill recei8e a @eekly @age R V1, and V2== can employ only 2== labo%rers0 &! t e same n%mber o! labo%rers as be!ore is p%t to @ork, t ere!ore, @e a8e +==8 U +==s R 1,===0 5 e rate o! s%rpl%s-8al%e @o%ld !all !rom 1+= to 1==T, @ ic is X0 &n t e case o! ne@ capital t e only e!!ect @o%ld be t is lo@er rate o! s%rpl%s8al%e0 3t er conditions being eD%al, t e rate o! pro!it @o%ld also a8e !allen accordingly, alt o%g not in t e same proportion0 For instance, i! c R <,===, @e a8e in t e one case <,=== c U 2==8 U 6==s R 3,===0 5 e rate o! s%rpl%s-8al%e R 1+=T, t e rate o! pro!it R 6==N<,2== R <+T0 &n t e second case, <,===c U +==8 U +==s R 3,===0 5 e rate o! s%rpl%s-8al%e R 1==T, t e rate o! pro!it R +==N<,+== R <=T0 &n t e case o! already in8ested capital, o@e8er, t ere @o%ld be a d%al e!!ect0 3nly 2== labo%rers co%ld be employed @it a V2== 8ariable capital, and t at at a rate o! s%rpl%s8al%e o! 1==T0 5 ey @o%ld t ere!ore prod%ce an aggregate s%rpl%s-8al%e o! only V2==0 F%rt ermore, since a constant capital o! V<,=== reD%ires +== labo%rers !or its operation, 2== labo%rers can p%t into motion only a constant capital o! V1,6==0 For prod%ction to contin%e on t e same scale, so t at 1N+ o! t e mac inery does not stand idle, V1== m%st be added to t e 8ariable capital in order to employ +== labo%rers as be!ore0 ?nd t is can be accomplis ed only by tying %p it erto disposable capital, so t at part o! t e acc%m%lation intended to extend prod%ction ser8es merely to stop a gap, or a portion reser8ed !or re8en%e is added to t e old capital0 5 en a 8ariable capital increased by V1== prod%ces V1== less s%rpl%s-8al%e0 More capital is reD%ired to employ t e same n%mber o! labo%rers, and at t e same time t e s%rpl%s-8al%e prod%ced by eac labo%rer is red%ced0 5 e ad8antages res%lting !rom a release and t e disad8antages res%lting !rom a tie-%p o! 8ariable capital bot exist only !or capital already engaged and reprod%cing itsel! %nder certain gi8en conditions0 For ne@ly in8ested capital t e ad8antages on t e one and, and t e disad8antages on t e ot er, are con!ined to an increase or drop in t e rate o! s%rpl%s-8al%e, and to a corresponding, i! in no @ay proportionate, c ange in t e rate o! pro!it0 5 e release and tie-%p o! 8ariable capital, H%st analysed, is t e res%lt o! a depreciation or appreciation o! t e elements o! 8ariable capital, t at is, o! t e cost o! reprod%cing labo%r-po@er0

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A%t 8ariable capital co%ld also be released i!, @it t e @age rate %nc anged, !e@er labo%rers @ere reD%ired d%e to t e de8elopment o! labo%r prod%cti8ity to set in motion t e same amo%nt o! constant capital0 &n like manner, t ere may re8ersely be a tie-%p o! additional 8ariable capital i! more labo%rers are reD%ired !or t e same D%antity o! constant capital d%e to a drop in prod%cti8ity0 &!, on t e ot er and, a portion o! capital !ormerly employed as 8ariable capital is employed in t e !orm o! constant capital, so t at merely a di!!erent distrib%tion exists bet@een t e components o! t e same capital, t is as an in!l%ence on bot t e rate o! s%rpl%s-8al%e and t e rate o! pro!it, b%t does not belong %nder t e eading o! tie-%p and release o! capital, @ ic is ere being disc%ssed0 We a8e already seen t at constant capital may also be tied %p or released by t e appreciation or depreciation o! its component elements0 ?side !rom t is, it can be tied %p only i! t e prod%cti8e po@er o! labo%r increases Bpro8ided a portion o! t e 8ariable is not con8erted into constant capitalC, so t at t e same amo%nt o! labo%r creates a greater prod%ct and t ere!ore sets in motion a larger constant capital0 5 e same may occ%r %nder certain circ%mstances i! prod%cti8ity decreases, !or instance in agric%lt%re, so t at t e same D%antity o! labo%r reD%ires more means o! prod%ction, s%c as seeds or man%re, drainage, etc0, in order to prod%ce t e same o%tp%t0 ;onstant capital may be released @it o%t depreciation i! impro8ements, %tilisation o! t e !orces o! -at%re, etc0, enable a constant capital o! smaller 8al%e to tec nically per!orm t e same ser8ices as @ere !ormerly per!ormed by a constant capital o! greater 8al%e0 We a8e seen in Aook && /Englis edition: 4ol0 &&, ,art &&&0 I 0d01 t at once commodities a8e been con8erted into money, or sold, a certain portion o! t is money m%st be recon8erted into t e material elements o! constant capital, and in t e proportions reD%ired by t e tec nical nat%re o! t e partic%lar sp ere o! prod%ction0 &n t is respect, t e most important element in all branc es I aside !rom @ages, i0 e0, 8ariable capital I is ra@ material, incl%ding a%xiliary material, @ ic is partic%larly important in s%c lines o! prod%ction as do not in8ol8e ra@ materials in t e strict sense o! t e term, !or instance in mining and t e extracti8e ind%stries in general0 5 at portion o! t e price @ ic is to make good t e @ear and tear o! mac inery enters t e acco%nts c ie!ly nominally so long as t e mac inery is at all in an operating condition0 &t does not greatly matter @ et er it is paid !or and replaced by money one day or t e next, or at any ot er stage o! t e period o! t%rno8er o! t e capital0 &t is D%ite di!!erent in t e case o! t e ra@ material0 &! t e price o! ra@ material rises, it may be impossible to make it good !%lly o%t o! t e price o! t e commodities a!ter @ages are ded%cted0 4iolent price !l%ct%ations t ere!ore ca%se interr%ptions, great collisions, e8en catastrop es, in t e process o! reprod%ction0 &t is especially agric%lt%ral prod%ce proper, i0 e0, ra@ materials taken !rom organic nat%re, @ ic I lea8ingaside t e credit system !or t e present I is s%bHect to s%c !l%ct%ations o! 8al%e in conseD%ence o! c anging yields, etc0 7%e to %ncontrollable nat%ral conditions, !a8o%rable or %n!a8o%rable seasons, etc0, t e same D%antity o! labo%r may be represented in 8ery di!!erent D%antities o! %se-8al%es, and a de!inite D%antity o! t ese %se-8al%es may t ere!ore a8e 8ery di!!erent prices0 &! t e 8al%e x is represented by 1== lbs o! t e commodity a, t en t e price o! one lb0 o! a R xN1==# i! it is represented by 1,=== lbs o! a, t e price o! one lb0 o! a R xN1,===, etc0 5 is is t ere!ore one o! t e elements o! t ese !l%ct%ations in t e price o! ra@ materials0 ? second element, mentioned at t is point only !or t e sake o! completeness I since competition and t e credit system are still o%tside t e scope o! o%r analysis I is t is: &t is, in t e nat%re o! t ings t at 8egetable and animal s%bstances @ ose gro@t and prod%ction are s%bHect to certain organic la@s and bo%nd %p @it de!inite nat%ral time periods, cannot be s%ddenly a%gmented in t e same degree as, !or instance, mac ines and ot er !ixed capital, or coal, ore, etc0, @ ose reprod%ction can, pro8ided t e nat%ral conditions do not c ange, be rapidly accomplis ed in an ind%strially de8eloped co%ntry0 &t is t ere!ore D%ite possible, and %nder a de8eloped system o! capitalist prod%ction e8en ine8itable, t at t e prod%ction and increase o! t e portion o! constant capital consisting o! !ixed capital, mac inery, etc0, s o%ld considerably o%tstrip t e portion consisting o! organic ra@ materials, so t at demand !or t e latter

8<

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gro@s more rapidly t an t eir s%pply, ca%sing t eir price to rise0 )ising prices act%ally ca%se 1C t ese ra@ materials to be s ipped !rom greater distances, since t e mo%nting prices s%!!ice to co8er greater !reig t rates# <C an increase in t eir prod%ction, @ ic circ%mstance, o@e8er, @ill probably not, !or nat%ral reasons, m%ltiply t e D%antity o! prod%cts %ntil t e !ollo@ing year# 3C t e %se o! 8ario%s pre8io%sly %n%sed s%bstit%tes and greater %tilisation o! @aste0 W en t is rise o! prices begins to exert a marked in!l%ence on prod%ction and s%pply it indicates in most cases t at t e t%rning point as been reac ed at @ ic demand drops on acco%nt o! t e protracted rise in t e price o! t e ra@ material and o! all commodities o! @ ic it is an element, ca%sing a reaction in t e price o! ra@ material0 ?side !rom t e con8%lsions @ ic t is ca%ses in 8ario%s !orms t ro%g depreciation o! capital, t ere are also ot er circ%mstances, @ ic @e s all mention s ortly0 A%t so m%c is already e8ident !rom t e !oregoing: 5 e greater t e de8elopment o! capitalist prod%ction, and, conseD%ently, t e greater t e means o! s%ddenly and permanently increasing t at portion o! constant capital consisting o! mac inery, etc0, and t e more rapid t e acc%m%lation Bpartic%larly in times o! prosperityC, so m%c greater t e relati8e o8er-prod%ction o! mac inery and ot er !ixed capital, so m%c more !reD%ent t e relati8e %nder-prod%ction o! 8egetable and animal ra@ materials, and so m%c more prono%nced t e pre8io%sly described rise o! t eir prices and t e attendant reaction0 ?nd so m%c more !reD%ent are t e con8%lsions ca%sed as t ey are by t e 8iolent price !l%ct%ations o! one o! t e main elements in t e process o! reprod%ction0 &!, o@e8er, a collapse o! t ese ig prices occ%rs beca%se t eir rise ca%sed a drop in demand on t e one and, and, on t e ot er, an expansion o! prod%ction in one place and in anot er importation !rom remote and pre8io%sly less resorted to, or entirely ignored, prod%ction areas, and, in bot cases, a s%pply o! ra@ materials exceeding t e demand I partic%larly at t e old ig prices I t en t e res%lt may be considered !rom di!!erent points o! 8ie@0 5 e s%dden collapse o! t e price o! ra@ materials c ecks t eir reprod%ction, and t e monopoly o! t e original prod%cing co%ntries, @ ic enHoy t e most !a8o%rable conditions o! prod%ction, is t ereby restored I possibly @it certain limitations, b%t restored ne8ert eless0 5r%e, d%e to t e impet%s it as ad, reprod%ction o! ra@ material proceeds on an extended scale, especially in t ose co%ntries @ ic more or less possess a monopoly o! t is prod%ction0 A%t t e basis on @ ic prod%ction carries on a!ter t e extension o! mac inery, etc0, and @ ic , a!ter some !l%ct%ations, is to ser8e as t e ne@ normal basis, t e ne@ point o! depart%re, is 8ery m%c extended by t e de8elopments in t e preceding cycle o! t%rno8er0 &n t e meantime, t e barely increased reprod%ction again experiences considerable impediments in some o! t e secondary so%rces o! s%pply0 For instance, it is easily demonstrated on t e basis o! t e export tables t at in t e last t irty years B%p to 186+C t e prod%ction o! cotton in &ndia increases @ ene8er t ere as been a drop in ?merican prod%ction, and s%bseD%ently it drops again more or less permanently0 7%ring t e period in @ ic ra@ materials become dear, ind%strial capitalists Hoin ands and !orm associations to reg%late prod%ction0 5 ey did so a!ter t e rise o! cotton prices in 1828 in Manc ester, !or example, and similarly in t e case o! !lax prod%ction in &reland0 A%t as soon as t e immediate imp%lse is o8er and t e general principle o! competition to Kb%y in t e c eapest marketL Binstead o! stim%lating prod%ction in t e co%ntries o! origin, as t e associations attempt to do, @it o%t regard to t e immediate price at @ ic t ese may appen at t at time to be able to s%pply t eir prod%ctC I as soon as t e principle o! competition again reigns s%preme, t e reg%lation o! t e s%pply is le!t once again to KpricesL0 ?ll t o%g t o! a common, all-embracing and !ar-sig ted control o! t e prod%ction o! ra@ materials gi8es @ay once more to t e !ait t at demand and s%pply @ill m%t%ally reg%late one anot er0 ?nd it m%st be admitted t at s%c control is on t e @ ole irreconcilable @it t e la@s o! capitalist prod%ction, and remains !or e8er a pio%s @is , or is limited to exceptional co-operation in times o! great stress and con!%sion0 2 5 e s%perstition o! t e capitalists in t is respect is so deep t at in t eir reports e8en !actory inspectors again and again t ro@ %p t eir ands in astonis ment0 5 e alternation o! good and bad years nat%rally also pro8ides !or c eaper ra@ materials0 ?side !rom t e direct e!!ect t is as on raising t e demand,

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t ere is also t e added stim%l%s o! t e pre8io%sly mentioned in!l%ence on t e rate o! pro!it0 5 e a!oresaid process o! prod%ction o! ra@ materials being grad%ally o8ertaken by t e prod%ction o! mac inery, etc0, is t en repeated on a larger scale0 ?n act%al impro8ement o! ra@ materials satis!ying not only t e desired D%antity, b%t also t e D%ality desired, s%c as cotton !rom &ndia o! ?merican D%ality, @o%ld reD%ire a prolonged, reg%larly gro@ing and steady E%ropean demand Bregardless o! t e economic conditions %nder @ ic t e &ndian prod%cer labo%rs in is co%ntryC0 ?s it is, o@e8er, t e sp ere o! prod%ction o! ra@ materials is, by !its, !irst s%ddenly enlarged, and t en again 8iolently c%rtailed0 ?ll t is, and t e spirit o! capitalist prod%ction in general, may be 8ery @ell st%died in t e cotton s ortage o! 1861-6+, !%rt er c aracterised as it @as by t e !act t at a ra@ material, one o! t e principal elements o! reprod%ction, @as !or a time entirely %na8ailable0 5o be s%re, t e price may also rise in t e e8ent o! an ab%ndant s%pply, pro8ided t e conditions !or t is ab%ndance are more knotty0 3r, t ere may be an act%al s ortage o! ra@ material0 &t @as t is last sit%ation @ ic originally pre8ailed in t e cotton crisis0 5 e closer @e approac o%r o@n time in t e istory o! prod%ction, t e more reg%larly do @e !ind, especially in t e essential lines o! ind%stry, t e e8er-rec%rring alternation bet@een relati8e appreciation and t e s%bseD%ent res%lting depreciation o! ra@ materials obtained !rom organic nat%re0 W at @e a8e H%st analysed @ill be ill%strated by t e !ollo@ing examples taken !rom reports o! !actory inspectors0 5 e moral o! istory, also to be ded%ced !rom ot er obser8ations concerning agric%lt%re, is t at t e capitalist system @orks against a rational agric%lt%re, or t at a rational agric%lt%re is incompatible @it t e capitalist system Balt o%g t e latter promotes tec nical impro8ements in agric%lt%reC, and needs eit er t e and o! t e small !armer li8ing by is o@n labo%r or t e control o! associated prod%cers0 6ere@it !ollo@ t e ill%strations re!erred to abo8e, taken !rom t e Englis Factory )eports0 K5 e state o! trade is better# b%t t e cycle o! good and bad times diminis es as mac inery increases, and t e c anges !rom t e one to t e ot er appen o!tener, as t e demand !or ra@ materials increases @it it000 ?t present, con!idence is not only restored a!ter t e panic o! 18+>, b%t t e panic itsel! seems to be almost !orgotten0 W et er t is impro8ement @ill contin%e or not depends greatly %pon t e price o! ra@ materials0 5 ere appear to me e8idences already, t at in some instances t e maxim%m as been reac ed, beyond @ ic t eir man%!act%re becomes grad%ally less and less pro!itable, till it ceases to be so altoget er0 &! @e take, !or instance, t e l%crati8e years in t e @orsted trade o! 182* and 18+=, @e see t at t e price o! Englis combing @ool stood at 1s0 1d0, and o! ?%stralian at bet@een 1s0 <d0 and 1s0 +d0 per lb0, and t at on t e a8erage o! t e ten years !rom 1821 to 18+=, bot incl%si8e, t e a8erage price o! Englis

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@ool ne8er exceeded 1s0 <d0 and o! ?%stralian @ool 1s0 +d0 per lb0 A%t t at in t e commencement o! t e disastro%s year o! 18+>, t e price o! ?%stralian @ool began @it 1s0 11d0, !alling to 1s0 6d0 in 7ecember, @ en t e panic @as at its eig t, b%t as grad%ally risen again to 1s0 *d0 t ro%g 18+8, at @ ic it no@ stands# @ ilst t at o! Englis @ool, commencing @it 1s0 8d0, and rising in ?pril and $eptember 18+> to 1s0 *d0, !alling in Pan%ary 18+8 to 1s0 <d0, as since risen to 1s0 +d0, @ ic is 3d0 per lb0 ig er t an t e a8erage o! t e ten years to @ ic & a8e re!erred000 5 is s o@s, & t ink, one o! t ree t ings I eit er t at t e bankr%ptcies @ ic similar prices occasioned in 18+> are !orgotten# or t at t ere is barely t e @ool gro@n @ ic t e existing spindles are capable o! cons%ming# or else, t at t e prices o! man%!act%red articles are abo%t to be permanently bot ig er000 ?nd as in past experience & a8e seen spindles and looms m%ltiply in n%mbers and speed in an incredibly s ort space o! time, and o%r exports o! @ool to France increase in an almost eD%al ratio, and as bot at ome and abroad t e age o! s eep seems to be getting less and less, o@ing to increasing pop%lations and to @ at t e agric%lt%ralists call "a D%ick ret%rn in stock", so & a8e o!ten !elt anxio%s !or persons @ om, @it o%t t is kno@ledge, & a8e seen embarking skill and capital in %ndertakings, @ olly reliant !or t eir s%ccess on a prod%ct @ ic can only be increased according to organic la@s0 000 5 e same state o! s%pply and demand o! all ra@ materials 000 seems to acco%nt !or many o! t e !l%ct%ations in t e cotton trade d%ring past periods, as @ell as !or t e condition o! t e Englis @ool market in t e a%t%mn o! 18+>, @it its o8er@ elming conseD%ences0L + B)0 Aaker in )eports o! &nsp0 o! Fact0, 3ct0 18+8, pp0 +6-610C

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5 e alcyon days o! t e West-)iding @orsted ind%stry, o! .orks ire, @ere 182*-+=0 5 is ind%stry employed <*,<26 persons in 1838# 3>,=== persons in 1823# 28,=*> in 182+# and >2,8*1 in 18+=0 5 e same district ad <,>68 mec anical looms in 1838# 11,2+8 in 1821# 16,8>= in 1823# 1*,1<1 in 182+ and <*,+3* in 18+=0 B)eports o! &nsp0 o! Fact0, 18+=, p0 6=0C 5 is prosperity o! t e carded @ool ind%stry excited certain !orebodings as early as 3ctober 18+=0 &n is report !or ?pril 18+1, $%b-&nspector Aaker said in regard to 'eeds and Arad!ord: K5 e state o! trade is, and as been !or some time, 8ery %nsatis!actory0 5 e @orsted spinners are !ast losing t e pro!its o! 18+=, and, in t e maHority o! cases, t e man%!act%rers are not doing m%c good0 & belie8e, at t is moment, t ere is more @oollen mac inery standing t an & a8e almost e8er kno@n at one time, and t e !lax spinners are also t%rning o!! ands and stopping !rames0 5 e cycles o! trade, in !act, in t e textile !abrics, are no@ extremely %ncertain, and & t ink @e s all s ortly !ind to be tr%e 000 t at t ere is no comparison made bet@een t e prod%cing po@er o! t e spindles, t e D%antity o! ra@ material, and t e gro@t o! t e pop%lationL Bp0 +<C0 5 e same is tr%e o! t e cotton ind%stry0 &n t e cited report !or 3ctober 18+8, @e read: K$ince t e o%rs o! labo%r in !actories a8e been !ixed, t e amo%nts o! cons%mption, prod%ce, and @ages in all textile !abrics a8e been red%ced to a r%le o! t ree0 000 & D%ote !rom a recent lect%re deli8ered by 000 t e present Mayor o! Alackb%rn, Mr0 Aaynes, on t e cotton trade, @ o by s%c means as red%ced t e cotton statistics o! K"Eac is o@n neig bo%r ood to t e orse-po@er @ill dri8e closest approximation: I real and mec anical 2+= sel!-acting m%le spindles @it preparation, or <== t rostle spindles, or 1+ looms !or 2= inc es clot , @it @inding, @arping, and siEing0 Eac orse-po@er in spinning @ill gi8e employment to <Z operati8es, b%t in @ea8ing to 1= persons, at @ages a8eraging !%ll 1=s0 6d0 a @eek to eac person0 000 5 e a8erage co%nts o! yarn sp%n and @o8en are !rom 3=s0 to 3<s0 t@ist, and 32s0 to 36s0 @e!t yarns# and taking t e spinning

86

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prod%ction at 13 o%nces per spindle per @eek, @ill gi8e 8<2,>== lbs yarn sp%n per @eek, reD%iring *>=,=== lbs or <,3== bales o! cotton, at a cost o! V<8,3==000 5 e total cotton cons%med in t is district B@it in a !i8e-mile radi%s ro%nd Alackb%rnC per @eek is 1,+3=,=== lbs, or 3,6+= bales, at a cost o! V22,6<+000 5 is is one-eig teent o! t e @ ole cotton spinning o! t e (nited Kingdom, and one-sixt o! t e @ ole po@er-loom @ea8ing0" K5 %s @e see t at, according to Mr0 Aaynes"s calc%lations, t e total n%mber o! cotton spindles in t e (nited Kingdom is <8,8==,===, and s%pposing t ese to be al@ays @orking !%ll time, t at t e ann%al cons%mption o! cotton o%g t to be 1,23<,=8=,=== lbs0 A%t as t e import o! cotton, less t e export in 18+6 and 18+>, @as only 1,=<<,+>6,83< lbs, t ere m%st necessarily be a de!iciency o! s%pply eD%al to 2=*,+=3,168 lbs0 Mr0 Aaynes, o@e8er, @ o as been good eno%g to comm%nicate @it me on t is s%bHect, t inks t at an ann%al cons%mption o! cotton based %pon t e D%antity %sed in t e Alackb%rn district @o%ld be liable to be o8erc arged, o@ing to t e di!!erence, not only in t e co%nts sp%n, b%t in t e excellence o! t e mac inery0 6e estimates t e total ann%al cons%mption o! cotton in t e (nited Kingdom at 1,===,===,=== lbs0 A%t i! e is rig t, and t ere really is an excess o! s%pply eD%al to <<,+>6,83< lbs, s%pply and demand seem to be nearly balanced already, @it o%t taking into consideration t ose additional spindles and looms @ ic Mr0 Aaynes speaks o! as getting ready !or @ork in is o@n district, and, by parity o! reasoning, probably in ot er districts alsoL Bpp0 +*, 6=C0

III. General Illustration. The Cotton Crisis "f -./-,/0

Preli,inar* 7istor*. 1845!3& ;<=>0 5 e golden age o! cotton ind%stry0 ,rice o! cotton 8ery lo@0 '0 6orner says on t is point:
KFor t e last eig t years & a8e not kno@n so acti8e a state o! trade as as pre8ailed d%ring t e last s%mmer and a%t%mn, partic%larly al!-year & in cotton spinning0 5 ro%g o%t t e a8e been recei8ing

notices e8ery @eek o! ne@ in8estments o! capital in !actories, eit er in t e !orm o! ne@ mills being b%ilt, o! t e !e@ t at @ere %ntenanted !inding occ%piers, o! enlargements o! existing mills, o! ne@ engines o! increased po@er, and o! man%!act%ring mac inery0L B)eports o! &nsp0 o! Fact0, 3ct0 182+, p0 130C

8>

; apter 4&&

;<=?0 5 e complaints begin:

KFor a considerable time past & a8e eard !rom t e occ%piers o! cotton mills 8ery general complaints o! t e depressed state o! t eir trade000 !or @it in t e last six @eeks se8eral mills a8e beg%n to @ork s ort time, %s%ally eig t o%rs a day instead o! t@el8e# t is appears to be on t e increase000 5 ere as been a great ad8ance in t e price o! t e ra@ material000 t ere as been not only no ad8ance in t e man%!act%red articles, b%t 000 prices are lo@er t an t ey @ere be!ore t e rise in cotton began0 From t e great increase in t e n%mber o! cotton mills @it in t e last !o%r years, t ere m%st a8e been, on t e one and, a greatly increased demand !or t e ra@ material, and, on t e ot er, a greatly increased s%pply in t e market o! t e man%!act%red articles# ca%ses t at m%st conc%rrently a8e operated against pro!its, s%pposing t e s%pply o! t e ra@ material and t e cons%mption o! t e man%!act%red article to a8e remained %naltered# b%t, o! co%rse, in t e greater ratio by t e late s ort s%pply o! cotton, and t e !alling o!! in t e demand !or t e man%!act%red articles in se8eral markets, bot ome and !oreign0 B)eports o! &nsp0 o! Fact0, 3ct0 1826, p0 1=0C 5 e rising demand !or ra@ materials nat%rally @ent and in and @it a market !looded @it man%!act%res0 Ay t e @ay, t e expansion o! ind%stry at t at time and t e s%bseD%ent stagnation @ere not con!ined to t e cotton districts0 5 e carded @ool district o! Arad!ord ad only 318 !actories in 1836 and 2*= in 18260 5 ese !ig%res do not by any means express t e act%al gro@t o! prod%ction, since t e existing !actories @ere also considerably enlarged0 5 is @as partic%larly tr%e o! t e !lax spinning-mills0 K?ll a8e contrib%ted more or less, d%ring t e last ten years, to t e o8erstocking o! t e market, to @ ic a great part o! t e present stagnation o! trade m%st be attrib%ted000 5 e depression000 nat%rally res%lts !rom s%c rapid increase o! mills and mac inery0L B)eports o! &nsp0 o! Fact0, 3ct0 1826, p0 3=0C

88

; apter 4&&

;<=@0 &n 3ctober, a money panic0 7isco%nt 8T0 5 is @as preceded by t e debacle o! t e rail@ay s@indle and t e East &ndian spec%lation in accommodation bills0 A%t: KMr0 Aaker enters into 8ery interesting details respecting t e increased demand, in t e last !e@ years, !or cotton, @ool, and !lax, o@ing to t e great extension o! t ese trades0 6e considers t e increased demand !or t ese ra@ materials, occ%rring, as it as, at a period @ en t e prod%ce as !allen m%c belo@ an a8erage s%pply, as almost s%!!icient, e8en @it o%t re!erence to t e monetary derangement, to acco%nt !or t e present state o! t ese branc es0 5 is opinion is !%lly con!irmed, by my o@n obser8ations, and con8ersation @it persons @ell acD%ainted @it trade0 5 ose se8eral branc es @ere all in a 8ery depressed state, @ ile disco%nts @ere readily obtained at and %nder + per cent0 5 e s%pply o! ra@ silk as, on t e contrary, been ab%ndant, t e prices moderate, and t e trade, conseD%ently, 8ery acti8e, till 000 t e last t@o or t ree @eeks, @ en t ere is no do%bt t e monetary derangement as a!!ected not only t e persons act%ally engaged in t e man%!act%re, b%t more extensi8ely still, t e man%!act%rers o! !ancy goods, @ o @ere great c%stomers to t e t ro@ster0 ? re!erence to p%blis ed ret%rns s o@s t at t e cotton trade ad increased nearly <> per cent in t e last t ree years0 ;otton as conseD%ently increased, in ro%nd n%mbers, !rom 2d0 to 6d0 per lb0, @ ile t@ist, in conseD%ence o! t e increased s%pply, is yet only a !raction abo8e its !ormer price0 5 e @oollen trade began its increase in 1836, since @ ic .orks ire as increased its man%!act%re o! t is article 2= per cent, b%t $cotland ex ibits a yet greater increase0 5 e increase o! t e @orsted trade
6

is still larger0

;alc%lations gi8e a res%lt o! %p@ards o! >2 per cent increase @it in t e same period0 5 e cons%mption o! ra@ @ool as t ere!ore been immense0 Flax as

8*

; apter 4&&

increased since 183* abo%t <+ per cent in England, << per cent in $cotland, and nearly *= per cent in &reland > # t e conseD%ence o! t is, in connexion @it per ton, @ ile t e price o! yarn 310C ;<=A0 $ince late in 1828 b%siness re8i8ed0 K5 e price o! !lax @ ic as been so lo@ as to almost g%arantee a reasonable pro!it %nder any !%t%re circ%mstances, as ind%ced t e man%!act%rers to carry on t eir @ork 8ery steadily0000 5 e @oollen man%!act%rers @ere exceedingly b%sy !or a @ ile in t e early part o! t e year0000 & !ear t at consignments o! @oollen goods o!ten take t e place o! real demand, and t at periods o! apparent prosperity, i0 e0, o! !%ll @ork, are not al@ays periods o! legitimate demand0 &n some mont s t e @orsted as been exceedingly good, in !act !lo%ris ing0000 ?t t e commencement o! t e period re!erred to, @ool @as exceedingly lo@# @ at @as bo%g t by t e spinners @as @ell bo%g t, and no do%bt in considerable D%antities0 W en t e price o! @ool rose @it t e spring @ool sales, t e spinner ad t e ad8antage, and t e demand !or man%!act%red goods becoming considerable and imperati8e, t ey kept it0 K B)eports o! &nsp0 o! Fact0, ?pril 182*, p0 2<0C K&! @e look at t e 8ariations in t e state o! trade, @ ic a8e occ%rred in t e man%!act%ring districts o! t e kingdom !or a period no@ o! bet@een t ree and !o%r years, & t ink @e m%st admit t e existence o! a great dist%rbing ca%se some@ ere 000 b%t may not t e immensely prod%cti8e po@er o! increased mac inery a8e added anot er element to t e same ca%seQL B)eports o! &nsp0 o! Fact0, ?pril 182*, pp0 2<, 230C &n -o8ember 1828, and in May and s%mmer o! 182*, rig t %p to 3ctober, b%siness !lo%ris ed0 bad crops, as been t at t e ra@ material as gone %p V1= as !allen 6d0 a b%ndle0L B)eports o! &nsp0 o! Fact0, 3ct0 182>, pp0 3=-

*=

; apter 4&&

K5 e @orsted st%!! o! trade, o! @ ic Arad!ord and 6ali!ax are t e great i8es o! ind%stry, as been t e one most acti8e# t is trade as ne8er be!ore reac ed anyt ing like t e extent, to @ ic it as no@ attained0 $pec%lation, and %ncertainty as to t e probable s%pply o! cotton @ool, a8e e8er ad t e e!!ect o! ca%sing greater excitement, and more !reD%ent alterations in t e state o! t at branc o! man%!act%re, t an any ot er0 5 ere is 000 at present an acc%m%lation in stock o! t e coarser kinds o! cotton goods, @ ic creates anxiety on t e part o! t e smaller spinners, and is already acting to t eir detriment, a8ing ca%sed se8eral o! t em to @ork t eir mills s ort time0 K B)eports o! &nsp0 o! Fact0, 3ct0 182*, pp0 62-6+0C ;<>B0 ?pril0 A%siness contin%ed brisk0 5 e exception: K5 e great depression in a part o! t e cotton trade 000 attrib%table to t e scarcity in t e s%pply o! t e ra@ material more especially adapted to t e branc engaged in spinning lo@ n%mbers o! cotton yarns, or man%!act%ring ea8y cotton goods0 ? !ear is entertained t at t e increased mac inery b%ilt recently !or t e @orsted trade, may be !ollo@ed @it a similar reaction0 Mr0 Aaker comp%tes t at in t e year 182* alone t e @orsted looms a8e increased t eir prod%ce 2= per cent, and t e spindles <+ or 3= per cent, and t ey are still increasing at t e same rate0 K B)eports o! &nsp0 o! Fact0, ?pril 18+=, p0 +20C

;<>B0 3ctober0
K5 e ig price o! ra@ cotton contin%es 000 to ca%se a considerable depression in t is branc o! man%!act%re, especially in t ose descriptions o! goods in @ ic t e ra@ material constit%tes a considerable part o! t e cost o! prod%ction0000 5 e great ad8ance in t e price o! ra@ silk as like@ise ca%sed a depression

*1

; apter 4&&

in many branc es o! t at man%!act%re0L B)eports0 o! &nsp0 o! Fact0, 3ct0 18+=, p0 120C ?nd on pages 31 and 33 o! t e same report @e learn t at t e ;ommittee o! t e )oyal $ociety !or t e ,romotion and &mpro8ement o! t e :ro@t o! Flax in &reland predicted t at t e ig price o! !lax, toget er @it t e lo@ le8el o! prices !or ot er agric%lt%ral prod%cts, ens%red a considerable increase in !lax prod%ction in t e ens%ing year0 ;<>C0 ?pril0 :reat prosperity0 '0 6orner says in is report: K?t no period d%ring t e last se8enteen years t at & a8e been o!!icially acD%ainted @it t e man%!act%ring districts in 'ancas ire a8e & kno@n s%c general prosperity# t e acti8ity in e8ery branc is extraordinary0L B)eports o! &nsp0 o! Fact0, ?pril 18+3, p0 1*0C ;<>C0 3ctober0 7epression in t e cotton ind%stry0 K38er-prod%ction0L B)eports o! &nsp0 o! Fact0, 3ct0 18+3, p0 1+0C ;<>=0 ?pril0 K5 e @oollen trade, alt o%g not brisk, as gi8en !%ll employment to all t e !actories engaged %pon t at !abric, and a similar remark applies to t e cotton !actories0 5 e @orsted trade generally as been in an %ncertain and %nsatis!actory condition d%ring t e @ ole o! t e last al!-year0 5 e man%!act%re o! !lax and emp are more likely to be serio%sly impeded, by reason o! t e diminis ed s%pplies o! t e ra@ materials !rom )%ssia d%e to t e ;rimean @ar0L B)eports o! &nsp0 o! Fact0, ?pril 18+2, p0 3>0C ;<>A0 K5 e trade in t e $cottis !lax districts still contin%es depressed I t e ra@ material being scarce, as @ell as ig in price# and t e in!erior D%ality o! t e last year"s crop in t e Aaltic, !rom @ ence come o%r principal s%pplies, @ill a8e an inH%rio%s e!!ect on t e trade o! t e district# H%te, neit er %n%s%ally o@e8er, @ ic ig is grad%ally s%perseding !lax in many o! t e coarser !abrics, is in price, nor scarce in D%antity 000 abo%t one- al! o! t e mac inery in 7%ndee is no@ employed in H%te spinning0L B)eports o! &nsp0

*<

; apter 4&&

o! Fact0, ?pril 18+*, p0 1*0C I K3@ing to t e ig price o! t e ra@ material, !lax spinning is still !ar !rom rem%nerating, and @ ile all t e ot er mills are going !%ll time, t ere are se8eral instances o! t e stoppage o! !lax mac inery0000 P%te spinning is 000 in a rat er more satis!actory state, o@ing to t e recent decline in t e price o! material, @ ic p0 <=0C as no@ !allen to a 8ery moderate point0L B)eports o! &nsp0 o! Fact0, 3ct0 18+*,

1831!34. %,erican Civil 8ar. Cotton +a,ine. The 2reatest E9a, le of an Interru tion in the Pro#uction Process through Scarcit* an# .earness of $a) -aterial
;<?B0 ?pril0 KWit respect to t e state o! trade, & am appy to be able to in!orm yo% t at, not@it standing t e @it t e exception o! silk, ands ig price o! ra@ material, all t e textile man%!act%res, a8e been !airly b%sy a8e o! d%ring t e past districts al!-year0000 &n some o! t e cotton a8e been ad8ertised !or, and

migrated t it er !rom -or!olk and ot er r%ral co%nties0 5 ere appears to be, in e8ery branc o! it alone, @ ic trade, a great scarcity o! ra@ material0 &t is 000 t e @ant keeps %s @it in bo%nds0 &n t e cotton trade, t e erection o! ne@ mills, t e !ormation o! ne@ systems o! extension, and t e demand !or ands, can scarcely, & t ink, a8e been at any time exceeded0 E8ery@ ere t ere are ne@ mo8ements in searc o! ra@ material0L B)eports o! &nsp0 o! Fact0, ?pril 186=, p0 +>0C

;<?B0 3ctober0
K5 e state o! trade in t e cotton, @oollen, and !lax districts as been good# indeed in &reland, it is stated to a8e been "8ery good" !or no@ more t an a year# and

*3

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t at it @o%ld a8e been still better, b%t !or t e ig price o! ra@ material0 5 e !lax spinners appear to be looking @it more anxiety t an e8er to t e opening o%t o! &ndia by rail@ays, and to t e de8elopment o! its agric%lt%re, !or a s%pply o! !lax @ ic Fact0, 3ct0 186=, p0 3>0C ;<?;0 ?pril0 K5 e state o! trade is at present depressed0000 ? !e@ cotton mills are r%nning s ort time, and many silk mills are only partially employed0 )a@ material is ig 0 &n almost e8ery branc o! textile man%!act%re it is abo8e t e price at @ ic it can be man%!act%red !or t e masses o! t e cons%mers0L B)eports o! &nsp0 o! Fact0, ?pril 1861, p0 330C &t ad become e8ident t at in 186= t e cotton ind%stry ad o8erprod%ced0 5 e e!!ect o! t is made itsel! !elt d%ring t e next !e@ years0 K&t as taken bet@een t@o and t ree years to absorb t e o8er-prod%ction o! 186= in t e markets o! t e @orld0L B)eports o! &nsp0 o! Fact0, 7ecember 1863, p0 1<>0C K5 e depressed state o! t e markets !or cotton man%!act%res in t e East, early in 186=, @ ic ad a corresponding e!!ect %pon t e trade o! Alackb%rn, in 3=,=== po@er-looms are %s%ally employed almost excl%si8ely in t e prod%ction o! clot to be cons%med in t e East0 5 ere @as conseD%ently b%t a limited demand !or labo%r !or many mont s prior to t e e!!ects o! t e cotton blockade being !elt0000 Fort%nately t is preser8ed many o! t e spinners and man%!act%rers !rom being in8ol8ed in t e common r%in0 $tocks increased in 8al%e so long as t ey @ere eld, and t ere ad been conseD%ently not ing like t at alarming depreciation in t e 8al%e o! property @ ic mig t not %nreasonably a8e been looked !or in s%c a crisis0L B)eports o! &nsp0 o! Fact0, 3ct0 186<, pp0 <*, 310C may be commens%rate @it t eir @ants0L B)eports o! &nsp0 o!

*2

; apter 4&&

;<?;0 3ctober0 K5rade as been !or some time in a 8ery depressed state0 &t is not improbable indeed t at d%ring t e @inter mont s many establis ments @ill be !o%nd to @ork 8ery s ort time0 5 is mig t, o@e8er, a8e been anticipated 000 irrespecti8e o! t e ca%ses @ ic and o%r exports, s ort time m%st a8e interr%pted o%r %s%al s%pplies o! cotton !rom ?merica a8e been kept d%ring t e ens%ing @inter in conseD%ence o! t e great increase o! prod%ction d%ring t e last t ree years, and t e %nsettled state o! t e &ndian and ; inese markets0L B)eports o! &nsp0 o! Fact0, 3ct0 1861, p0 1*0C Cotton "aste. 0ast Dndian Cotton )Surat*. Dnfluence on the "ages of ,abourers. Dmprovement of Machinery. +dding Starch 'lour and Mineral Substitutes to Cotton. 0ffect of Starch 'lour Si#ing on ,abourers. Manufacturers of 'iner Earn Grades. Manufacturers5 'raud K? man%!act%rer @rites to me t %s: "?s to estimates o! cons%mption per spindle, & do%bt i! yo% take s%!!iciently into calc%lation t e !act t at @ en cotton is ig in price, e8ery spinner o! ordinary yarns Bsay %p to 2=s0C Bprincipally 1<s0 to 3<s0C @ill raise is co%nts as m%c as e can, t at is, @ill spin 16s0 @ ere e %sed to spin 1<s0, or <<s0 in t e place o! 16s0, and so on# and t e man%!act%rer %sing t ese !ine yarns @ill make is clot t e %s%al @eig t by t e addition o! so m%c more siEe0 5 e trade is a8ailing itsel! o! t is reso%rce at present to an extent @ ic discreditable0 & a8e is e8en eard on good a%t ority o!

ordinary export s irting @eig ing 8 lbs @ ic @as made o! +[ lbs0 cotton and <` lbs siEe0000 &n clot s o! ot er descriptions as m%c as += per cent siEe is sometimes added# so t at a man%!act%rer may and does tr%ly boast t at e is getting ric by selling clot !or less money per po%nd t an e paid !or t e mere yarn o! @ ic t ey are composed0L" B)eports o! &nsp0 o! Fact0, ?pril 1862, p0 <>0C

*+

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K&

a8e also recei8ed statements t at t e @ea8ers

attrib%te increased sickness to t e siEe @ ic is %sed in dressing t e @arps o! $%rat cotton, and @ ic is not made o! t e same material as !ormerly, 8iE0, !lo%r0 5 is s%bstit%te !or !lo%r is said, o@e8er, to a8e t e 8ery important ad8antage o! increasing greatly t e @eig t o! t e clot man%!act%red, making 1+ lbs o! t e ra@ material to @eig <= lbs @ en @o8en into clot 0L B)eports o! &nsp0 o! Fact0, 3ct0 18630 5 is s%bstit%te @as gro%nd talc%m, called ; ina clay, or gyps%m, called Frenc c alk0C K5 e earnings o! t e @ea8ers Bmeaning t e operati8esC are m%c red%ced !rom t e employment o! s%bstit%tes !or !lo%r as siEing !or @arps0 5 is siEing, @ ic gi8es @eig t to t e yarn, renders it ard and brittle0 Eac t read o! t e @arp in t e loom passes t ro%g a part o! t e loom called "a eald", @ ic consists o! strong t reads to keep t e @arp in its proper place, and t e ard state o! t e @arp ca%ses t e t reads o! t e eald to break !reD%ently# and it is said to take a @ea8er !i8e min%tes to tie %p t e t reads e8ery time t ey break# and a @ea8er as to piece t ese ends at least ten times as o!ten as !ormerly, t %s red%cing t e prod%cti8e po@ers o! t e loom in t e @orking- o%rs0 K BDbid0, pp0 2<-230C K&n ?s ton, $talybridge, Mossley, 3ld am, etc0, t e red%ction o! t e time as been !%lly one-t ird, and t e o%rs are lessening e8ery @eek0000 $im%ltaneo%sly @it t is dimin%tion o! time t ere is also a red%ction o! @ages in many departments0L B)eports o! &nsp0 o! Fact0, 3ct0 1861, pp0 1<-130C Early in 1861 t ere @as a strike among t e mec anical @ea8ers in some parts o! 'ancas ire0 $e8eral man%!act%rers ad anno%nced a @age red%ction o! + to >0+T0 5 e operati8es insisted t at t e @age scale remain t e same @ ile @orking- o%rs @ere red%ced0 5 is @as not granted, and a strike @as called0 ? mont later, t e operati8es ad to gi8e in0 A%t t en t ey got bot 0 K&n addition to t e red%ction o! @ages to @ ic t e operati8es at last consented, many mills are no@

*6

; apter 4&&

r%nning s ort time0L B)eports o! &nsp0 o! Fact0, ?pril 1861, p0 <3:C ;<?F0 ?pril0 K5 e s%!!erings o! t e operati8es since t e date o! my last report a8e greatly increased# b%t at no period o! t e istory o! man%!act%res, a8e s%!!erings so patient sel!-respect0L s%dden and so se8ere been borne @it so m%c silent resignation and so m%c B)eports o! &nsp0 o! Fact0, ?pril 186<, p0 1=0C K5 e proportionate n%mber o! operati8es @ olly o%t o! employment at t is date appears not to be m%c larger t an it @as in 1828, @ en t ere @as an ordinary panic o! s%!!icient conseD%ences to excite alarm amongst t e man%!act%rers, so m%c as to @arrant t e collection o! similar statistics o! t e state o! t e cotton trade as are no@ iss%ed @eekly0000 &n May 1828, t e proportion o! cotton operati8es o%t o! @ork in Manc ester o%t o! t e @ ole n%mber %s%ally employed @as 1+ per cent, on s ort time 1< per cent, @ ilst >= per cent @ere in !%ll @ork0 3n t e <8t o! May o! t e present year, o! t e @ ole n%mber o! persons %s%ally employed 1+ per cent @ere o%t o! @ork, 3+ per cent @ere on s ort time, and 2* per cent @ere @orking !%ll time0000 &n some ot er places, $tockport !or example, t e a8erages o! s ort time and o! non-employment are ig er, @ ilst t ose o! !%ll time are lessL, beca%se coarser n%mbers are sp%n t ere t an in Manc ester Bp0 16C0 ;<?F0 3ctober0 K& !ind by t e last ret%rn to ,arliament t at t ere @ere <,88> cotton !actories in t e (nited Kingdom in 1861, <,1=* o! t em being in my district B'ancas ire and ; es ireC0 & @as a@are t at a 8ery large proportion o! t e <,1=* !actories in my district @ere small establis ments, gi8ing employment to !e@ persons,

*>

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b%t &

a8e been s%rprised to !ind

o@ large t at

proportion is0 &n 3*<, or 1* per cent, t e steam-engine or @ater@ eel is %nder 1= orse-po@er# in 32+, or 16 per cent, t e orsepo@er is abo8e 1= and %nder <=# and in 1,3>< t e po@er is <= orses and more0000 ? 8ery large proportion o! t ese small man%!act%rers I being more t an a t ird o! t e @ ole n%mber I @ere operati8es t emsel8es at no distant period# t ey are men @it o%t command o! capital0 5 e br%nt o! t e b%rden t en @o%ld a8e to be borne by t e remaining t@o-t irds0L B)eports o! &nsp0 o! Fact0, 3ct0 186<, pp0 18, 1*0C ?ccording to t e same report, 2=,126, or 1103T, o! t e cotton employees in 'ancas ire and ; es ire @ere t en @orking !%ll time# 132,>6>, or 38T, @ere @orking s ort time# and 1>*,><1, or +=0>T, @ere %nemployed0 ?!ter ded%cting t e ret%rns !rom Manc ester and Aolton, @ ere mainly !ine grades @ere sp%n, a line relati8ely little a!!ected by t e cotton !amine, t e matter looks still more %n!a8o%rable# namely, !%lly employed 80+T, partly employed 38T, and %nemployed +30+T Bpp0 1* and <=C0 KWorking %p good or bad cotton makes a material di!!erence to t e operati8e0 &n t e earlier part o! t e year, @ en man%!act%rers @ere endea8o%ring to keep t eir mills at @ork by %sing %p all t e moderately priced cotton t ey co%ld obtain, m%c bad cotton @as bro%g t into mills in @ ic good cotton @as ordinarily %sed, and t e di!!erence to t e operati8es in @ages @as so great t at many strikes took place on t e gro%nd t at t ey co%ld not make a !air day"s @ages at t e old rates0000 &n some cases, alt o%g @orking !%ll time, t e di!!erence in @ages !rom @orking bad cotton @as as m%c as one- al!L Bp0 <>C0 ;<?C0 ?pril0 K7%ring t e present year t ere @ill not be !%ll employment !or m%c Fact0, ?pril 1863, p0 120C K? 8ery serio%s obHection to t e %se o! $%rat cotton, as man%!act%rers are no@ compelled to %se it, is t at more t an one- al! o! t e cotton operati8es in t e co%ntry0L B)eports o! &nsp0 o!

*8

; apter 4&&

t e speed o! t e mac inery m%st be greatly red%ced in t e processes o! man%!act%re0 For some years past e8ery e!!ort as been made to increase t e speed o! mac inery, in order to make t e same mac inery prod%ce more @ork# and t e red%ction o! t e speed becomes t ere!ore a D%estion @ ic a!!ects t e operati8e as @ell as t e man%!act%rer# !or t e c ie! part o! t e operati8es are paid by t e @ork done# !or instance, spinners are paid per lb0 !or t e yarn sp%n, @ea8ers per piece !or t e n%mber o! pieces @o8en# and e8en @it t e ot er classes o! operati8es paid by t e @eek t ere @o%ld be a dimin%tion o! @ages in consideration o! t e less amo%nt o! goods prod%ced0 From inD%iries & a8e made, and statements placed in my ands, o! t e earnings o! cotton operati8es d%ring t e present year, & !ind t ere is a dimin%tion a8eraging <= per cent %pon t eir !ormer earnings, in some instances t e dimin%tion as been as m%c as += per cent, calc%lated %pon t e same rate o! @ages as pre8ailed in 1861L Bp0 13C0 K0005 e s%m earned depends %pon 000 t e nat%re o! t e material operated %pon0000 5 e position o! t e operati8es in regard to t e amo%nt o! t eir earnings is 8ery m%c Mac inery better no@ B3ctober 1863C t an it @as t is time last year0 as impro8ed, t e material is better %nderstood, and t e operati8es are able better to o8ercome t e di!!ic%lties t ey ad to contend @it at !irst0 & remember being in a se@ing sc ool Ba c arity instit%tion !or %nemployedC at ,reston last spring, @ en t@o yo%ng @omen, @ o ad been sent to @ork at a @ea8ing s ed t e day be!ore, %pon t e representation o! t e man%!act%rer t at t ey co%ld earn 2s0 per @eek, ret%rned to t e sc ool to be readmitted, complaining t at t ey co%ld not a8e earned 1s0 per @eek0 & a8e been in!ormed o! "sel!acting minders" 000 men @ o manage a pair o! sel!-

**

; apter 4&&

acting m%les, earning at t e end o! a !ortnig t"s !%ll @ork 8s0 11d0, and t at !rom t is s%m @as ded%cted t e rent o! t e o%se, t e man%!act%rer, o@e8er, ret%rning al! t e rent as a gi!t0 B6o@ genero%sSC 5 e minders took a@ay t e s%m o! 6s0 11d0 &n many places t e sel!-acting minders ranged !rom +s0 to *s0 per @eek, and t e @ea8ers !rom <s0 to 6s0 per @eek in t e last mont s o! 186<0000 ?t t e present time a m%c more ealt y state o! t ings exists, alt o%g t ere is still a great decrease in t e earnings in most districts0000 5 ere are se8eral ca%ses @ ic a8e tended to t e red%ction o! earnings, besides t e s orter staple o! t e $%rat cotton and its dirty condition# !or instance, it is no@ t e practice to mix "@aste" largely @it $%rat, @ ic conseD%ently increases t e di!!ic%lties o! t e spinner or minder0 5 e t reads, !rom t eir s ortness o! !ibre, are more liable to break in t e dra@ing o%t o! t e m%le and in t e t@isting o! t e yarn, and t e m%le cannot be kept so contin%o%sly in motion0000 5 en, !rom t e great attention reD%ired in @atc ing t e t reads in @ea8ing, many @ea8ers can only mind one loom, and 8ery !e@ can mind more t an t@o looms0000 5 ere as been a direct red%ction o! +, >Z and 1= per cent %pon t e @ages o! t e operati8es0000 &n t e maHority o! cases t e operati8e as to make t e best o! is material, and to earn t e best @ages e can at t e ordinary rates0000 ?not er di!!ic%lty t e @ea8ers @ell-!inis ed clot a8e sometimes to contend @it is, t at t ey are expected to prod%ce !rom in!erior materials, and are s%bHect to !ine !or t e !la@s in t eir @ork0L B)eports o! &nsp0 o! Fact0, 3ct0 1863, pp0 21-230C Wages @ere miserable, e8en @ ere @ork @as !%ll time0 5 e cotton @orkers @illingly o!!ered t emsel8es !or all p%blic @orks s%c as drainage, road-b%ilding, stone-breaking and street-pa8ing, in @ ic t ey @ere employed, to get t eir keep !rom t e a%t orities Balt o%g t is practically amo%nted to assistance to t e man%!act%rer0 $ee Aook &, $0 +*8N+8* /Englis edition: pp0 +>2->+0 I 0d01C0 5 e @ ole bo%rgeoisie stood g%ard o8er t e labo%rers0 Were t e @orst dog"s @ages

1==

; apter 4&&

o!!ered, and a labo%rer re!%sed to accept t em, t e )elie! ;ommittee @o%ld strike im !rom its lists0 &t @as in a @ay a golden age !or t e man%!act%rers, !or t e labo%rers ad eit er to star8e or @ork at a price most pro!itable !or t e bo%rgeois0 5 e )elie! ;ommittees acted as @atc -dogs0 ?t t e same time, t e man%!act%rers acted in secret agreement @it t e go8ernment to inder emigration as m%c as possible, partly to retain in readiness t e capital in8ested in t e !les and blood o! t e labo%rers, and partly to sa!eg%ard t e o%se-rent sD%eeEed o%t o! t e labo%rers0 K5 e )elie! ;ommittees acted @it great strictness %pon t is point0 &! @ork @as o!!ered, t e operati8es to @ om it @as proposed @ere str%ck o!! t e lists, and t %s compelled to accept t e o!!er0 W en t ey obHected to accept @ork000 t e ca%se as been t at t eir earnings @o%ld a8e been merely nominal, and t e @ork exceedingly se8ere0L B)eports o! &nsp0 o! Fact0, 3ct0 1863, p0 *>0C 5 e operati8es @ere @illing to per!orm any @ork gi8en to t em %nder t e ,%blic Works ?ct0 K5 e principle %pon @ ic ind%strial employments @ere organised 8aried considerably in di!!erent to@ns, b%t in t ose places e8en in @ ic t e o%tdoor @ork @as not absol%tely a labo%r test t e manner in @ ic labo%r @as rem%nerated by its being paid !or eit er at t e exact rate o! relie!, or closely approximating t e rate, it became in !act a labo%r testL Bp0 6*C0 K5 e ,%blic Works ?ct o! 1863 @as intended to remedy t is incon8enience, and to enable t e operati8e to earn is day"s @ages as an independent labo%rer0 5 e p%rpose o! t is ?ct @as t ree-!old: !irstly, to enable local a%t orities to borro@ money o! t e Exc eD%er 'oan ;ommissioners B@it consent o! t e ,resident o! t e ;entral )elie! ;ommitteeC# secondly, to !acilitate t e impro8ement o! t e to@ns o! t e cotton districts# t irdly, to pro8ide @ork and rem%nerati8e @ages to t e %nemployed operati8es0L 'oans to t e amo%nt o! V883,>== ad been granted %nder t is ?ct %p to t e end o! 3ctober 1863 Bp0 >=C0 5 e @orks %ndertaken @ere mainly canalisation, road-b%ilding, street-pa8ing, @ater@orks reser8oirs, etc0 Mr0 6enderson, president o! t e committee in Alackb%rn, @rote @it re!erence to t is to !actory inspector )edgra8e:

1=1

; apter 4&&

K-ot ing in my experience, d%ring t e present period o! s%!!ering and distress, as str%ck me more !orcibly or gi8en me more satis!action, t an t e c eer!%l alacrity @it @ ic t e %nemployed operati8es o! t is district a8e accepted o! t e @ork o!!ered to t em t ro%g t e adoption o! t e ,%blic Works ?ct, by t e ;orporation o! Alackb%rn0 ? greater contrast t an t at presented bet@een t e cotton spinner as a skilled @orkman in a !actory, and as a labo%rer in a se@er 12 or 18 !eet deep, can scarcely be concei8ed0L B7epending on t e siEe o! is !amily, e earned 2 to 1<s0 per @eek, t is enormo%s amo%nt pro8iding sometimes !or a !amily o! eig t0 5 e to@ns-men deri8ed a do%ble pro!it !rom t is0 &n t e !irst place, t ey sec%red money to impro8e t eir smoky and neglected cities at exceptionally lo@ interest rates0 &n t e second place, t ey paid t e labo%rers !ar less t an t e reg%lar @age0C K?cc%stomed as e ad been to a temperat%re all b%t tropical, to @ork at @ ic manip%lation a8ailed agility and delicacy o! im in!initely more t an

m%sc%lar strengt and to do%ble and sometimes treble t e rem%neration @ ic it is possible !or im no@ to obtain, is ready acceptance o! t e pro!!ered employment in8ol8ed an amo%nt o! sel!-denial and consideration t e exercise o! @ ic is most creditable0 &n Alackb%rn t e men a8e been tested at almost e8ery 8ariety o! o%tdoor @ork# in exca8ating a sti!! ea8y clay soil to a considerable dept , in draining, in stone-breaking, in road-making, and in exca8ating !or street se@ers to a dept o! 12, 16, and sometimes <= !eet0 &n many cases @ ile t %s employed t ey are standing in m%d and @ater to t e dept o! 1= or 1< inc es, and in all t ey are exposed to a climate @ ic , !or c illy %midity is not s%rpassed & s%ppose, e8en i! it is eD%alled, by t at o! any district in EnglandL Bpp0 *1-*<C0 K5 e cond%ct o! t e operati8es make t e best o! o%tdoor labo%rL Bp0 6*C0 ;<?=0 ?pril0 as been almost blameless, and t eir readiness to accept and

1=<

; apter 4&&

K;omplaints are occasionally made in di!!erent districts at t e scarcity o! ands, b%t t is de!iciency is c ie!ly !elt in partic%lar departments, as, !or instance o! @ea8ers0000 5 ese complaints a8e t eir origin as m%c !rom t e lo@ rate o! @ages @ ic t e ands can earn o@ing to t e in!erior D%alities o! yarn %sed, as !rom any positi8e scarcity o! @ork-people e8en in t at partic%lar department0 -%mero%s di!!erences taken place d%ring t e past mont a8e bet@een t e

masters o! partic%lar mills and t eir operati8es in respect o! t e @ages0 $trikes, & am sorry to say, are b%t too !reD%ently resorted to0 000 5 e e!!ect o! t e ,%blic Works ?ct is !elt as a competition by t e millo@ners0 5 e local committee at Aac%p as s%spended operations, !or alt o%g all t e mills are not r%nning, yet a scarcity o! ands as been experienced0L B)eports o! &nsp0 o! Fact0, ?pril 1862, pp0 *, 1=0C &t @as indeed ig time !or t e man%!act%rers0 7%e to t e ,%blic Works ?ct t e demand !or labo%r gre@ so strong t at many a !actory and @as earning 2 to + s illings daily in t e D%arries o! Aac%p0 ?nd so t e p%blic @orks @ere grad%ally s%spended I t is ne@ edition o! t e +teliers nationau o! 1828, b%t t is time instit%ted in t e interests o! t e bo%rgeoisie0

Experiments in corpore vili

K?lt o%g & a8e gi8en t e act%al earnings o! t e operati8es B!%lly employedC in se8eral mills, it does not !ollo@ t at t ey earn t e same amo%nt @eek by @eek0 5 e operati8es are s%bHect to great !l%ct%ation, !rom t e constant experimentalising o! t e man%!act%rers %pon di!!erent kinds and proportions o! cotton and @aste in t e same mill, t e "mixings" as it is called, being !reD%ently c anged# and t e earnings o! t e operati8es rise and !all @it t e D%ality o! t e cotton mixings# sometimes t ey a8e been @it in 1+ per cent o! !ormer earnings, and t en in a @eek or t@o, t ey a8e !allen !rom += to 6= per cent0L &nspector )edgra8e, @ o makes t is report, t en proceeds to cite @age !ig%res taken !rom act%al practice, o! @ ic t e !ollo@ing examples may s%!!ice:

1=3

; apter 4&&

?, @ea8er, !amily o! 6, employed 2 days a @eek, 6s0 80+d0# A, t@ister, employed 20+ days a @eek, 6s0# ;, @ea8er, !amily o! 2, employed + days a @eek, +s0 1d0# 7, sl%bber, !amily o! 6, employed 2 days a @eek, >s0 1=d0# E, @ea8er, !amily o! >, employed 3 days a @eek, +s0, etc0 )edgra8e contin%es: K5 e abo8e ret%rns are deser8ing o! consideration, !or t ey s o@ t at @ork @o%ld become a mis!ort%ne in many a !amily, as it not merely red%ces t e income, b%t brings it so lo@ as to be %tterly ins%!!icient to pro8ide more t an a small portion o! t e absol%te @ants, @ere it not t at s%pplemental relie! is granted to operati8es @ en t e @ages o! t e !amily do not reac t e s%m t at @o%ld be gi8en to t em as relie!, i! t ey @ere all %nemployed0L B)eports o! &nsp0 o! Fact0, 3ct0 1863, pp0 +=-+30C K&n no @eek since t e +t o! P%ne last @as t ere more t an t@o days se8en o%rs and a !e@ min%tes employment !or all t e @orkers0L BDbid0, p0 1<10C From t e beginning o! t e crisis to Marc <+, 1863, nearly t ree million po%nds sterling @ere expended by t e g%ardians, t e ;entral )elie! ;ommittee, and t e Mansion 6o%se ;ommittee0 BDbid0, p0 130C K&n a district in @ ic t e !inest yarn is sp%n 000 t e spinners s%!!er an indirect red%ction o! 1+ per cent in conseD%ence o! t e c ange !rom $o%t $ea &sland to Egyptian cotton0 &n an extensi8e district, in many parts o! @ ic @aste is largely %sed as a mixt%re @it $%rat 000 t e spinners a8e ad a red%ction o! + per cent, and a8e lost !rom <= to 3= per cent in addition, t ro%g @orking $%rat and @aste0 5 e @ea8ers are red%ced !rom 2 looms to < looms0 &n 186=, t ey a8eraged +s0 >d0 per loom, in 1863, only 3s0 2d0 5 e !ines, @ ic !ormerly 8aried !rom 3d0 to 6d0 B!or t e @ea8erC on ?merican, no@ r%n %p to !rom 1s0 to 3s0 6d0L &n one district, @ ere Egyptian cotton @as %sed @it an admixt%re o! East &ndian Kt e a8erage o! t e m%le spinners, @ ic @as in 186= 18s0 to <+s0, no@ a8erages !rom 1=s0 to 18s0 per @eek, ca%sed, in addition to in!erior cotton, by t e red%ction

1=2

; apter 4&&

o! t e speed o! t e m%le to p%t an extra amo%nt o! t@ist in t e yarn, @ ic in ordinary times @o%ld be paid !or according to listL Bpp0 23, 22C0 K?lt o%g t e &ndian cotton may a8e been @orked to pro!it by t e man%!act%rer, it @ill be seen Bsee t e @age list on p0 +3C t at t e operati8es are s%!!erers compared @it 1861, and i! t e %se o! $%rat be con!irmed, t e operati8es @ill @ant to earn t e @ages o! 1861, @ ic @o%ld serio%sly a!!ect t e pro!its o! t e man%!act%rer, %nless e obtain compensation eit er in t e price o! t e ra@ cotton or o! is prod%ctsL Bp0 1=+C0 (ouse19ent0 K5 e rent is !reD%ently ded%cted !rom t e @ages o! operati8es, e8en @ en @orking s ort time, by t e man%!act%rers @ ose cottages t ey may be occ%pying0 -e8ert eless t e 8al%e o! t is class o! property as diminis ed, and o%ses may be obtained at a red%ction o! !rom <+ to += per cent %pon t e rent o! t e o%ses in ordinary times# !or instance, a cottage @ ic @o%ld a8e cost 3s0 6d0 per @eek can no@ be ad !or <s0 2d0 per @eek, and sometimes e8en !or lessL Bp0 +>C0 0migration0 5 e employers @ere nat%rally opposed to emigration o! labo%rers, beca%se, on t e one and, Klooking !or@ard to t e reco8ery o! t e cotton trade !rom its present depression, t ey keep @it in t eir reac t e means @ ereby t eir mills can be @orked in t e most ad8antageo%s mannerL0 3n t e ot er and, Kmany man%!act%rers are o@ners o! t e o%ses in @ ic operati8es employed in t eir mills reside, and some %nD%estionably expect to obtain a portion o! t e back rent o@ingL Bp0 *6C0 Mr0 Aernall 3sborne said in a speec to is parliamentary constit%ents on 3ctober <<, 1862, t at t e labo%rers o! 'ancas ire ad be a8ed like t e ancient p ilosop ers I B$toicsC0 -ot like s eepQ

Chapter $. Supple entar! Re ar%s

$%ppose, as is ass%med in t is part, t e amo%nt o! pro!it in any partic%lar sp ere o! prod%ction eD%als t e s%m o! t e s%rpl%s-8al%e prod%ced by t e total capital in8ested in t at sp ere0 E8en t en t e bo%rgeois @ill not consider is pro!it as identical @it s%rpl%s-8al%e, i0 e0, @it %npaid s%rpl%s-labo%r, and, to be s%re, !or t e !ollo@ing reasons: 1C &n t e process o! circ%lation e !orgets t e process o! prod%ction0 6e t inks t at s%rpl%s-8al%e is made @ en e realises t e 8al%e o! commodities, @ ic incl%des realisation o! t eir s%rpl%s8al%e0 /? blank space @ ic !ollo@s in t e man%script, indicates t at Marx intended to d@ell in greater detail on t is point0 I '. 0.1 <C ?ss%ming a %ni!orm degree o! exploitation, @e a8e seen t at regardless o! all modi!ications originating in t e credit system, regardless o! t e capitalists" e!!orts to o%t@it and c eat one anot er, and, lastly, regardless o! any !a8o%rable c oice o! t e market I t e rate o! pro!it may di!!er considerably, depending on t e lo@ or ig prices o! ra@ materials and t e experience o! t e b%yer, on t e relati8e prod%cti8ity, e!!iciency and c eapness o! t e mac inery, on t e greater or lesser e!!iciency o! t e aggregate arrangement in t e 8ario%s stages o! t e prod%cti8e process, elimination o! @aste, t e simplicity and e!!iciency o! management and s%per8ision, etc0 &n s ort, gi8en t e s%rpl%s-8al%e !or a certain 8ariable capital, it still depends 8ery m%c on t e indi8id%al b%siness ac%men o! t e capitalist, or o! is managers and salesmen, @ et er t is same s%rpl%s8al%e is expressed in a greater or smaller rate o! pro!it, and accordingly yields a greater or smaller amo%nt o! pro!it0 'et t e same s%rpl%s-8al%e o! V1,===, t e prod%ct o! V1,=== in @ages, obtain in enterprise ? !or a constant capital o! V*,===, and in enterprise A !or V11,===0 &n case ? @e a8e p" R 1,===N1=,=== or 1=T0 &n case A @e a8e p" R 1,===N1<,===, or 8XT0 5 e total capital prod%ces relati8ely more pro!it in enterprise ? t an in A, beca%se o! a ig er rate o! pro!it, alt o%g t e 8ariable capital ad8anced in bot cases R V1,=== and t e s%rpl%s-8al%e prod%ced by eac like@ise R V1,===, so t at in bot cases t ere exists t e same degree o! exploitation o! t e same n%mber o! labo%rers0 5 is di!!erence in t e presentation o! t e same mass o! s%rpl%s-8al%e, or t e di!!erence in t e rates o! pro!it, and t ere!ore in t e pro!it itsel!, @ ile t e exploitation o! labo%r is t e same, may also be d%e to ot er ca%ses0 $till, it may also be d%e @ olly to a di!!erence in t e b%siness ac%men @it @ ic bot establis ments are r%n0 ?nd t is circ%mstance misleads t e capitalist, con8inces im t at is pro!its are not d%e to exploiting labo%r, b%t, at least in part, to ot er independent circ%mstances, and partic%larly is indi8id%al acti8ity0 5 e analyses in t is !irst part demonstrate t e incorrectness o! t e 8ie@ B)odbert%s / Sociale Griefe an von Hirchmann, Dritter GriefI "iderlegung der 9icardo5schen ,ehre von der Grundrente und Gegrndung einer neuen 9ententheorie , Aerlin, 18+1, $0 1<+0 I 0d01C according to @ ic Bas distinct !rom gro%nd-rent, in @ ic case, !or example, t e area o! real estate remains t e same and yet t e rent risesC a c ange in t e magnit%de o! an indi8id%al capital is s%pposed to a8e no in!l%ence on t e ratio o! pro!it to capital, and t %s on t e rate o! pro!it, beca%se i! t e mass o! pro!it s o%ld gro@, so does t e mass o! capital %pon @ ic it is calc%lated, and 8ice 8ersa0 5 is is tr%e only in t@o cases0 First, @ en I ass%ming t at all ot er circ%mstances, especially t e rate o! s%rpl%s-8al%e, remain %nc anged I t ere is a c ange in t e 8al%e o! t at commodity @ ic is a money-commodity0 B5 e same occ%rs in a merely nominal c ange o! 8al%e, t e rise or !all o! more tokens o! 8al%e, ot er conditions being eD%al0C 'et t e total capital R V1==, and t e pro!it R V<=, t e rate o! pro!it being R <=T0 $ o%ld gold !all by al!, or do%ble, t e same capital pre8io%sly @ort only V1==, @ill be @ort V<== i! it !alls and t e pro!it @ill be @ort V2=, i0 e0, it @ill be expressed in so m%c money instead o! t e !ormer V<=# i! it rises, t e capital o! V1== @ill

1=6

; apter 4&&

be @ort only V+=, and t e pro!it @ill be represented by a prod%ct, @ ose 8al%e @ill be V1=0 A%t in eit er case <==:2= R +=:1= R 1==:<= R <=T0 &n all t ese examples t ere @o%ld, o@e8er, a8e been no act%al c ange in t e magnit%de o! capital-8al%e, and only in t e money-expression o! t e same 8al%e and t e same s%rpl%s-8al%e0 For t is reason sN;, or t e rate o! pro!it, co%ld not be a!!ected0 &n t e second case t ere is an act%al c ange o! magnit%de in t e 8al%e, b%t %naccompanied by a c ange in t e ratio o! 8 to c# in ot er @ords, @it a constant rate o! s%rpl%s-8al%e t e relation o! capital in8ested in labo%r-po@er B8ariable capital considered as an index o! t e amo%nt o! labo%rpo@er set in motionC to t e capital in8ested in means o! prod%ction remains t e same0 (nder t ese circ%mstances, no matter @ et er @e a8e ;, or n;, or ;Nn, e0g0, 1,===, or <,===, or +==, and t e rate o! pro!it being <=T, t e pro!it R <== in t e !irst case, R 2== in t e second, and R 1== in t e t ird0 A%t <==:1,=== R 2==:<,=== R 1==:+== R <=T0 5 at is to say, t e rate o! pro!it is %nc anged, beca%se t e composition o! capital remains t e same and is not a!!ected by t e c ange in magnit%de0 5 ere!ore, an increase or decrease in t e amo%nt o! pro!it s o@s merely an increase or decrease in t e magnit%de o! t e in8ested capital0 &n t e !irst case t ere is, t ere!ore, b%t t e appearance o! a c ange in t e magnit%de o! t e employed capital, @ ile in t e second case t ere is an act%al c ange in magnit%de, b%t no c ange in t e organic composition o! t e capital, i0 e0, in t e relati8e proportions o! its 8ariable and constant portions0 A%t @it t e exception o! t ese t@o cases, a c ange in t e magnit%de o! t e employed capital is eit er t e result o! a preceding c ange in t e 8al%e o! one o! its components, and t ere!ore o! a c ange in t e relati8e magnit%de o! t ese components Bas long as t e s%rpl%s8al%e itsel! does not c ange @it t e 8ariable capitalC# or, t is c ange o! magnit%de Bas in labo%rprocesses on a large scale, introd%ction o! ne@ mac inery, etc0C is t e cause o! a c ange in t e relati8e magnit%de o! its t@o organic components0 &n all t ese cases, ot er circ%mstances remaining t e same, a c ange in t e magnit%de o! t e employed capital m%st t ere!ore be accompanied sim%ltaneo%sly by a c ange in t e rate o! pro!it0 ? rise in t e rate o! pro!it is al@ays d%e to a relati8e or absol%te increase o! t e s%rpl%s-8al%e in relation to its cost o! prod%ction, i0 e0, to t e ad8anced total capital, or to a decrease in t e di!!erence bet@een t e rate o! pro!it and t e rate o! s%rpl%s-8al%e0 Fl%ct%ations in t e rate o! pro!it may occ%r irrespecti8e o! c anges in t e organic components o! t e capital, or o! t e absol%te magnit%de o! t e capital, t ro%g a rise or !all in t e 8al%e o! t e !ixed or circ%lating ad8anced capital ca%sed by an increase or a red%ction o! t e @orking-time reD%ired !or its reprod%ction, t is increase or red%ction taking place independently o! t e already existing capital0 5 e 8al%e o! e8ery commodity I t %s also o! t e commodities making %p t e capital I is determined not by t e necessary labo%r-time contained in it, b%t by t e social labo%rtime reD%ired !or its reprod%ction0 5 is reprod%ction may take place %nder %n!a8o%rable or %nder propitio%s circ%mstances, distinct !rom t e conditions o! original prod%ction0 &!, %nder altered conditions, it takes do%ble or, con8ersely, al! t e time, to reprod%ce t e same material capital, and i! t e 8al%e o! money remains %nc anged, a capital !ormerly @ort V1== @o%ld be @ort V<==, or V+= respecti8ely0 $ o%ld t is appreciation or depreciation a!!ect all parts o! capital %ni!ormly, t en t e pro!it @o%ld also be accordingly expressed in do%ble, or al!, t e amo%nt o! money0 A%t i! it in8ol8es a c ange in t e organic composition o! t e capital, i! t e ratio o! t e 8ariable to t e constant portion o! capital rises or !alls, t en, ot er circ%mstances remaining t e same, t e rate o! pro!it @ill rise @it a relati8ely rising 8ariable capital and !all @it a relati8ely !alling one0 &! only t e money-8al%e o! t e ad8anced capital rises or !alls Bin conseD%ence o! a c ange in t e 8al%e o! moneyC, t en t e money-expression o! t e s%rpl%s-8al%e rises, or !alls, in t e same proportion0 5 e rate o! pro!it remains %nc anged0

Part II. Conversion of Profit into $verage Profit

Chapter &. 'ifferent Co positions of Capitals in 'ifferent (ranches of Production and Resultin) 'ifferences in Rates of Profit
&n t e preceding part @e demonstrated, among ot er t ings, t at t e rate o! pro!it may 8ary I rise or !all I @ ile t e rate o! s%rpl%s-8al%e remains t e same0 &n t e present c apter @e ass%me t at t e intensity o! labor exploitation, and t ere!ore t e rate o! s%rpl%s-8al%e and t e lengt o! t e @orking-day, are t e same in all t e sp eres o! prod%ction into @ ic t e social labor o! a gi8en co%ntry is di8ided0 ?dam $mit as already compre ensi8ely s o@n t at t e n%mero%s di!!erences in t e exploitation o! labor in 8ario%s sp eres o! prod%ction balance one anot er by means o! all kinds o! existing compensations, or compensations accepted as s%c on t e basis o! c%rrent preH%dice, so t at t ey are merely e8anescent distinctions and are o! no moment in a st%dy o! t e general relations0 3t er di!!erences, !or instance t ose in t e @age scale, rest largely on t e di!!erence bet@een simple and complicated labor mentioned in t e beginning o! Aook & Bp0 1*C, and a8e not ing to do @it t e intensity o! exploitation in t e di!!erent sp eres o! prod%ction, alt o%g t ey render t e lot o! t e laborer in t ose sp eres 8ery %neD%al0 For instance, i! t e labor o! a goldsmit is better paid t an t at o! a day-laborer, t e !ormer"s s%rpl%s-labor prod%ces proportionately more s%rpl%s-8al%e t an t e latter"s0 ?nd alt o%g t e eD%aliEing o! @ages and @orking-days, and t ereby o! t e rates o! s%rpl%s-8al%e, among di!!erent sp eres o! prod%ction, and e8en among di!!erent in8estments o! capital in t e same sp ere o! prod%ction, is c ecked by all kinds o! local obstacles, it is ne8ert eless taking place more and more @it t e ad8ance o! capitalist prod%ction and t e s%bordination o! all economic conditions to t is mode o! prod%ction0 5 e st%dy o! s%c !rictions, @ ile important to any special @ork on @ages, may be dispensed @it as incidental and irrele8ant in a general analysis o! capitalist prod%ction0 &n a general analysis o! t is kind it is %s%ally al@ays ass%med t at t e act%al conditions correspond to t eir conception, or, @ at is t e same, t at act%al conditions are represented only to t e extent t at t ey are typical o! t eir o@n general case0 5 e di!!erence in t e rates o! s%rpl%s-8al%e in di!!erent co%ntries, and conseD%ently t e national di!!erences in t e degree o! exploitation o! labor, are immaterial !or o%r present analysis0 W at @e @ant to s o@ in t is part is precisely t e @ay in @ ic a general rate o! pro!it takes s ape in any gi8en co%ntry0 &t is e8ident, o@e8er, t at a comparison o! t e 8ario%s national rates o! pro!it reD%ires only a collation o! t e pre8io%sly st%died @it t at @ ic is ere to be st%died0 First one s o%ld consider t e di!!erences in t e national rates o! s%rpl%s-8al%e, and t en, on t e basis o! t ese gi8en rates, a comparison s o%ld be made o! t e di!!erences in t e national rates o! pro!it0 &n so !ar as t ose di!!erences are not d%e to di!!erences in t e national rates o! s%rpl%s-8al%e, t ey m%st be d%e to circ%mstances in @ ic t e s%rpl%s-8al%e is ass%med, H%st as in t e analysis o! t is c apter, to be %ni8ersally t e same, i0 e0, constant0 We demonstrated in t e preceding c apter t at, ass%ming t e rate o! s%rpl%s-8al%e to be constant, t e rate o! pro!it obtaining !or a gi8en capital may rise or !all in conseD%ence o! circ%mstances

1=8

; apter 4&&&

@ ic raise or lo@er t e 8al%e o! one or t e ot er portion o! constant capital, and so a!!ect t e proportion bet@een t e 8ariable and constant components o! capital0 We !%rt er obser8ed t at circ%mstances @ ic prolong or red%ce t e time o! t%rno8er o! an indi8id%al capital may similarly in!l%ence t e rate o! pro!it0 $ince t e mass o! t e pro!it is identical @it t e mass o! t e s%rpl%s8al%e, and @it t e s%rpl%s-8al%e itsel!, it @as also seen t at t e mass o! t e pro!it I as distinct !rom t e rate o! pro!it I is not a!!ected by t e a!orementioned !l%ct%ations o! 8al%e0 5 ey only modi!y t e rate in @ ic a gi8en s%rpl%s-8al%e, and t ere!ore a pro!it o! a gi8en magnit%de, express t emsel8es# in ot er @ords, t ey modi!y only t e relati8e magnit%de o! pro!it, i0 e0, its magnit%de compared @it t e magnit%de o! t e ad8anced capital0 &nasm%c as capital @as tied %p or released by s%c !l%ct%ations o! 8al%e, it @as not only t e rate o! pro!it, b%t t e pro!it itsel!, @ ic @as likely to be a!!ected in t is indirect manner0 6o@e8er, t is as t en al@ays applied only to s%c capital as @as already in8ested, and not to ne@ in8estments0 Aesides, t e increase or red%ction o! pro!it al@ays depended on t e extent to @ ic t e same capital co%ld, in conseD%ence o! s%c !l%ct%ation o! 8al%e, set in motion more or less labor# in ot er @ords, it depended on t e extent to @ ic t e same capital co%ld, @it t e rate o! s%rpl%s-8al%e remaining t e same, obtain a larger or smaller amo%nt o! s%rpl%s-8al%e0 Far !rom contradicting t e general r%le, or !rom being an exception to it, t is seeming exception @as really b%t a special case in t e application o! t e general r%le0 &t @as seen in t e preceding part t at, t e degree o! exploitation remaining constant, c anges in t e 8al%e o! t e component parts o! constant capital and in t e time o! t%rno8er o! capital are attended by c anges in t e rate o! pro!it0 5 e ob8io%s concl%sion is t at t e rates o! pro!it in di!!erent sp eres o! prod%ction existing side by side a8e to di!!er @ en, ot er circ%mstances remaining %nc anged, t e time o! t%rno8er o! capitals employed in t e di!!erent sp eres di!!ers, or @ en t e 8al%e-relation o! t e organic components o! t ese capitals di!!ers in t e 8ario%s branc es o! prod%ction0 W at @e pre8io%sly regarded as c anges occ%rring s%ccessi8ely @it one and t e same capital is no@ to be regarded as sim%ltaneo%s di!!erences among capital in8estments existing side by side in di!!erent sp eres o! prod%ction0 &n t ese circ%mstances @e s all a8e to analyEe: 1C t e di!!erence in t e organic composition o! capitals, and <C t e di!!erence in t eir period o! t%rno8er0 5 e premise in t is entire analysis is nat%rally t at by speaking o! t e composition or t%rno8er o! a capital in a certain line o! prod%ction @e al@ays mean t e a8erage normal proportions o! capital in8ested in t is sp ere, and generally t e a8erage in t e total capital employed in t at partic%lar sp ere, and not t e accidental di!!erences o! t e indi8id%al capitals0 $ince it is !%rt er ass%med t at t e rate o! s%rpl%s-8al%e and t e @orking-day are constant, and since t is ass%mption also implies constant @ages, a certain D%antity o! 8ariable capital represents a de!inite D%antity o! labor-po@er set in motion, and t ere!ore a de!inite D%antity o! materialiEed labor0 &!, t ere!ore, V1== represent t e @eekly @age o! 1== laborers, indicating 1== act%al laborpo@ers, t en n times V1== indicate t e labo%r-po@ers o! n times 1== laborers, and V1==Nn t ose o! 1==Nn laborers0 5 e 8ariable capital t %s ser8es ere Bas is al@ays t e case @ en t e @age is gi8enC as an index o! t e amo%nt o! labor set in motion by a de!inite total capital0 7i!!erences in t e magnit%de o! t e employed 8ariable capitals ser8e, t ere!ore, as indexes o! t e di!!erence in t e amo%nt o! employed labor-po@er0 &! V1== indicate 1== laborers per @eek, and represent 6,=== @orking- o%rs at 6= @orking- o%rs per @eek, t en V<== represent 1<,===, and V+= only 3,=== @orking- o%rs0 Ay composition o! capital @e mean, as stated in Aook &, t e proportion o! its acti8e and passi8e components, i0 e0, o! 8ariable and constant capital0 5@o proportions enter into consideration %nder t is eading0 5 ey are not eD%ally important, alt o%g t ey may prod%ce similar e!!ects %nder certain circ%mstances0

1=*

; apter 4&&&

5 e !irst proportion rests on a tec nical basis, and m%st be regarded as gi8en at a certain stage o! de8elopment o! t e prod%cti8e !orces0 ? de!inite D%antity o! labor-po@er represented by a de!inite n%mber o! laborers is reD%ired to prod%ce a de!inite D%antity o! prod%cts in, say, one day, and I @ at is sel!-e8ident I t ereby to cons%me prod%cti8ely, i0 e0, to set in motion, a de!inite D%antity o! means o! prod%ction, mac inery, ra@ materials, etc0 ? de!inite n%mber o! laborers corresponds to a de!inite D%antity o! means o! prod%ction, and ence a de!inite D%antity o! li8ing labor to a de!inite D%antity o! labor materialiEed in means o! prod%ction0 5 is proportion di!!ers greatly in di!!erent sp eres o! prod%ction, and !reD%ently e8en in di!!erent branc es o! one and t e same ind%stry, alt o%g it may by coincidence be entirely or approximately t e same in entirely separate lines o! ind%stry0 5 is proportion !orms t e tec nical composition o! capital and is t e real basis o! its organic composition0 6o@e8er, it is also possible t at t is !irst proportion may be t e same in di!!erent lines o! ind%stry, pro8ided 8ariable capital is merely an index o! labor-po@er and constant capital merely an index o! t e mass o! means o! prod%ction set in motion by t is labor-po@er0 For instance, certain @ork in copper and iron may reD%ire t e same ratio o! labor-po@er to mass o! means o! prod%ction0 A%t since copper is more expensi8e t an iron, t e 8al%e-relation bet@een 8ariable and constant capital is di!!erent in eac case, and ence also t e 8al%e-composition o! t e t@o total capitals0 5 e di!!erence bet@een t e tec nical composition and t e 8al%e composition is mani!ested in eac branc o! ind%stry in t at t e 8al%e-relation o! t e t@o portions o! capital may 8ary @ ile t e tec nical composition is constant, and t e 8al%e-relation may remain t e same @ ile t e tec nical composition 8aries0 5 e latter case @ill, o! co%rse, be possible only i! t e c ange in t e ratio o! t e employed masses o! means o! prod%ction and labor-po@er is compensated by a re8erse c ange in t eir 8al%es0 5 e 8al%e-composition o! capital, inasm%c as it is determined by, and re!lects, its tec nical composition, is called t e organic composition o! capital0 &n t e case o! 8ariable capital, t ere!ore, @e ass%me t at it is t e index o! a de!inite D%antity o! labor-po@er, or o! a de!inite n%mber o! laborers, or a de!inite D%antity o! li8ing labor set in motion0 We a8e seen in t e preceding part t at a c ange in t e magnit%de o! t e 8al%e o! 8ariable capital mig t e8ent%ally indicate not ing b%t a ig er or lo@er price o! t e same mass o! labor0 A%t ere, @ ere t e rate o! s%rpl%s-8al%e and t e @orking-day are taken to be constant, and t e @ages !or a de!inite @orking period are gi8en, t is is o%t o! t e D%estion0 3n t e ot er and, a di!!erence in t e magnit%de o! t e constant capital may like@ise be an index o! a c ange in t e mass o! means o! prod%ction set in motion by a de!inite D%antity o! labor-po@er0 A%t it may also stem !rom a di!!erence in 8al%e bet@een t e means o! prod%ction set in motion in one sp ere and t ose o! anot er0 Aot points o! 8ie@ m%st t ere!ore be examined ere0 Finally, @e m%st take note o! t e !ollo@ing essential !acts: 'et V1== be t e @eekly @age o! 1== laborers0 'et t e @eekly @orking- o%rs R 6=0 F%rt ermore, let t e rate o! s%rpl%s-8al%e R 1==T0 &n t is case, t e laborers @ork 3= o! t e 6= o%rs !or t emsel8es and 3= o%rs gratis !or t e capitalist0 &n !act, t e V1== o! @ages represent H%st t e 3= @orking- o%rs o! 1== laborers, or altoget er 3,=== @orking- o%rs, @ ile t e ot er 3,=== o%rs @orked by t e laborers are incorporated in t e V1== o! s%rpl%s-8al%e, or in t e pro!it pocketed by t e capitalist0 ?lt o%g t e @age o! V1== does not, t ere!ore, express t e 8al%e in @ ic t e @eekly labor o! t e 1== laborers is materialiEed, it indicates ne8ert eless Bsince t e lengt o! t e @orking-day and t e rate o! s%rpl%s-8al%e are gi8enC t at t is capital sets in motion 1== laborers !or 6,=== @orking- o%rs0 5 e capital o! V1== indicates t is, !irst, beca%se it indicates t e n%mber o! laborers set in motion, @it V1 R 1 laborer per @eek, ence V1== R 1== laborers# and, secondly, beca%se, since t e rate o! s%rpl%s-8al%e is gi8en as 1==T, eac o! t ese laborers per!orms t@ice as m%c @ork as is contained in is @ages, so t at V1, i0 e0, is @age, @ ic is t e expression o!

11=

; apter 4&&&

al! a @eek o! labor, act%ates a @ ole @eek"s labor, H%st as V1== sets in motion 1== @eeks o! labor, alt o%g it contains only +=0 ? 8ery essential distinction is t %s to be made in regard to 8ariable capital laid o%t in @ages0 &ts 8al%e as t e s%m o! @ages, i0 e0, as a certain amo%nt o! materialised labo%r, is to be disting%is ed !rom its 8al%e as a mere index o! t e mass o! li8ing labo%r @ ic it sets in motion0 5 e latter is al@ays greater t an t e labo%r @ ic it incorporates, and is, t ere!ore, represented by a greater 8al%e t an t at o! t e 8ariable capital0 5 is greater 8al%e is determined, on t e one and, by t e n%mber o! labo%rers set in motion by t e 8ariable capital and, on t e ot er, by t e D%antity o! s%rpl%s-labo%r per!ormed by t em0 &t !ollo@s !rom t is manner o! looking %pon 8ariable capital t at: W en a capital in8ested in prod%ction sp ere ? expends only 1== in 8ariable capital !or eac >== o! total capital, lea8ing 6== !or constant capital, @ ile a capital in8ested in prod%ction sp ere A expends 6== !or 8ariable and only 1== !or constant capital, t en capital ? o! >== sets in motion only 1== o! labo%r-po@er, or, in t e terms o! o%r pre8io%s ass%mption, 1== @eeks o! labo%r, or 6,=== o%rs o! li8ing labo%r, @ ile t e same amo%nt o! capital A @ill set in motion 6== @eeks o! labo%r, or 36,=== o%rs o! li8ing labo%r0 5 e capital in ? @o%ld t en appropriate only += @eeks o! labo%r, or 3,=== o%rs o! s%rpl%s-labo%r, @ ile t e same amo%nt o! capital in A @o%ld appropriate 3== @eeks o! labo%r, or 18,=== o%rs0 4ariable capital is not only t e index o! t e labo%r embodied in it0 W en t e rate o! s%rpl%s-8al%e is kno@n it is also an index o! t e amo%nt o! labo%r set in motion o8er and abo8e t at embodied in itsel!, i0 e0, o! s%rpl%s-labo%r0 ?ss%ming t e same intensity o! exploitation, t e pro!it in t e !irst case @o%ld be 1==N>== R 1N> R 12 <N>T, and in t e second case, 6==N>== R 6N> R 8+ +N>T, or a six-!old rate o! pro!it0 &n t is case, t e pro!it itsel! @o%ld act%ally be six times as great, 6== in A as against 1== in ?, beca%se t e same capital set in motion six times as m%c li8ing labo%r, @ ic at t e same le8el o! exploitation means six times as m%c s%rpl%s 8al%e, and t %s six times as m%c pro!it0 A%t i! t e capital in8ested in ? @ere not >== b%t V>,===, @ ile t at in8ested in A @ere only V>==, and t e organic composition o! bot @ere to remain t e same, t en t e capital in ? @o%ld employ V1,=== o! t e V>,=== as 8ariable capital, t at is, 1,=== labo%rers per @eek R 6=,=== o%rs o! li8ing labo%r, o! @ ic 3=,=== @o%ld be s%rpl%s-labo%r0 .et eac V>== o! t e capital in ? @o%ld contin%e to set in motion only 1N6 as m%c li8ing labo%r, and ence only 1N6 as m%c s%rpl%slabo%r, as t e capital in A, and @o%ld prod%ce only 1N6 as m%c pro!it0 &! @e consider t e rate o! pro!it, t en in ? 1===N>=== R 1==N>== R 12 <N>T, as compared @it 6==N>==, or 8+ +N>T, in A0 5aking eD%al amo%nts o! capital, t e rates o! pro!it di!!er beca%se, o@ing to t e di!!erent masses o! li8ing labo%r set in motion, t e masses o! s%rpl%s-8al%e, and t %s o! pro!it, di!!er, alt o%g t e rates o! s%rpl%s-8al%e are t e same0 We get practically t e same res%lt i! t e tec nical conditions are t e same in bot sp eres o! prod%ction, b%t t e 8al%e o! t e elements o! t e employed constant capital is greater or smaller in t e one t an in t e ot er0 'et %s ass%me t at bot in8est V1== as 8ariable capital and t ere!ore employ 1== labo%rers per @eek to set in motion t e same D%antity o! mac inery and ra@ materials0 A%t let t e latter be more expensi8e in A t an in ?0 For instance, let t e V1== o! 8ariable capital set in motion V<== o! constant capital in ?, and V2== in A0 Wit t e same rate o! s%rpl%s-8al%e, o! 1==T, t e s%rpl%s-8al%e prod%ced is in eit er case eD%al to V1==0 6ence, t e pro!it is also eD%al to V1== in bot 0 A%t t e rate o! pro!it in ? is 1==NB<== c U 1==8C R X R 33XT, @ ile in A it is 1==NB2==c U 1==8C R 1N+ R <=T0 &n !act, i! @e select a certain aliD%ot part o! t e total capital in eit er case, @e !ind t at in e8ery V1== o! A only V<=, or 1N+, constit%te 8ariable capital, @ ile in e8ery V1== o! ? V33X, or X, !orm 8ariable capital0 A prod%ces less pro!it !or eac V1==, beca%se it sets in motion less li8ing labo%r t an ?0 5 e di!!erence in t e rates o! pro!it t %s resol8es itsel! once more, in t is case, into a di!!erence o! t e masses o! pro!it, beca%se o! t e masses o! s%rpl%s-8al%e, prod%ced by eac 1== o! in8ested capital0 5 e di!!erence bet@een t is second example and t e !irst is H%st t is: 5 e eD%alisation bet@een ? and A in t e second case @o%ld reD%ire only a c ange in t e 8al%e o! t e constant capital o! eit er

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? or A, pro8ided t e tec nical basis remained t e same0 A%t in t e !irst case t e tec nical composition itsel! is di!!erent in t e t@o sp eres o! prod%ction and @o%ld a8e to be completely c anged to ac ie8e an eD%alisation0 5 e di!!erent organic composition o! 8ario%s capitals is t %s independent o! t eir absol%te magnit%de0 &t is al@ays b%t a D%estion o! o@ m%c o! e8ery 1== is 8ariable and o@ m%c constant capital0 ;apitals o! di!!erent magnit%de, calc%lated in percentages, or, @ at amo%nts to t e same in t is case, capitals o! t e same magnit%de operating !or t e same @orking-time and @it t e same degree o! exploitation may prod%ce 8ery m%c di!!erent amo%nts o! pro!it, beca%se o! s%rpl%s8al%e, !or t e reason t at a di!!erence in t e organic composition o! capital in di!!erent sp eres o! prod%ction implies a di!!erence in t eir 8ariable part, t %s a di!!erence in t e D%antities o! li8ing labo%r set in motion by t em, and t ere!ore also a di!!erence in t e D%antities o! s%rpl%s-labo%r appropriated by t em0 ?nd t is s%rpl%s-labo%r is t e s%bstance o! s%rpl%s-8al%e, and t %s o! pro!it0 &n di!!erent sp eres o! prod%ction eD%al portions o! t e total capital comprise %neD%al so%rces o! s%rpl%s-8al%e, and t e sole so%rce o! s%rpl%s-8al%e is li8ing labo%r0 ?ss%ming t e same degree o! labo%r exploitation, t e mass o! labo%r set in motion by a capital o! 1==, and conseD%ently t e mass o! s%rpl%s-labo%r appropriated by it, depend on t e magnit%de o! its 8ariable component0 &! a capital, consisting in per cent o! *= cU 1=8, prod%ced as m%c s%rpl%s8al%e, or pro!it, at t e same degree o! exploitation as a capital consisting o! 1= c U *=8, it @o%ld be as plain as day t at t e s%rpl%s-8al%e, and t %s 8al%e in general, m%st a8e an entirely di!!erent so%rce t an labo%r, and t at political economy @o%ld t en be depri8ed o! e8ery rational basis0 &! @e are to ass%me all t e time t at V1 stands !or t e @eekly @age o! a labo%rer @orking 6= o%rs, and t at t e rate o! s%rpl%s-8al%e is 1==T, t en it is e8ident t at t e total 8al%e prod%ct o! one labo%rer in a @eek, is V<0 5en labo%rers @o%ld t en prod%ce no more t an V<=0 ?nd since V1= o! t e V<= replace t e @ages, t e ten labo%rers cannot prod%ce more s%rpl%s-8al%e t an V1=0 3n t e ot er and, *= labo%rers, @ ose total prod%ct is V18=, and @ ose @ages amo%nt to V*=, @o%ld prod%ce a s%rpl%s-8al%e o! V*=0 5 e rate o! pro!it in t e !irst case @o%ld t %s be 1=T, and in t e ot er *=T 0 &! t is @ere not so, t en 8al%e and s%rpl%s-8al%e @o%ld be somet ing else t an materialised labo%r0 $ince capitals in di!!erent sp eres o! prod%ction 8ie@ed in percentages I or as capitals o! eD%al magnit%de I are di8ided di!!erently into 8ariable and constant capital, setting in motion %neD%al D%antities o! li8ing labo%r and prod%cing di!!erent s%rpl%s-8al%es, and t ere!ore pro!its, it !ollo@s t at t e rate o! pro!it, @ ic consists precisely o! t e ratio o! s%rpl%s8al%e to total capital in per cent, m%st also di!!er0 -o@, i! capitals in di!!erent sp eres o! prod%ction, calc%lated in per cent, i0 e0, capitals o! eD%al magnit%de, prod%ce %neD%al pro!its in conseD%ence o! t eir di!!erent organic composition, t en it !ollo@s t at t e pro!its o! %neD%al capitals in di!!erent sp eres o! prod%ction cannot be proportional to t eir respecti8e magnit%des, or t at pro!its in di!!erent sp eres o! prod%ction are not proportional to t e magnit%de o! t e respecti8e capitals in8ested in t em0 For i! pro!its @ere to gro@ pro rata to t e magnit%de o! in8ested capital, it @o%ld mean t at in per cent t e pro!its @o%ld be t e same, so t at in di!!erent sp eres o! prod%ction capitals o! eD%al magnit%de @o%ld a8e eD%al rates o! pro!it, in spite o! t eir di!!erent organic composition0 &t is only in t e same sp ere o! prod%ction, @ ere @e a8e a gi8en organic composition o! capital, or in di!!erent sp eres @it t e same organic composition o! capital, t at t e amo%nts o! pro!its are directly proportional to t e amo%nts o! in8ested capitals0 5o say t at t e pro!its o! %neD%al capitals are proportional to t eir magnit%des @o%ld only mean t at capitals o! eD%al magnit%de yield eD%al pro!its, or t at t e rate o! pro!it is t e same !or all capitals, @ ate8er t eir magnit%de and organic composition0 5 ese statements old good on t e ass%mption t at t e commodities are sold at t eir 8al%es0 5 e 8al%e o! a commodity is eD%al to t e 8al%e o! t e constant capital contained in it, pl%s t e 8al%e o! t e 8ariable capital reprod%ced in it, pl%s t e increment I t e s%rpl%s-8al%e prod%ced I o! t is

11<

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8ariable capital0 ?t t e same rate o! s%rpl%s-8al%e, its D%antity e8idently depends on t e D%antity o! t e 8ariable capital0 5 e 8al%e o! t e prod%ct o! an indi8id%al capital o! 1== is, in one case, *= c U 1=8 U 1=s R 11=# and in t e ot er, 1=c U *=8 U *=s R l*=0 &! t e commodities go at t eir 8al%es, t e !irst prod%ct is sold at 11=, o! @ ic 1= represent s%rpl%s-8al%e, or %npaid labo%r, and t e second at 1*=, o! @ ic *= represent s%rpl%s-8al%e, or %npaid labo%r0 5 is is partic%larly important in comparing rates o! pro!it in di!!erent co%ntries0 'et %s ass%me t at t e rate o! s%rpl%s-8al%e in one E%ropean co%ntry is 1==T, so t at t e labo%rer @orks al! o! t e @orking-day !or imsel! and t e ot er al! !or is employer0 'et %s !%rt er ass%me t at t e rate o! pro!it in an ?sian co%ntry is <+T, so t at t e labo%rer @orks 2N+ o! t e @orking-day !or imsel!, and 1N+ !or is employer0 'et 82 c U l68 be t e composition o! t e national capital in t e E%ropean co%ntry, and 16c U 828 in t e ?sian co%ntry, @ ere little mac inery, etc0, is %sed, and @ ere a gi8en D%antity o! labo%r-po@er cons%mes relati8ely little ra@ material prod%cti8ely in a gi8en time0 5 en @e a8e t e !ollo@ing calc%lation: &n t e E%ropean co%ntry t e 8al%e o! t e prod%ct R 82 c U 168 U 16s R 116# rate o! pro!it R 16N1== R 16T0 &n t e ?sian co%ntry t e 8al%e o! t e prod%ct R 16 c U 828 U <1s R 1<1# rate o! pro!it R <1N1== R <1T0 5 e rate o! pro!it in t e ?sian co%ntry is t %s more t an <+T ig er t an in t e E%ropean co%ntry, alt o%g t e rate o! s%rpl%s-8al%e in t e !ormer is one-!o%rt t at o! t e latter0 Men like ;arey, Aastiat, and tutti 3uanti, @o%ld arri8e at t e 8ery opposite concl%sion0 Ay t e @ay, di!!erent national rates o! pro!it are mostly based on di!!erent national rates o! s%rpl%s-8al%e0 A%t in t is c apter @e compare %neD%al rates o! pro!it deri8ed !rom t e same rate o! s%rpl%s-8al%e0 ?side !rom di!!erences in t e organic composition o! capitals, and t ere!ore aside !rom t e di!!erent masses o! labo%r I and conseD%ently, ot er circ%mstances remaining t e same, !rom di!!erent masses o! s%rpl%s-labo%r set in motion by capitals o! t e same magnit%de in di!!erent sp eres o! prod%ction, t ere is yet anot er so%rce o! ineD%ality in rates o! pro!it0 5 is is t e di!!erent period o! t%rno8er o! capital in di!!erent sp eres o! prod%ction0 We a8e seen in ; apter &4 t at, ot er conditions being eD%al, t e rates o! pro!it o! capitals o! t e same organic composition are in8ersely proportional to t eir periods o! t%rno8er0 We a8e also seen t at t e same 8ariable capital t%rned o8er in di!!erent periods o! time prod%ces di!!erent D%antities o! ann%al s%rpl%s-8al%e0 5 e di!!erence in t e periods o! t%rno8er is t ere!ore anot er reason @ y capitals o! eD%al magnit%de in di!!erent sp eres o! prod%ction do not prod%ce eD%al pro!its in eD%al periods, and @ y, conseD%ently, t e rates o! pro!it in t ese di!!erent sp eres di!!er0 ?s !ar as t e ratio o! t e !ixed and circ%lating capital in t e composition o! capitals is concerned, o@e8er, it does not in itsel! a!!ect t e rate o! pro!it in t e least0 &t can a!!ect t e rate o! pro!it only i! in one case, t is di!!erence in composition coincides @it a di!!erent ratio o! t e 8ariable and constant parts, so t at t e di!!erence in t e rate o! pro!it is d%e to t is latter di!!erence, and not to t e di!!erent ratio o! !ixed and circ%lating capital# and, in t e ot er case, i! t e di!!erence in t e ratio o! t e !ixed and circ%lating parts o! capital is responsible !or a di!!erence in t e period o! t%rno8er in @ ic a certain pro!it is realised0 &! capitals are di8ided into !ixed and circ%lating capital in di!!erent proportions, t is @ill nat%rally al@ays in!l%ence t e period o! t%rno8er and ca%se di!!erences in it0 A%t t is does not imply t at t e period o! t%rno8er, in @ ic t e same capitals realise certain pro!its, is di!!erent0 For instance, ? may contin%ally a8e to con8ert t e greater part o! its prod%ct into ra@ materials, etc0, @ ile A may %se t e same mac inery, etc0, !or a longer time, and may need less ra@ material, b%t bot ? and A, being occ%pied in prod%ction, al@ays a8e a part o! t eir capital engaged, t e one in ra@ materials, i0 e0, in circ%lating capital, and t e ot er in mac inery, etc0, or in !ixed capital0 ? contin%ally con8erts a portion o! its capital !rom t e !orm o! commodities into t at o! money, and t e latter again into t e !orm o! ra@

113

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material, @ ile A employs a portion o! its capital !or a longer time as an instr%ment o! labo%r @it o%t any s%c con8ersions0 &! bot o! t em employ t e same amo%nt o! labo%r, t ey @ill indeed sell D%antities o! prod%cts o! %neD%al 8al%e in t e co%rse o! t e year, b%t bot D%antities o! prod%cts @ill contain eD%al amo%nts o! s%rpl%s-8al%e, and t eir rates o! pro!it, calc%lated on t e entire capital in8ested, @ill be t e same, alt o%g t eir composition o! !ixed and circ%lating capital, and t eir periods o! t%rno8er, are di!!erent0 Aot capitals realise eD%al pro!its in eD%al periods, alt o%g t eir periods o! t%rno8er are di!!erent0 1 5 e di!!erence in t e period o! t%rno8er is in itsel! o! no importance, except so !ar as it a!!ects t e mass o! s%rpl%s-labo%r appropriated and realised by t e same capital in a gi8en time0 &!, t ere!ore, a di!!erent di8ision into !ixed and circ%lating capital does not necessarily imply a di!!erent period o! t%rno8er, @ ic @o%ld in its t%rn imply a di!!erent rate o! pro!it, it is e8ident t at i! t ere is any s%c di!!erence in t e rates o! pro!it, it is not d%e to a di!!erent ratio o! !ixed to circ%lating capital as s%c , b%t rat er to t e !act t at t is di!!erent ratio indicates an ineD%ality in t e periods o! t%rno8er a!!ecting t e rate o! pro!it0 &t !ollo@s, t ere!ore, t at t e di!!erent composition o! constant capital in respect to its !ixed and circ%lating portions in 8ario%s branc es o! prod%ction as in itsel! no bearing on t e rate o! pro!it, since it is t e ratio o! 8ariable to constant capital @ ic decides t is D%estion, @ ile t e 8al%e o! t e constant capital, and t ere!ore also its magnit%de in relation to t e 8ariable is entirely %nrelated to t e !ixed or circ%lating nat%re o! its components0 .et it may be !o%nd I and t is o!ten leads to incorrect concl%sions I t at @ ere8er !ixed capital is considerably ad8anced t is b%t expresses t e !act t at prod%ction is on a large scale, so t at constant capital greatly o%t@eig s t e 8ariable, or t at t e li8ing labo%r-po@er it employs is small compared to t e mass o! t e means o! prod%ction @ ic it operates0 We a8e t %s demonstrated t at di!!erent lines o! ind%stry a8e di!!erent rates o! pro!it, @ ic correspond to di!!erences in t e organic composition o! t eir capitals and, @it in indicated limits, also to t eir di!!erent periods o! t%rno8er# gi8en t e same time o! t%rno8er, t e la@ Bas a general tendencyC t at pro!its are related to one anot er as t e magnit%des o! t e capitals, and t at, conseD%ently, capitals o! eD%al magnit%de yield eD%al pro!its in eD%al periods, applies only to capitals o! t e same organic composition, e8en @it t e same rate o! s%rpl%s-8al%e0 5 ese statements old good on t e ass%mption @ ic as been t e basis o! all o%r analyses so !ar, namely t at t e commodities are sold at t eir 8al%es0 5 ere is no do%bt, on t e ot er and, t at aside !rom %nessential, incidental and m%t%ally compensating distinctions, di!!erences in t e a8erage rate o! pro!it in t e 8ario%s branc es o! ind%stry do not exist in reality, and co%ld not exist @it o%t abolis ing t e entire system o! capitalist prod%ction0 &t @o%ld seem, t ere!ore, t at ere t e t eory o! 8al%e is incompatible @it t e act%al process, incompatible @it t e real p enomena o! prod%ction, and t at !or t is reason any attempt to %nderstand t ese p enomena s o%ld be gi8en %p0 &t !ollo@s !rom t e !irst part o! t is 8ol%me t at t e cost-prices o! prod%cts in di!!erent sp eres o! prod%ction are eD%al i! eD%al portions o! capital a8e been ad8anced !or t eir prod%ction, o@e8er di!!erent t e organic composition o! s%c capitals0 5 e distinction bet@een 8ariable and constant capital escapes t e capitalist in t e cost-price0 ? commodity !or @ ose prod%ction e m%st ad8ance V1== costs im H%st as m%c , @ et er e in8ests *= c U 1=8, or 1=c U *=80 &t costs im V1== in eit er case I no more and no less0 5 e cost-prices are t e same !or eD%al capitals in di!!erent sp eres, no matter o@ m%c t e prod%ced 8al%es and s%rpl%s-8al%es may di!!er0 5 e eD%ality o! cost-prices is t e basis !or competition among in8ested capitals, @ ereby an a8erage pro!it is bro%g t abo%t0

Chapter *. #or ation of a +eneral Rate of Profit ,-vera)e Rate of Profit. and Transfor ation of the Values of Co odities into Prices of Production
5 e organic composition o! capital depends at any gi8en time on t@o circ%mstances: !irst, on t e tec nical relation o! labo%r po@er employed to t e mass o! t e means o! prod%ction employed# secondly, on t e price o! t ese means o! prod%ction0 5 is composition, as @e a8e seen, m%st be examined on t e basis o! percentage ratios0 We express t e organic composition o! a certain capital consisting 2N+ o! constant and 1N+ o! 8ariable capital, by t e !orm%la 8= c U <=80 &t is !%rt ermore ass%med in t is comparison t at t e rate o! s%rpl%s-8al%e is %nc angeable0 'et it be any rate picked at random# say, 1==T0 5 e capital o! 8= c U <=8 t en prod%ces a s%rpl%s-8al%e o! <=s, and t is yields a rate o! pro!it o! <=T on t e total capital0 5 e magnit%de o! t e act%al 8al%e o! its prod%ct depends on t e magnit%de o! t e !ixed part o! t e constant capital, and on t e portion @ ic passes !rom it t ro%g @ear and tear into t e prod%ct0 A%t since t is circ%mstance as absol%tely no bearing on t e rate o! pro!it, and ence, in t e present analysis, @e s all ass%me, !or t e sake o! simplicity, t at t e constant capital is e8ery@ ere %ni!ormly and entirely trans!erred to t e ann%al prod%ct o! t e capitals0 &t is !%rt er ass%med t at t e capitals in t e di!!erent sp eres o! prod%ction ann%ally realise t e same D%antities o! s%rpl%s-8al%e proportionate to t e magnit%de o! t eir 8ariable parts0 For t e present, t ere!ore, @e disregard t e di!!erence @ ic may be prod%ced in t is respect by 8ariations in t e d%ration o! t%rno8ers0 5 is point @ill be disc%ssed later0 'et %s take !i8e di!!erent sp eres o! prod%ction, and let t e capital in eac a8e a di!!erent organic composition as !ollo@s: ;apitals )ate o! $%rpl%s- 4al%e )ate $%rpl%s- 4al%e o! o! 4al%e ,rod%ct ,ro!it &0 8=c U 1==T <=8 &&0 >=c U 1==T 3=8 &&&0 6=c 1==T U 2=8 &40 8+c 1==T U 1+8 40 *+c U 1==T <= 1<= <=T

3=

13=

3=T

2=

12=

2=T

1+

11+

1+T

1=+

+T

11+

; apter &J

+8 6ere, in di!!erent sp eres o! prod%ction @it t e same degree o! exploitation, @e !ind considerably di!!erent rates o! pro!it corresponding to t e di!!erent organic composition o! t ese capitals0 5 e s%m total o! t e capitals in8ested in t ese !i8e sp eres o! prod%ction R +==# t e s%m total o! t e s%rpl%s-8al%e prod%ced by t em R 11=# t e aggregate 8al%e o! t e commodities prod%ced by t em R 61=0 &! @e consider t e +== as a single capital, and capitals & to 4 merely as its component parts Bas, say, di!!erent departments o! a cotton mill, @ ic as di!!erent ratios o! constant to 8ariable capital in its carding, preparatory spinning, spinning, and @ea8ing s ops, and in @ ic t e a8erage ratio !or t e !actory as a @ ole as still to be calc%latedC, t e mean composition o! t is capital o! +== @o%ld R 3*=c U 11=8, or, in per cent, R >8c U <<80 $ o%ld eac o! t e capitals o! 1== be regarded as 1N+ o! t e total capital, its composition @o%ld eD%al t is a8erage o! >8 c U <<8# !or e8ery 1== t ere @o%ld be an a8erage s%rpl%s-8al%e o! <<# t %s, t e a8erage rate o! pro!it @o%ld R <<T, and, !inally, t e price o! e8ery !i!t o! t e total prod%ct prod%ced by t e +== @o%ld R 1<<0 5 e prod%ct o! eac !i!t o! t e ad8anced total capital @o%ld t en a8e to be sold at 1<<0 A%t to a8oid entirely erroneo%s concl%sions it m%st not be ass%med t at all cost-prices R 1==0 Wit 8=c U <=8 and a rate o! s%rpl%s-8al%e R 1==T, t e total 8al%e o! commodities prod%ced by capital & R 1== @o%ld be 8= c U <=8 U <=s R 1<=, pro8ided t e entire constant capital @ent into t e ann%al prod%ct0 -o@, t is may %nder certain circ%mstances be t e case in some sp eres o! prod%ction0 A%t ardly in cases @ ere t e proportion o! c : 8 R 2 : 10 We m%st, t ere!ore, remember in comparing t e 8al%es prod%ced by eac 1== o! t e di!!erent capitals, t at t ey @ill di!!er in accordance @it t e di!!erent composition o! c as to its !ixed and circ%lating parts, and t at, in t%rn, t e !ixed portions o! eac o! t e di!!erent capitals depreciate slo@ly or rapidly as t e case may be, t %s trans!erring %neD%al D%antities o! t eir 8al%e to t e prod%ct in eD%al periods o! time0 A%t t is is immaterial to t e rate o! pro!it0 -o matter @ et er t e 8= c gi8e %p a 8al%e o! 8=, or +=, or +, to t e ann%al prod%ct, and t e ann%al prod%ct conseD%ently R 8= c U <=8 U <=s R 1<=, or +=c U <=8 U <=s R *=, or +8 U <=8 U <=s R 2+# in all t ese cases t e red%ndance o! t e prod%ct"s 8al%e o8er its cost-price R <=, and in calc%lating t e rate o! pro!it t ese <= are related to t e capital o! 1== in all o! t em0 5 e rate o! pro!it o! capital &, t ere!ore, is <=T in e8ery case0 5o make t is still plainer, @e let di!!erent portions o! constant capital go into t e 8al%e o! t e prod%ct o! t e same !i8e capitals in t e !ollo@ing table: ;apitals )ate o! $%rpl%s- )ate $%rpl%s- 4al%e o! 4al%e ,ro!it &0 8=c U 1==T <=8 &&0 >=c U 1==T 3=8 &&&0 6=c 1==T U 2=8 &40 8+c 1==T U 1+8 <= <=T (sed %p c 4al%e o! ;ostcommodities ,rice

+=

*=

>=

3=

3=T

+1

111

81

2=

2=T

+1

131

*1

1+

1+T

2=

>=

++

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; apter &J

40 *+c U 1==T +8 3*=c 11=8 >8c <<8 U I

+T

1=

<=

1+

11=

11=T I

5otal

U I

<<

<<T

?8erage

&! @e no@ again consider capitals & to 4 as a single total capital, @e s all see t at, in t is case as @ell, t e composition o! t e s%ms o! t ese !i8e capitals R +== R 3*= c U 11=8, so t at @e get t e same a8erage composition R >8c U <<8, and, similarly, t e a8erage s%rpl%s-8al%e remains <<0 &! @e di8ide t is s%rpl%s-8al%e %ni!ormly among capitals & to 4, @e get t e !ollo@ing commodityprices: ;apitals $%rpl%s- 4al%e o! ;ost-,rice o! ,rice o! )ate 7e8iation 4al%e ;ommodities ;ommodities ;ommodities o! o! ,ro!it ,rice !rom 4al%e &0 8=c U <= <=8 &&0 >=c U 3= 3=8 &&&0 6=c 2= U 2=8 &40 8+c 1+ U 1+8 40 *+c U + +8 *= >= *< <<T U<

111

81

1=3

<<T

-8

131

*1

113

<<T

-18

>=

++

>>

<<T

U>

<=

1+

3>

<<T

U1>

5aken toget er, t e commodities are sold at < U > U 1> R <6 abo8e, and 8 U 18 R <6 belo@ t eir 8al%e, so t at t e de8iations o! price !rom 8al%e balance o%t one anot er t ro%g t e %ni!orm distrib%tion o! s%rpl%s-8al%e, or t ro%g addition o! t e a8erage pro!it o! << per 1== %nits o! ad8anced capital to t e respecti8e cost-prices o! t e commodities & to 40 3ne portion o! t e commodities is sold abo8e its 8al%e in t e same proportion in @ ic t e ot er is sold belo@ it0 ?nd it is only t e sale o! t e commodities at s%c prices t at enables t e rate o! pro!it !or capitals & to 4 to be %ni!ormly <<T, regardless o! t eir di!!erent organic composition0 5 e prices @ ic obtain as t e a8erage o! t e 8ario%s rates o! pro!it in t e di!!erent sp eres o! prod%ction added to t e cost-prices o! t e di!!erent sp eres o! prod%ction, constit%te t e prices o! prod%ction0 5 ey a8e as t eir prereD%isite t e existence o! a general rate o! pro!it, and t is, again, pres%pposes t at t e rates o! pro!it in e8ery indi8id%al sp ere o! prod%ction taken by itsel! a8e pre8io%sly been red%ced to H%st as many a8erage rates0 5 ese partic%lar rates o! pro!it R sNc in e8ery sp ere o! prod%ction, and m%st, as occ%rs in ,art & o! t is book, be ded%ced o%t o! t e 8al%es o! t e

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commodities0 Wit o%t s%c ded%ction t e general rate o! pro!it Band conseD%ently t e price o! prod%ction o! commoditiesC remains a 8ag%e and senseless conception0 6ence, t e price o! prod%ction o! a commodity is eD%al to its cost-price pl%s t e pro!it, allotted to it in per cent, in accordance @it t e general rate o! pro!it, or, in ot er @ords, to its cost-price pl%s t e a8erage pro!it0 3@ing to t e di!!erent organic compositions o! capitals in8ested in di!!erent lines o! prod%ction, and, ence, o@ing to t e circ%mstance t at I depending on t e di!!erent percentage @ ic t e 8ariable part makes %p in a total capital o! a gi8en magnit%de I capitals o! eD%al magnit%de p%t into motion 8ery di!!erent D%antities o! labo%r, t ey also appropriate 8ery di!!erent D%antities o! s%rpl%s-labo%r or prod%ce 8ery di!!erent D%antities o! s%rpl%s-8al%e0 ?ccordingly, t e rates o! pro!it pre8ailing in t e 8ario%s branc es o! prod%ction are originally 8ery di!!erent0 5 ese di!!erent rates o! pro!it are eD%aliEed by competition to a single general rate o! pro!it, @ ic is t e a8erage o! all t ese di!!erent rates o! pro!it0 5 e pro!it accr%ing in accordance @it t is general rate o! pro!it to any capital o! a gi8en magnit%de, @ ate8er its organic composition, is called t e a8erage pro!it0 5 e price o! a commodity, @ ic is eD%al to its cost-price pl%s t e s are o! t e ann%al a8erage pro!it on t e total capital in8ested Bnot merely cons%medC in its prod%ction t at !alls to it in accordance @it t e conditions o! t%rno8er, is called its price o! prod%ction0 5ake, !or example, a capital o! +==, o! @ ic 1== is !ixed capital, and let 1=T o! t is @ear o%t d%ring one t%rno8er o! t e circ%lating capital o! 2==0 'et t e a8erage pro!it !or t e period o! t%rno8er be 1=T0 &n t at case t e cost-price o! t e prod%ct created d%ring t is t%rno8er @ill be 1= c !or @ear pl%s 2== Bc U 8C circ%lating capital R 21=, and its price o! prod%ction @ill be 21= cost-price pl%s B1=T pro!it on +==C += R 26=0 5 %s, alt o%g in selling t eir commodities t e capitalists o! t e 8ario%s sp eres o! prod%ction reco8er t e 8al%e o! t e capital cons%med in t eir prod%ction, t ey do not sec%re t e s%rpl%s8al%e, and conseD%ently t e pro!it, created in t eir o@n sp ere by t e prod%ction o! t ese commodities0 W at t ey sec%re is only as m%c s%rpl%s-8al%e, and ence pro!it, as !alls, @ en %ni!ormly distrib%ted, to t e s are o! e8ery aliD%ot part o! t e total social capital !rom t e total social s%rpl%s-8al%e, or pro!it, prod%ced in a gi8en time by t e social capital in all sp eres o! prod%ction0 E8ery 1== o! an in8ested capital, @ ate8er its composition, dra@s as m%c pro!it in a year, or any ot er period o! time, as !alls to t e s are o! e8ery 1==, t e -t part o! t e total capital, d%ring t e same period0 $o !ar as pro!its are concerned, t e 8ario%s capitalists are H%st so many stock olders in a stock company in @ ic t e s ares o! pro!it are %ni!ormly di8ided per 1==, so t at pro!its di!!er in t e case o! t e indi8id%al capitalists only in accordance @it t e amo%nt o! capital in8ested by eac in t e aggregate enterprise, i0 e0, according to is in8estment in social prod%ction as a @ ole, according to t e n%mber o! is s ares0 5 ere!ore, t e portion o! t e price o! commodities @ ic replaces t e elements o! capital cons%med in t e prod%ction o! t ese commodities, t e portion, t ere!ore, @ ic @ill a8e to be %sed to b%y back t ese cons%med capital-8al%es, i0 e0, t eir cost-price, depends entirely on t e o%tlay o! capital @it in t e respecti8e sp eres o! prod%ction0 A%t t e ot er element o! t e price o! commodities, t e pro!it added to t is cost-price, does not depend on t e amo%nt o! pro!it prod%ced in a gi8en sp ere o! prod%ction by a gi8en capital in a gi8en period o! time0 &t depends on t e mass o! pro!it @ ic !alls as an a8erage !or any gi8en period to eac indi8id%al capital as an aliD%ot part o! t e total social capital in8ested in social prod%ction0 W en a capitalist sells is commodities at t eir price o! prod%ction, t ere!ore, e reco8ers money in proportion to t e 8al%e o! t e capital cons%med in t eir prod%ction and sec%res pro!it in proportion to t is ad8anced capital as t e aliD%ot part in t e total social capital0 6is cost-prices are speci!ic0 A%t t e pro!it added to t em is independent o! is partic%lar sp ere o! prod%ction, being a simple a8erage per 1== %nits o! in8ested capital0 'et %s ass%me t at t e !i8e di!!erent in8estments & to 4 o! t e !oregoing ill%stration belong to one man0 5 e D%antity o! 8ariable and constant capital cons%med per 1== o! t e in8ested capital in

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eac o! t e departments & to 4 in t e prod%ction o! commodities & to 4 @o%ld, needless to say, make %p a part o! t eir price, since at least t is price is reD%ired to reco8er t e ad8anced and cons%med portions o! t e capital0 5 ese cost-prices @o%ld t ere!ore be di!!erent !or eac class o! t e commodities & to 4, and @o%ld as s%c be set di!!erently by t e o@ner0 A%t as regards t e di!!erent D%antities o! s%rpl%s-8al%e, or pro!it, prod%ced by & to 4, t ey mig t easily be regarded by t e capitalist as pro!it on is ad8anced aggregate capital, so t at eac 1== %nits @o%ld get t eir de!inite aliD%ot part0 6ence, t e cost-prices o! t e commodities prod%ced in t e 8ario%s departments & to 4 @o%ld be di!!erent# b%t t at portion o! t eir selling price deri8ed !rom t e pro!it added per 1== capital @o%ld be t e same !or all t ese commodities0 5 e aggregate price o! t e commodities & to 4 @o%ld t ere!ore eD%al t eir aggregate 8al%e, i0 e0, t e s%m o! t e costprices & to 4 pl%s t e s%m o! t e s%rpl%s-8al%es, or pro!its, prod%ced in & to 40 &t @o%ld ence act%ally be t e money-expression o! t e total D%antity o! past and ne@ly applied labo%r incorporated in commodities & to 40 ?nd in t e same @ay t e s%m o! t e prices o! prod%ction o! all commodities prod%ced in society I t e totality o! all branc es o! prod%ction I is eD%al to t e s%m o! t eir 8al%es0 5 is statement seems to con!lict @it t e !act t at %nder capitalist prod%ction t e elements o! prod%cti8e capital are, as a r%le, bo%g t on t e market, and t at !or t is reason t eir prices incl%de pro!it @ ic as already been realised, ence, incl%de t e price o! prod%ction o! t e respecti8e branc o! ind%stry toget er @it t e pro!it contained in it, so t at t e pro!it o! one branc o! ind%stry goes into t e cost-price o! anot er0 A%t i! @e place t e s%m o! t e cost-prices o! t e commodities o! an entire co%ntry on one side, and t e s%m o! its s%rpl%s-8al%es, or pro!its, on t e ot er, t e calc%lation m%st e8idently be rig t0 For instance, take a certain commodity ?0 &ts costprice may contain t e pro!its o! A, ;, 7, etc0, H%st as t e cost-prices o! A, ;, 7, etc0, may contain t e pro!its o! ?0 -o@, as @e make o%r calc%lation t e pro!it o! ? @ill not be incl%ded in its costprice, nor @ill t e pro!its o! A, ;, 7, etc0, be incl%ded in t eirs0 -obody e8er incl%des is o@n pro!it in is cost-price0 &! t ere are, t ere!ore, n sp eres o! prod%ction, and i! eac makes a pro!it amo%nting to p, t en t eir aggregate cost-price R k - np0 ;onsidering t e calc%lation as a @ ole @e see t at since t e pro!its o! one sp ere o! prod%ction pass into t e cost-price o! anot er, t ey are t ere!ore incl%ded in t e calc%lation as constit%ents o! t e total price o! t e end-prod%ct, and so cannot appear a second time on t e pro!it side0 &! any do appear on t is side, o@e8er, t en only beca%se t e commodity in D%estion is itsel! an %ltimate prod%ct, @ ose price o! prod%ction does not pass into t e cost-price o! some ot er commodity0 &! t e cost-price o! a commodity incl%des a s%m R p, @ ic stands !or t e pro!its o! t e prod%cers o! t e means o! prod%ction, and i! a pro!it R p 1 is added to t is cost-price, t e aggregate pro!it , R p U p10 5 e aggregate cost-price o! t e commodity, considered @it o%t t e pro!it portions, is t en its o@n cost-price min%s ,0 'et t is cost-price be k0 5 en, ob8io%sly, k U p R k U p U p 10 &n dealing @it s%rpl%s-8al%es, @e a8e seen in Aook & t at t e prod%ct o! e8ery capital may be so treated, as t o%g a part o! it replaces only capital, @ ile t e ot er part represents only s%rpl%s8al%e0 &n applying t is approac to t e aggregate prod%ct o! society, @e m%st make some recti!ications0 'ooking %pon society as a @ ole, t e pro!it contained in, say, t e price o! !lax cannot appear t@ice I not bot as a portion o! t e linen price and as t e pro!it o! t e !lax0 5 ere is no di!!erence bet@een s%rpl%s-8al%e and pro!it, as long as, e0g0, ?"s s%rpl%s-8al%e passes into A"s constant capital0 &t is, a!ter all, D%ite immaterial to t e 8al%e o! t e commodities, @ et er t e labo%r contained in t em is paid or %npaid0 5 is merely s o@s t at A pays !or ?"s s%rpl%s8al%e0 ?"s s%rpl%s-8al%e cannot be entered t@ice in t e total calc%lation0 A%t t e di!!erence is t is: ?side !rom t e !act t at t e price o! a partic%lar prod%ct, let %s say t at o! capital A, di!!ers !rom its 8al%e beca%se t e s%rpl%s-8al%e realised in A may be greater or smaller t an t e pro!it added to t e price o! t e prod%cts o! A, t e same circ%mstance applies also to t ose commodities @ ic !orm t e constant part o! capital A, and indirectly also its 8ariable part, as t e labo%rers" necessities o! li!e0 $o !ar as t e constant portion is concerned, it is itsel!

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eD%al to t e cost-price pl%s t e s%rpl%s-8al%e, ere t ere!ore eD%al to cost-price pl%s pro!it, and t is pro!it may again be greater or smaller t an t e s%rpl%s-8al%e !or @ ic it stands0 ?s !or t e 8ariable capital, t e a8erage daily @age is indeed al@ays eD%al to t e 8al%e prod%ced in t e n%mber o! o%rs t e labo%rer m%st @ork to prod%ce t e necessities o! li!e0 A%t t is n%mber o! o%rs is in its t%rn obsc%red by t e de8iation o! t e prices o! prod%ction o! t e necessities o! li!e !rom t eir 8al%es0 6o@e8er, t is al@ays resol8es itsel! to one commodity recei8ing too little o! t e s%rpl%s-8al%e @ ile anot er recei8es too m%c , so t at t e de8iations !rom t e 8al%e @ ic are embodied in t e prices o! prod%ction compensate one anot er0 (nder capitalist prod%ction, t e general la@ acts as t e pre8ailing tendency only in a 8ery complicated and approximate manner, as a ne8er ascertainable a8erage o! ceaseless !l%ct%ations0 $ince t e general rate o! pro!it is !ormed by taking t e a8erage o! t e 8ario%s rates o! pro!it !or eac 1== o! capital in8ested in a de!inite period, e0g0, a year, it !ollo@s t at in it t e di!!erence bro%g t abo%t by di!!erent periods o! t%rno8er o! di!!erent capitals is also e!!aced0 A%t t ese di!!erences a8e a decisi8e bearing on t e di!!erent rates o! pro!it in t e 8ario%s sp eres o! prod%ction @ ose a8erage !orms t e general rate o! pro!it0 &n t e preceding ill%stration concerning t e !ormation o! t e a8erage rate o! pro!it @e ass%med eac capital in eac sp ere o! prod%ction R 1==, and @e did so to s o@ t e di!!erence in t e rates o! pro!it in per cent, and t %s also t e di!!erence in t e 8al%es o! commodities prod%ced by eD%al amo%nts o! capital0 A%t it goes @it o%t saying t at t e act%al amo%nts o! s%rpl%s-8al%e prod%ced in eac sp ere o! prod%ction depend on t e magnit%de o! t e in8ested capitals, since t e composition o! capital is gi8en in eac sp ere o! prod%ction0 .et t e act%al rate o! pro!it in any partic%lar sp ere o! prod%ction is not a!!ected by t e !act t at t e capital in8ested is 1==, or m times 1==, or xm times 1==0 5 e rate o! pro!it remains 1=T, @ et er t e total pro!it is 1=:1==, or 1,===:1=,===0 6o@e8er, since t e rates o! pro!it di!!er in t e 8ario%s sp eres o! prod%ction, @it 8ery m%c di!!erent D%antities o! s%rpl%s-8al%e, or pro!it, being prod%ced in t em, depending on t e proportion o! t e 8ariable to t e total capital, it is e8ident t at t e a8erage pro!it per 1== o! t e social capital, and ence t e a8erage, or general, rate o! pro!it, @ill di!!er considerably in accordance @it t e respecti8e magnit%des o! t e capitals in8ested in t e 8ario%s sp eres0 'et %s take !o%r capitals ?, A, ;, 70 'et t e rate o! s%rpl%s-8al%e !or all R 1==T0 'et t e 8ariable capital !or eac 1== o! t e total be <+ in ?, 2= in A, 1+ in ;, and 1= in 70 5 en eac 1== o! t e total capital @o%ld yield a s%rpl%s-8al%e, or pro!it, o! <+ in ?, 2= in A, 1+ in ;, and 1= in 70 5 is @o%ld total *=, and i! t ese !o%r capitals are o! t e same magnit%de, t e a8erage rate o! pro!it @o%ld t en be *=N2 or <<ZT0 $%ppose, o@e8er, t e total capitals are as !ollo@s: ? R <==, A R 3==, ; R 1,===, 7 R 2,===0 5 e pro!its prod%ced @o%ld t en respecti8ely R +=, 1<=, 1+=, and 2==0 5 is makes a pro!it o! ><=, and an a8erage rate o! pro!it o! 13 1N11T !or +,+==, t e s%m o! t e !o%r capitals0 5 e masses o! t e total 8al%e prod%ced di!!er in accordance @it t e magnit%des o! t e total capitals in8ested in ?, A, ;, 7, respecti8ely0 5 e !ormation o! t e a8erage rate o! pro!it is, t ere!ore, not merely a matter o! obtaining t e simple a8erage o! t e di!!erent rates o! pro!it in t e 8ario%s sp eres o! prod%ction, b%t rat er one o! t e relati8e @eig t @ ic t ese di!!erent rates o! pro!it a8e in !orming t is a8erage0 5 is, o@e8er, depends on t e relati8e magnit%de o! t e capital in8ested in eac partic%lar sp ere, or on t e aliD%ot part @ ic t e capital in8ested in eac partic%lar sp ere !orms in t e aggregate social capital0 5 ere @ill nat%rally be a 8ery great di!!erence, depending on @ et er a greater or smaller part o! t e total capital prod%ces a ig er or lo@er rate o! pro!it0 ?nd t is, again, depends on o@ m%c capital is in8ested in sp eres, in @ ic t e 8ariable capital is relati8ely small or large compared to t e total capital0 &t is H%st like t e a8erage interest obtained by a %s%rer @ o lends 8ario%s D%antities o! capital at di!!erent interest rates# !or instance, at 2, +, 6, >T, etc0 5 e a8erage rate @ill depend entirely on o@ m%c o! is capital e as loaned o%t at eac o! t e di!!erent rates o! interest0

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5 e general rate o! pro!it is, t ere!ore, determined by t@o !actors: 1C 5 e organic composition o! t e capitals in t e di!!erent sp eres o! prod%ction, and t %s, t e di!!erent rates o! pro!it in t e indi8id%al sp eres0 <C 5 e distrib%tion o! t e total social capital in t ese di!!erent sp eres, and t %s, t e relati8e magnit%de o! t e capital in8ested in eac partic%lar sp ere at t e speci!ic rate o! pro!it pre8ailing in it# i0 e0, t e relati8e s are o! t e total social capital absorbed by eac indi8id%al sp ere o! prod%ction0 &n Aooks & and && @e dealt only @it t e value o! commodities0 3n t e one and, t e cost1price as no@ been singled o%t as a part o! t is 8al%e, and, on t e ot er, t e price of production o! commodities as been de8eloped as its con8erted !orm0 $%ppose t e composition o! t e a8erage social capital is 8= c U <=8 and t e ann%al rate o! s%rpl%s8al%e, s", is 1==T0 &n t at case t e a8erage ann%al pro!it !or a capital o! 1== R <=, and t e general ann%al rate o! pro!it R <=T0 W ate8er t e cost-price, k, o! t e commodities ann%ally prod%ced by a capital o! 1==, t eir price o! prod%ction @o%ld t en be k U <=0 &n t ose sp eres o! prod%ction in @ ic t e composition o! capital @o%ld R B8= - xC c U B<= U xC8, t e act%ally prod%ced s%rpl%s8al%e, or t e ann%al pro!it prod%ced in t at partic%lar sp ere, @o%ld be <= U x, t at is, greater t an <=, and t e 8al%e o! t e prod%ced commodities R k U <= U x, t at is, greater t an k U <=, or greater t an t eir price o! prod%ction0 &n t ose sp eres, in @ ic t e composition o! t e capitalRB8= U xC c U B<= - xC8, t e ann%ally prod%ced s%rpl%s-8al%e, or pro!it, @o%ld R <= - x, or less t an <=, and conseD%ently t e 8al%e o! t e commodities k U <= - x less t an t e price o! prod%ction, @ ic R k U <=0 ?side !rom possible di!!erences in t e periods o! t%rno8er, t e price o! prod%ction o! t e commodities @o%ld t en eD%al t eir 8al%e only in sp eres, in @ ic t e composition @o%ld appen to be 8=c U <=80 5 e speci!ic de8elopment o! t e social prod%cti8ity o! labo%r in eac partic%lar sp ere o! prod%ction 8aries in degree, ig er or lo@er, depending on o@ large a D%antity o! means o! prod%ction are set in motion by a de!inite D%antity o! labo%r, ence in a gi8en @orking-day by a de!inite n%mber o! labo%rers, and, conseD%ently, on o@ small a D%antity o! labo%r is reD%ired !or a gi8en D%antity o! means o! prod%ction0 $%c capitals as contain a larger percentage o! constant and a smaller percentage o! 8ariable capital t an t e a8erage social capital are, t ere!ore, called capitals o! higher composition, and, con8ersely, t ose capitals in @ ic t e constant is relati8ely smaller, and t e 8ariable relati8ely greater t an in t e a8erage social capital, are called capitals o! lowercomposition0 Finally, @e call t ose capitals @ ose composition coincides @it t e a8erage, capitals o! a8erage composition0 $ o%ld t e a8erage social capital be composed in per cent o! 8= c U <=8, t en a capital o! *=c U 1=8 is higher, and a capital o! >=c U 3=8 lower t an t e social a8erage0 :enerally speaking, i! t e composition o! t e a8erage social capitalRmc U n8, in @ ic m and n are constant magnit%des and m U n R 1==, t e !orm%la Bm U xC c U Bn - xC8represents t e ig er composition, and Bm - xC c U Bn U xC8 t e lo@er composition o! an indi8id%al capital or gro%p o! capitals0 5 e @ay in @ ic t ese capitals per!orm t eir !%nctions a!ter establis ment o! an a8erage rate o! pro!it and ass%ming one t%rno8er per year, is s o@n in t e !ollo@ing tab%lation, in @ ic & represents t e a8erage composition @it an a8erage rate o! pro!it o! <=T0 &C 8=8 U <=8 U <=s0 )ate o! pro!it R <=T0 ,rice o! prod%ct R 1<=0 4al%e R 1<=0 &&C *=c U 1=8 U 1=s0 )ate o! pro!it R <=T0 ,rice o! prod%ct R 1<=0 4al%e R 11=0 &&&C >=c U 3=8 U 3=s0 )ate o! pro!it R <=T0 ,rice o! prod%ct R 1<=0 4al%e R 13=0

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5 e 8al%e o! t e commodities prod%ced by capital && @o%ld, t ere!ore, be smaller t an t eir price o! prod%ction, t e price o! prod%ction o! t e commodities o! &&& smaller t an t eir 8al%e, and only in t e case o! capital & in branc es o! prod%ction in @ ic t e composition appens to coincide @it t e social a8erage, @o%ld 8al%e and price o! prod%ction be eD%al0 &n applying t ese terms to any partic%lar cases note m%st, o@e8er, be taken @ et er a de8iation o! t e ratio bet@een c and 8 is simply d%e to a c ange in t e 8al%e o! t e elements o! constant capital, rat er t an to a di!!erence in t e tec nical composition0 5 e !oregoing statements a8e at any rate modi!ied t e original ass%mption concerning t e determination o! t e cost-price o! commodities0 We ad originally ass%med t at t e cost-price o! a commodity eD%alled t e 8al%e o! t e commodities cons%med in its prod%ction0 A%t !or t e b%yer t e price o! prod%ction o! a speci!ic commodity is its cost-price, and may t %s pass as cost-price into t e prices o! ot er commodities0 $ince t e price o! prod%ction may di!!er !rom t e 8al%e o! a commodity, it !ollo@s t at t e cost-price o! a commodity containing t is price o! prod%ction o! anot er commodity may also stand abo8e or belo@ t at portion o! its total 8al%e deri8ed !rom t e 8al%e o! t e means o! prod%ction cons%med by it0 &t is necessary to remember t is modi!ied signi!icance o! t e cost-price, and to bear in mind t at t ere is al@ays t e possibility o! an error i! t e cost-price o! a commodity in any partic%lar sp ere is identi!ied @it t e 8al%e o! t e means o! prod%ction cons%med by it0 3%r present analysis does not necessitate a closer examination o! t is point0 &t remains tr%e, ne8ert eless, t at t e cost-price o! a commodity is al@ays smaller t an its 8al%e0 For no matter o@ m%c t e cost-price o! a commodity may di!!er !rom t e 8al%e o! t e means o! prod%ction cons%med by it, t is past mistake is immaterial to t e capitalist0 5 e costprice o! a partic%lar commodity is a de!inite condition @ ic is gi8en, and independent o! t e prod%ction o! o%r capitalist, @ ile t e res%lt o! is prod%ction is a commodity containing s%rpl%s8al%e, t ere!ore an excess o! 8al%e o8er and abo8e its cost-price0 For all ot er p%rposes, t e statement t at t e cost-price is smaller t an t e 8al%e o! a commodity as no@ c anged practically into t e statement t at t e cost-price is smaller t an t e price o! prod%ction0 ?s concerns t e total social capital, in @ ic t e price o! prod%ction is eD%al to t e 8al%e, t is statement is identical @it t e !ormer, namely t at t e cost-price is smaller t an t e 8al%e0 ?nd @ ile it is modi!ied in t e indi8id%al sp eres o! prod%ction, t e !%ndamental !act al@ays remains t at in t e case o! t e total social capital t e cost-price o! t e commodities prod%ced by it is smaller t an t eir 8al%e, or, in t e case o! t e total mass o! social commodities, smaller t an t eir price o! prod%ction, @ ic is identical @it t eir 8al%e0 5 e cost-price o! a commodity re!ers only to t e D%antity o! paid labo%r contained in it, @ ile its 8al%e re!ers to all t e paid and %npaid labo%r contained in it0 5 e price o! prod%ction re!ers to t e s%m o! t e paid labo%r pl%s a certain D%antity o! %npaid labo%r determined !or any partic%lar sp ere o! prod%ction by conditions o8er @ ic it as no control0 5 e !orm%la t at t e price o! prod%ction o! a commodity R k U p, i0 e0, eD%als its cost-price pl%s pro!it, is no@ more precisely de!ined @it p R kp" Bp" being t e general rate o! pro!itC0 6ence t e price o! prod%ction R k U kp"0 &! k R 3== and p" R 1+T, t en t e price o! prod%ction is k U kp" R 3== U 3== \ 1+N1==, or 32+0 5 e price o! prod%ction o! t e commodities in any partic%lar sp ere may c ange in magnit%de: 1C &! t e general rate o! pro!it c anges independently o! t is partic%lar sp ere, @ ile t e 8al%e o! t e commodities remains t e same Bt e same D%antities o! congealed and li8ing labo%r being cons%med in t eir prod%ction as be!oreC0 <C &! t ere is a c ange o! 8al%e, eit er in t is partic%lar sp ere in conseD%ence o! tec nical c anges, or in conseD%ence o! a c ange in t e 8al%e o! t ose commodities @ ic !orm t e elements o! its constant capital, @ ile t e general rate o! pro!it remains %nc anged0 3C Finally, i! a combination o! t e t@o a!orementioned circ%mstances takes place0

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&n spite o! t e great c anges occ%rring contin%ally, as @e s all see, in t e act%al rates o! pro!it @it in t e indi8id%al sp eres o! prod%ction, any real c ange in t e general rate o! pro!it, %nless bro%g t abo%t by @ay o! an exception by extraordinary economic e8ents, is t e belated e!!ect o! a series o! !l%ct%ations extending o8er 8ery long periods, !l%ct%ations @ ic reD%ire m%c time be!ore consolidating and eD%alising one anot er to bring abo%t a c ange in t e general rate o! pro!it0 &n all s orter periods BD%ite aside !rom !l%ct%ations o! market-pricesC, a c ange in t e prices o! prod%ction is, t ere!ore, al@ays traceable prima facie to act%al c anges in t e 8al%e o! commodities, i0 e0, to c anges in t e total amo%nt o! labo%r-time reD%ired !or t eir prod%ction0 Mere c anges in t e money-expression o! t e same 8al%es are, nat%rally, not at all considered ere0 3n t e ot er and, it is e8ident t at !rom t e point o! 8ie@ o! t e total social capital t e 8al%e o! t e commodities prod%ced by it Bor, expressed in money, t eir priceC R 8al%e o! constant capital U 8al%e o! 8ariable capital U s%rpl%s-8al%e0 ?ss%ming t e degree o! labo%r exploitation to be constant, t e rate o! pro!it cannot c ange so long as t e mass o! s%rpl%s-8al%e remains t e same, %nless t ere is a c ange in eit er t e 8al%e o! t e constant capital, t e 8al%e o! t e 8ariable capital, or t e 8al%e o! bot , so t at ; c anges, and t ereby sN;, @ ic represents t e general rate o! pro!it0 &n eac case, t ere!ore, a c ange in t e general rate o! pro!it implies a c ange in t e 8al%e o! commodities @ ic !orm t e elements o! t e constant or 8ariable capital, or o! bot 0 3r, t e general rate o! pro!it may c ange, @ ile t e 8al%e o! t e commodities remains t e same, @ en t e degree o! labo%r exploitation c anges0 3r, i! t e degree o! labo%r exploitation remains t e same, t e general rate o! pro!it may c ange t ro%g a c ange in t e amo%nt o! labo%r employed relati8e to t e constant capital as a res%lt o! tec nical c anges in t e labo%r-process0 A%t s%c tec nical c anges m%st al@ays s o@ t emsel8es in, and be attended by, a c ange in t e 8al%e o! t e commodities, @ ose prod%ction @o%ld t en reD%ire more or less labo%r t an be!ore0 We sa@ in ,art & t at s%rpl%s-8al%e and pro!it are identical !rom t e standpoint o! t eir mass0 A%t t e rate o! pro!it is !rom t e 8ery o%tset distinct !rom t e rate o! s%rpl%s-8al%e, @ ic appears at !irst sig t as merely a di!!erent !orm o! calc%lating0 A%t at t e same time t is ser8es, also !rom t e o%tset, to obsc%re and mysti!y t e act%al origin o! s%rpl%s-8al%e, since t e rate o! pro!it can rise or !all @ ile t e rate o! s%rpl%s-8al%e remains t e same, and 8ice 8ersa, and since t e capitalist is in practice solely interested in t e rate o! pro!it0 .et t ere @as di!!erence o! magnit%de only bet@een t e rate o! s%rpl%s-8al%e and t e rate o! pro!it and not bet@een t e s%rpl%s-8al%e itsel! and pro!it0 $ince in t e rate o! pro!it t e s%rpl%s-8al%e is calc%lated in relation to t e total capital and t e latter is taken as its standard o! meas%rement, t e s%rpl%s-8al%e itsel! appears to originate !rom t e total capital, %ni!ormly deri8ed !rom all its parts, so t at t e organic di!!erence bet@een constant and 8ariable capital is obliterated in t e conception o! pro!it0 7isg%ised as pro!it, s%rpl%s-8al%e act%ally denies its origin, loses its c aracter, and becomes %nrecognisable0 6o@e8er, it erto t e distinction bet@een pro!it and s%rpl%s-8al%e applied solely to a D%alitati8e c ange, or c ange o! !orm, @ ile t ere @as no real di!!erence o! magnit%de in t is !irst stage o! t e c ange bet@een s%rpl%s-8al%e and pro!it, b%t only bet@een t e rate o! pro!it and t e rate o! s%rpl%s-8al%e0 A%t it is di!!erent, as soon as a general rate o! pro!it, and t ereby an a8erage pro!it corresponding to t e magnit%de o! in8ested capital gi8en in t e 8ario%s sp eres o! prod%ction, a8e been establis ed0 &t is t en only an accident i! t e s%rpl%s-8al%e, and t %s t e pro!it, act%ally prod%ced in any partic%lar sp ere o! prod%ction, coincides @it t e pro!it contained in t e selling price o! a commodity0 ?s a r%le, s%rpl%s-8al%e and pro!it and not t eir rates alone, are t en di!!erent magnit%des0 ?t a gi8en degree o! exploitation, t e mass o! s%rpl%s-8al%e prod%ced in a partic%lar sp ere o! prod%ction is t en more important !or t e aggregate a8erage pro!it o! social capital, and

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t %s !or t e capitalist class in general, t an !or t e indi8id%al capitalist in any speci!ic branc o! prod%ction0 &t is o! importance to t e latter only in so !ar as t e D%antity o! s%rpl%s-8al%e prod%ced in is branc elps to reg%late t e a8erage pro!it0 A%t t is is a process @ ic occ%rs be ind is back, one e does not see, nor %nderstand, and @ ic indeed does not interest im0 5 e act%al di!!erence o! magnit%de bet@een pro!it and s%rpl%s-8al%e I not merely bet@een t e rate o! pro!it and t e rate o! s%rpl%s-8al%e I in t e 8ario%s sp eres o! prod%ction no@ completely conceals t e tr%e nat%re and origin o! pro!it not only !rom t e capitalist, @ o as a special interest in decei8ing imsel! on t is score, b%t also !rom t e labo%rer0 5 e trans!ormation o! 8al%es into prices o! prod%ction ser8es to obsc%re t e basis !or determining 8al%e itsel!0 Finally, since t e mere trans!ormation o! s%rpl%s-8al%e into pro!it disting%is es t e portion o! t e 8al%e o! a commodity !orming t e pro!it !rom t e portion !orming its cost-price, it is nat%ral t at t e conception o! 8al%e s o%ld el%de t e capitalist at t is H%nct%re, !or e does not see t e total labo%r p%t into t e commodity, b%t only t at portion o! t e total labo%r !or @ ic e as paid in t e s ape o! means o! prod%ction, be t ey li8ing or not, so t at is pro!it appears to im as somet ing o%tside t e immanent 8al%e o! t e commodity0 -o@ t is idea is !%lly con!irmed, !orti!ied, and ossi!ied in t at, !rom t e standpoint o! is partic%lar sp ere o! prod%ction, t e pro!it added to t e cost-price is not act%ally determined by t e limits o! t e !ormation o! 8al%e @it in is o@n sp ere, b%t t ro%g completely o%tside in!l%ences0 5 e !act t at t is intrinsic connection is ere re8ealed !or t e !irst time# t at %p to t e present time political economy, as @e s all see in t e !ollo@ing and in Aook &4, eit er !orcibly abstracted itsel! !rom t e distinctions bet@een s%rpl%s-8al%e and pro!it, and t eir rates, so it co%ld retain 8al%e determination as a basis, or else abandoned t is 8al%e determination and @it it all 8estiges o! a scienti!ic approac , in order to cling to t e di!!erences t at strike t e eye in t is p enomenon I t is con!%sion o! t e t eorists best ill%strates t e %tter incapacity o! t e practical capitalist, blinded by competition as e is, and incapable o! penetrating its p enomena, to recognise t e inner essence and inner str%ct%re o! t is process be ind its o%ter appearance0 &n !act, all t e la@s e8ol8ed in ,art & concerning t e rise and !all o! t e rate o! pro!it a8e t e !ollo@ing t@o-!old meaning: 1C 3n t e one and, t ey are t e la@s o! t e general rate o! pro!it0 &n 8ie@ o! t e many di!!erent ca%ses @ ic make t e rate o! pro!it rise or !all one @o%ld t ink, a!ter e8eryt ing t at as been said and done, t at t e general rate o! pro!it m%st c ange e8ery day0 A%t a trend in one sp ere o! prod%ction compensates !or t at in anot er, t eir e!!ects cross and paralyse one anot er0 We s all later examine to @ ic side t ese !l%ct%ations %ltimately gra8itate0 A%t t ey are slo@0 5 e s%ddenness, m%ltiplicity, and di!!erent d%ration o! t e !l%ct%ations in t e indi8id%al sp eres o! prod%ction make t em compensate !or one anot er in t e order o! t eir s%ccession in time, a !all in prices !ollo@ing a rise, and 8ice 8ersa, so t at t ey remain limited to local, i0 e0, indi8id%al, sp eres0 Finally, t e 8ario%s local !l%ct%ations ne%tralise one anot er0 Wit in eac indi8id%al sp ere o! prod%ction, t ere take place c anges, i0 e0, de8iations !rom t e general rate o! pro!it, @ ic co%nterbalance one anot er in a de!inite time on t e one and, and t %s a8e no in!l%ence %pon t e general rate o! pro!it, and @ ic , on t e ot er, do not react %pon it, beca%se t ey are balanced by ot er sim%ltaneo%s local !l%ct%ations0 $ince t e general rate o! pro!it is not only determined by t e a8erage rate o! pro!it in eac sp ere, b%t also by t e distrib%tion o! t e total social capital among t e di!!erent indi8id%al sp eres, and since t is distrib%tion is contin%ally c anging, it becomes anot er constant ca%se o! c ange in t e general rate o! pro!it0 A%t it is a ca%se o! c ange @ ic mostly paralyses itsel!, o@ing to t e %ninterr%pted and many-sided nat%re o! t is mo8ement0 <C Wit in eac sp ere, t ere is some room !or play !or a longer or s orter space o! time, in @ ic t e rate o! pro!it o! t is sp ere may !l%ct%ate, be!ore t is !l%ct%ation consolidates s%!!iciently a!ter rising or !alling to gain time !or in!l%encing t e general rate o! pro!it and t ere!ore ass%ming

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more t an local importance0 5 e la@s o! t e rate o! pro!it, as de8eloped in ,art & o! t is book, like@ise remain applicable @it in t ese limits o! space and time0 5 e t eoretical conception concerning t e !irst trans!ormation o! s%rpl%s-8al%e into pro!it, t at e8ery part o! a capital yields a %ni!orm pro!it, expresses a practical !act0 W ate8er t e composition o! an ind%strial capital, @ et er it sets in motion one D%arter o! congealed labo%r and t ree-D%arters o! li8ing labo%r, or t ree-D%arters o! congealed labo%r and one-D%arter o! li8ing labo%r, @ et er in one case it absorbs t ree times as m%c s%rpl%s-labo%r, or prod%ces t ree times as m%c s%rpl%s-8al%e t an in anot er I in eit er case it yields t e same pro!it, gi8en t e same degree o! labo%r exploitation and lea8ing aside indi8id%al di!!erences, @ ic , incidentally, disappear beca%se @e are dealing in bot cases @it t e a8erage composition o! t e entire sp ere o! prod%ction0 5 e indi8id%al capitalist Bor all t e capitalists in eac indi8id%al sp ere o! prod%ctionC, @ ose o%tlook is limited, rig tly belie8es t at is pro!it is not deri8ed solely !rom t e labo%r employed by im, or in is line o! prod%ction0 5 is is D%ite tr%e, as !ar as is a8erage pro!it is concerned0 5o @ at extent t is pro!it is d%e to t e aggregate exploitation o! labo%r on t e part o! t e total social capital, i0 e0, by all is capitalist colleag%es I t is interrelation is a complete mystery to t e indi8id%al capitalist# all t e more so, since no bo%rgeois t eorists, t e political economists, a8e so !ar re8ealed it0 ? sa8ing o! labo%r I not only labo%r necessary to prod%ce a certain prod%ct, b%t also t e n%mber o! employed labo%rers I and t e employment o! more congealed labo%r Bconstant capitalC, appear to be 8ery so%nd operations !rom t e economic standpoint and do not seem to exert t e least in!l%ence on t e general rate o! pro!it and t e a8erage pro!it0 6o@ co%ld li8ing labo%r be t e sole so%rce o! pro!it, in 8ie@ o! t e !act t at a red%ction in t e D%antity o! labo%r reD%ired !or prod%ction appears not to exert any in!l%ence on pro!itQ Moreo8er, it e8en seems in certain circ%mstances to be t e nearest so%rce o! an increase o! pro!its, at least !or t e indi8id%al capitalist0 &! in any partic%lar sp ere o! prod%ction t ere is a rise or !all o! t e portion o! t e cost-price @ ic represents t e 8al%e o! constant capital, t is portion comes !rom t e circ%lation and, eit er enlarged or red%ced, passes !rom t e 8ery o%tset into t e process o! prod%ction o! t e commodity0 &!, on t e ot er and, t e same n%mber o! labo%rers prod%ces more or less in t e same time, so t at t e D%antity o! labo%r reD%ired !or t e prod%ction o! a de!inite D%antity o! commodities 8aries @ ile t e n%mber o! labo%rers remains t e same, t at portion o! t e cost-price @ ic represents t e 8al%e o! t e 8ariable capital may remain t e same, i0 e0, contrib%te t e same amo%nt to t e cost-price o! t o total prod%ct0 A%t e8ery one o! t e indi8id%al commodities @ ose s%m makes %p t e total prod%ct, s ares in more or less labo%r Bpaid and t ere!ore also %npaidC, and s ares conseD%ently in t e greater or smaller o%tlay !or t is labo%r, i0 e0, a 1arger or smaller portion o! t e @age0 5 e total @ages paid by t e capitalist remain t e same, b%t @ages di!!er i! calc%lated per piece o! t e commodity0 5 %s, t ere is a c ange in t is portion o! t e cost-price o! t e commodity0 A%t no matter @ et er t e cost-price o! t e indi8id%al commodity Bor, per aps, t e cost-price o! t e s%m o! commodities prod%ced by a capital o! a gi8en magnit%deC rises or !alls, be it d%e to s%c c anges in its o@n 8al%e, or in t at o! its elements, t e a8erage pro!it o!, e0g0, 1=T remains 1=T0 $till, 1=T o! an indi8id%al commodity may represent 8ery di!!erent amo%nts, depending on t e c ange o! magnit%de ca%sed in t e cost-price o! t e indi8id%al commodity by s%c c anges o! 8al%e as @e a8e ass%med0 $o !ar as t e 8ariable capital is concerned I and t is is most important, beca%se it is t e so%rce o! s%rpl%s-8al%e, and beca%se anyt ing @ ic conceals its relation to t e acc%m%lation o! @ealt by t e capitalist ser8es to mysti!y t e entire system I matters get cr%der or appear to t e capitalist in t e !ollo@ing lig t: ? 8ariable capital o! V1== represents t e @eekly @age o!, say, 1== labo%rers0 &! t ese 1== labo%rers @eekly prod%ce <== pieces o! a commodity R <==;, in a gi8en @orkingtime, t en 1; I abstracted !rom t at portion o! its cost-price @ ic is added by t e constant capital, costs V1==N<== R 1= s illings, since V1== R <==;0 -o@ s%ppose t at a c ange occ%rs in t e prod%cti8eness o! labo%r0 $%ppose it do%bles, so t at t e same n%mber o! labo%rers no@

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prod%ces t@ice <==; in t e time @ ic it pre8io%sly took to prod%ce <==;0 &n t at case Bconsidering only t at part o! t e cost-price @ ic consists o! @agesC 1; R V1==N2== R + s illings, since no@ V1== R 2==;0 $ o%ld t e prod%cti8eness decrease one- al!, t e same labo%r @o%ld prod%ce only <==;N< and since V1== R <==;N<, 1; R V<==N< R V10 5 e c anges in t e labo%r-time reD%ired !or t e prod%ction o! t e commodities, and ence t e c anges in t eir 8al%e, t %s appear in regard to t e cost-price, and ence to t e price o! prod%ction, as a di!!erent distrib%tion o! t e same @age !or more or !e@er commodities, depending on t e greater or smaller D%antity o! commodities prod%ced in t e same @orking-time !or t e same @age0 W at t e capitalist, and conseD%ently also t e political economist, see is t at t e part o! t e paid labo%r per piece o! commodity c anges @it t e prod%cti8ity o! labo%r, and t at t e 8al%e o! eac piece also c anges accordingly0 W at t ey do not see is t at t e same applies to %npaid labo%r contained in 8ery piece o! t e commodity, and t is is percei8ed so m%c less since t e a8erage pro!it act%ally is only accidentally determined by t e %npaid labo%r absorbed in t e sp ere o! t e indi8id%al capitalist0 &t is only in s%c cr%de and meaningless !orm t at @e can glimpse t at t e 8al%e o! commodities is determined by t e labo%r contained in t em0

Chapter 1/. E0ualisation of the +eneral Rate of Profit Throu)h Co petition. 1ar%et-Prices and 1ar%et-Values. SurplusProfit
5 e capital in8ested in some sp eres o! prod%ction as a mean, or a8erage, composition, t at is, it as t e same, or almost t e same composition as t e a8erage social capital0 &n t ese sp eres t e price o! prod%ction is exactly or almost t e same as t e 8al%e o! t e prod%ced commodity expressed in money0 &! t ere @ere no ot er @ay o! reac ing a mat ematical limit, t is @o%ld be t e one0 ;ompetition so distrib%tes t e social capital among t e 8ario%s sp eres o! prod%ction t at t e prices o! prod%ction in eac sp ere take s ape according to t e model o! t e prices o! prod%ction in t ese sp eres o! a8erage composition, i0e0, t ey R k U kp" Bcost-price pl%s t e a8erage rate o! pro!it m%ltiplied by t e cost priceC0 5 is a8erage rate o! pro!it, o@e8er, is t e percentage o! pro!it in t at sp ere o! a8erage composition in @ ic pro!it, t ere!ore, coincides @it s%rpl%s-8al%e0 6ence, t e rate o! pro!it is t e same in all sp eres o! prod%ction, !or it is eD%aliEed on t e basis o! t ose a8erage sp eres o! prod%ction @ ic as t e a8erage composition o! capital0 ;onseD%ently, t e s%m o! t e pro!its in all sp eres o! prod%ction m%st eD%al t e s%m o! t e s%rpl%s-8al%es, and t e s%m o! t e prices o! prod%ction o! t e total social prod%ct eD%al t e s%m o! its 8al%e0 A%t it is e8ident t at t e balance among sp eres o! prod%ction o! di!!erent composition m%st tend to eD%aliEe t em @it t e sp eres o! a8erage composition, be it exactly or only approximately t e same as t e social a8erage0 Aet@een t e sp eres more or less approximating t e a8erage t ere is again a tendency to@ard eD%aliEation, seeking t e ideal a8erage, i0e0, an a8erage t at does not really exist, i0e0, a tendency to take t is ideal as a standard0 &n t is @ay t e tendency necessarily pre8ails to make t e prices o! prod%ction merely con8erted !orms o! 8al%e, or to t%rn pro!its into mere portions o! s%rpl%s-8al%e0 6o@e8er, t ese are not distrib%ted in proportion to t e s%rpl%s-8al%e prod%ced in eac special sp ere o! prod%ction, b%t rat er in proportion to t e mass o! capital employed in eac sp ere, so t at eD%al masses o! capital, @ ate8er t eir composition, recei8e eD%al aliD%ot s ares o! t e total s%rpl%s-8al%e prod%ced by t e total social capital0 &n t e case o! capitals o! a8erage, or approximately a8erage, composition, t e price o! prod%ction is t %s t e same or almost t e same as t e 8al%e, and t e pro!it t e same as t e s%rpl%s-8al%e prod%ced by t em0 ?ll ot er capitals, o! @ ate8er composition, tend to@ard t is a8erage %nder press%re o! competition0 A%t since t e capitals o! a8erage composition are o! t e same, or approximately t e same, str%ct%re as t e a8erage social capital, all capitals a8e t e tendency, regardless o! t e s%rpl%s-8al%e prod%ced by t em, to realiEe t e a8erage pro!it, rat er t an t eir o@n s%rpl%s-8al%e in t e price o! t eir commodity, i0e0, to realiEe t e prices o! prod%ction0 3n t e ot er and, it may be said t at @ ere8er an a8erage pro!it, and t ere!ore a general rate o! pro!it, is prod%ced I no matter by @ at means I s%c an a8erage pro!it cannot be anyt ing b%t t e pro!it on t e a8erage social capital, @ ose s%m is eD%al to t e s%m o! s%rpl%s-8al%e0 Moreo8er, t e prices obtained by adding t is a8erage pro!it to t e cost-prices cannot be anyt ing b%t t e 8al%es transm%ted into prices o! prod%ction0 -ot ing @o%ld be altered i! capitals in certain sp eres o! prod%ction @o%ld not, !or some reason, be s%bHect to t e process o! eD%aliEation0 5 e a8erage pro!it @o%ld t en be comp%ted on t at portion o! t e social capital @ ic enters t e

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eD%aliEation process0 &t is e8ident t at t e a8erage pro!it can be not ing b%t t e total mass o! s%rpl%s-8al%es allotted to t e 8ario%s D%antities o! capital proportionally to t eir magnit%des in t eir di!!erent sp eres o! prod%ction0 &t is t e total realiEed %npaid labo%r, and t is total mass, like t e paid, congealed or li8ing, labo%r, obtains in t e total mass o! commodities and money t at !alls to t e capitalists0 5 e really di!!ic%lt D%estion is t is: o@ is t is eD%aliEation o! pro!its into a general rate o! pro!it bro%g t abo%t, since it is ob8io%sly a res%lt rat er t an a point o! depart%reQ 5o begin @it , an estimate o! t e 8al%es o! commodities, !or instance in terms o! money, can ob8io%sly only be t e res%lt o! t eir exc ange0 &!, t ere!ore, @e ass%me s%c an estimate, @e m%st regard it as t e o%tcome o! an act%al exc ange o! commodity-8al%e !or commodity-8al%e0 A%t o@ does t is exc ange o! commodities at t eir real 8al%e come abo%tQ 'et %s !irst ass%me t at all commodities in t e di!!erent branc es o! prod%ction are sold at t eir real 8al%es0 W at @o%ld t en be t e o%tcomeQ ?ccording to t e !oregoing, 8ery di!!erent rates o! pro!it @o%ld t en reign in t e 8ario%s sp eres o! prod%ction0 &t is prima facie t@o entirely di!!erent matters @ et er commodities are sold at t eir 8al%es Bi0e0, exc anged in proportion to t e 8al%e contained in t em at prices corresponding to t eir 8al%eC, or @ et er t ey are sold at s%c prices t at t eir sale yields eD%al pro!its !or eD%al masses o! t e capital ad8anced !or t eir respecti8e prod%ction0 5 e !act t at capitals employing %neD%al amo%nts o! li8ing labo%r prod%ce %neD%al amo%nts o! s%rpl%s-8al%e, pres%pposes at least to a certain extent t at t e degree o! exploitation or t e rate o! s%rpl%s-8al%e are t e same, or t at any existing di!!erences in t em are eD%aliEed by real or imaginary Bcon8entionalC gro%nds o! compensation0 5 is @o%ld ass%me competition among labo%rers and eD%aliEation t ro%g t eir contin%al migration !rom one sp ere o! prod%ction to anot er0 $%c a general rate o! s%rpl%s-8al%e I 8ie@ed as a tendency, like all ot er economic la@s I as been ass%med by %s !or t e sake o! t eoretical simpli!ication0 A%t in reality it is an act%al premise o! t e capitalist mode o! prod%ction, alt o%g it is more or less obstr%cted by practical !rictions ca%sing more or less considerable local di!!erences, s%c as t e settlement la@s !or !armlabo%rers in Aritain0 A%t in t eory it is ass%med t at t e la@s o! capitalist prod%ction operate in t eir p%re !orm0 &n reality t ere exists only approximation# b%t, t is approximation is t e greater, t e more de8eloped t e capitalist mode o! prod%ction and t e less it is ad%lterated and amalgamated @it s%r8i8als o! !ormer economic conditions0 5 e @ ole di!!ic%lty arises !rom t e !act t at commodities are not exc anged simply as commodities, b%t as products of capitals, @ ic claim participation in t e total amo%nt o! s%rpl%s8al%e, proportional to t eir magnit%de, or eD%al i! t ey are o! eD%al magnit%de0 ?nd t is claim is to be satis!ied by t e total price !or commodities prod%ced by a gi8en capital in a certain space o! time0 5 is total price is, o@e8er, only t e s%m o! t e prices o! t e indi8id%al commodities prod%ced by t is capital0 5 e punctum saliens @ill be best bro%g t i! @e approac t e matter as !ollo@s: s%ppose, t e labo%rers t emsel8es are in possession o! t eir respecti8e means o! prod%ction and exc ange t eir commodities @it one anot er0 &n t at case t ese commodities @o%ld not be prod%cts o! capital0 5 e 8al%e o! t e 8ario%s means o! labo%r and ra@ materials @o%ld di!!er in accordance @it t e tec nical nat%re o! t e labo%rs per!ormed in t e di!!erent branc es o! prod%ction0 F%rt ermore, aside !rom t e %neD%al 8al%e o! t e means o! prod%ction employed by t em, t ey @o%ld reD%ire di!!erent D%antities o! means o! prod%ction !or gi8en D%antities o! labo%r, depending on @ et er a certain commodity can be !inis ed in one o%r, anot er in one day, and so !ort 0 ?lso s%ppose t e labo%rers @ork an eD%al a8erage lengt o! time, allo@ing !or compensations t at arise !rom t e di!!erent labo%r intensities, etc0 &n s%c a case, t@o labo%rers @o%ld, !irst, bot a8e replaced t eir o%tlays, t e cost-prices o! t e cons%med means o! prod%ction, in t e commodities @ ic make %p t e prod%ct o! t eir day"s @ork0 5 ese o%tlays @o%ld di!!er, depending on t e tec nical

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nat%re o! t eir labo%r0 $econdly, bot o! t em @o%ld a8e created eD%al amo%nts o! ne@ 8al%e, namely t e @orking-day added by t em to t e means o! prod%ction0 5 is @o%ld comprise t eir @ages pl%s t e s%rpl%s-8al%e, t e latter representing s%rpl%s-labo%r o8er and abo8e t eir necessary @ants, t e prod%ct o! @ ic @o%ld o@e8er belong to t em0 5o p%t it t e capitalist @ay, bot o! t em recei8e t e same @ages pl%s t e same pro!it, or t e same 8al%e, expressed, say, by t e prod%ct o! a ten- o%r @orking-day0 A%t in t e !irst place, t e 8al%es o! t eir commodities @o%ld a8e to di!!er0 &n commodity &, !or instance, t e portion o! 8al%e corresponding to t e cons%med means o! prod%ction mig t be ig er t an in commodity &&0 ?nd, to introd%ce all possible di!!erences, @e mig t ass%me rig t no@ t at commodity & absorbs more li8ing labo%r, and conseD%ently reD%ires more labo%r-time to be prod%ced, t an commodity &&0 5 e 8al%es o! commodities & and && are, t ere!ore, 8ery di!!erent0 $o are t e s%ms o! t e 8al%es o! t e commodities, @ ic represent t e prod%ct o! t e labo%r per!ormed by labo%rers & and && in a gi8en time0 5 e rates o! pro!it @o%ld also di!!er considerably !or & and && i! @e take t e rate o! pro!it to be t e proportion o! t e s%rpl%s-8al%e to t e total 8al%e o! t e in8ested means o! prod%ction0 5 e means o! s%bsistence daily cons%med by & and && d%ring prod%ction, @ ic take t e place o! @ages, ere !orm t e part o! t e in8ested means o! prod%ction ordinarily called 8ariable capital0 A%t !or eD%al @orking periods t e s%rpl%s 8al%es @o%ld be t e same !or & and &&, or, more precisely, since & and && eac recei8e t e 8al%e o! t e prod%ct o! a day"s @ork, bot o! t em recei8e eD%al 8al%es a!ter t e 8al%e o! t e in8ested KconstantL elements as been ded%cted, and one portion o! t ose eD%al 8al%es may be regarded as a s%bstit%te !or t e means o! s%bsistence cons%med in prod%ction, and t e ot er as s%rpl%s-8al%e in excess o! it0 &! labo%rer & as greater expenses, t ey are made good by a greater portion o! t e 8al%e o! is commodity, @ ic replaces t is Kconstant K part, and e t ere!ore as to recon8ert a larger portion o! t e total 8al%e o! is prod%ct into t e material elements o! t is constant part, @ ile labo%rer &&, t o%g recei8ing less !or t is, as so m%c less to recon8ert0 &n t ese circ%mstances, a di!!erence in t e rates o! pro!it @o%ld t ere!ore be immaterial, H%st as it is immaterial to t e @age-labo%rer today @ at rate o! pro!it may express t e amo%nt o! s%rpl%s-8al%e !ilc ed !rom im, and H%st as in international commerce t e di!!erence in t e 8ario%s national rates o! pro!it is immaterial to commodity exc ange0 5 e exc ange o! commodities at t eir 8al%es, or approximately at t eir 8al%es, t %s reD%ires a m%c lo@er stage t an t eir exc ange at t eir prices o! prod%ction, @ ic reD%ires a de!inite le8el o! capitalist de8elopment0 W ate8er t e manner in @ ic t e prices o! 8ario%s commodities are !irst m%t%ally !ixed or reg%lated, t eir mo8ements are al@ays go8erned by t e la@ o! 8al%e0 &! t e labo%r-time reD%ired !or t eir prod%ction appens to s rink, prices !all# i! it increases, prices rise, pro8ided ot er conditions remain t e same0 ?part !rom t e domination o! prices and price mo8ement by t e la@ o! 8al%e, it is D%ite appropriate to regard t e 8al%es o! commodities as not only t eoretically b%t also istorically prius to t e prices o! prod%ction0 5 is applies to conditions in @ ic t e labo%rer o@ns is means o! prod%ction, and t is is t e condition o! t e land-o@ning !armer li8ing o!! is o@n labo%r and t e cra!tsman, in t e ancient as @ell as in t e modern @orld0 5 is agrees also @it t e 8ie@ @e expressed pre8io%sly t at t e e8ol%tion o! prod%cts into commodities arises t ro%g exc ange bet@een di!!erent comm%nities, not bet@een t e members o! t e same comm%nity0 &t olds not only !or t is primiti8e condition, b%t also !or s%bseD%ent conditions, based on sla8ery and ser!dom, and !or t e g%ild organisation o! andicra!ts, so long as t e means o! prod%ction in8ol8ed in eac branc o! prod%ction can be trans!erred !rom one sp ere to anot er only @it di!!ic%lty and t ere!ore t e 8ario%s sp eres o! prod%ction are related to one anot er, @it in certain limits, as !oreign co%ntries or comm%nist comm%nities0 For prices at @ ic commodities are exc anged to approximately correspond to t eir 8al%es, not ing more is necessary t an 1C !or t e exc ange o! t e 8ario%s commodities to cease being

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p%rely accidental or only occasional# <C so !ar as direct exc ange o! commodities is concerned, !or t ese commodities to be prod%ced on bot sides in approximately s%!!icient D%antities to meet m%t%al reD%irements, somet ing learned !rom m%t%al experience in trading and t ere!ore a nat%ral o%tgro@t o! contin%ed trading# and 3C so !ar as selling is concerned, !or no nat%ral or arti!icial monopoly to enable eit er o! t e contracting sides to sell commodities abo8e t eir 8al%e or to compel t em to %ndersell0 Ay accidental monopoly @e mean a monopoly @ ic a b%yer or seller acD%ires t ro%g an accidental state o! s%pply and demand0 5 e ass%mption t at t e commodities o! t e 8ario%s sp eres o! prod%ction are sold at t eir 8al%e merely implies, o! co%rse, t at t eir 8al%e is t e centre o! gra8ity aro%nd @ ic t eir prices !l%ct%ate, and t eir contin%al rises and drops tend to eD%alise0 5 ere is also t e mar-et1value I o! @ ic later I to be disting%is ed !rom t e indi8id%al 8al%e o! partic%lar commodities prod%ced by di!!erent prod%cers0 5 e indi8id%al 8al%e o! some o! t ese commodities @ill be belo@ t eir market-8al%e Bt at is, less labo%r time is reD%ired !or t eir prod%ction t an expressed is t e market 8al%eC @ ile t at o! ot ers @ill exceed t e market-8al%e0 3n t e one and, market-8al%e is to be 8ie@ed as t e a8erage 8al%e o! commodities prod%ced in a single sp ere, and, on t e ot er, as t e indi8id%al 8al%e o! t e commodities prod%ced %nder a8erage conditions o! t eir respecti8e sp ere and !orming t e b%lk o! t e prod%cts o! t at sp ere0 &t is only in extraordinary combinations t at commodities prod%ced %nder t e @orst, or t e most !a8o%rable, conditions reg%late t e market-8al%e, @ ic , in t%rn, !orms t e centre o! !l%ct%ation !or market-prices0 5 e latter, o@e8er, are t e same !or commodities o! t e same kind0 &! t e ordinary demand is satis!ied by t e s%pply o! commodities o! a8erage 8al%e, ence o! a 8al%e mid@ay bet@een t e t@o extremes, t en t e commodities @ ose indi8id%al 8al%e is belo@ t e market-8al%e realise an extra s%rpl%s-8al%e, or s%rpl%s-pro!it, @ ile t ose, @ ose indi8id%al 8al%e exceeds t e market8al%e, are %nable to realise a portion o! t e s%rpl%s-8al%e contained in t em0 &t does no good to say t at t e sale o! commodities prod%ced %nder t e least !a8o%rable conditions pro8es t at t ey are reD%ired to satis!y t e demand0 &! in t e ass%med case t e price @ere ig er t an t e a8erage market-8al%e, t e demand @o%ld be smaller0 ?t a certain price, a commodity occ%pies H%st so m%c place on t e market0 5 is place remains t e same in case o! a price c ange only i! t e ig er price is accompanied by a drop in t e s%pply o! t e commodity, and a lo@er price by an increase o! s%pply0 ?nd i! t e demand is so great t at it does not contract @ en t e price is reg%lated by t e 8al%e o! commodities prod%ced %nder t e least !a8o%rable conditions, t en t ese determine t e market-8al%e0 5 is is not possible %nless demand is greater t an %s%al, or i! s%pply drops belo@ t e %s%al le8el0 Finally, i! t e mass o! t e prod%ced commodities exceeds t e D%antity disposed o! at a8erage market-8al%es, t e commodities prod%ced %nder t e most !a8o%rable conditions reg%late t e market-8al%e0 5 ey may, !or example, be sold exactly or approximately at t eir indi8id%al 8al%e, in @ ic case t e commodities prod%ced %nder t e least !a8o%rable conditions may not e8en realise t eir cost-price, @ ile t ose prod%ced %nder a8erage conditions realise only a portion o! t e s%rpl%s-8al%e contained in t em0 W at as been said ere o! market-8al%e applies to t e price o! prod%ction as soon as it takes t e place o! market-8al%e0 5 e price o! prod%ction is reg%lated in eac sp ere, and like@ise reg%lated by special circ%mstances0 ?nd t is price o! prod%ction is, in its t%rn, t e centre aro%nd @ ic t e daily market-prices !l%ct%ate and tend to eD%alise one anot er @it in de!inite periods0 B$ee )icardo on determining t e price o! prod%ction t ro%g t ose @orking %nder t e least !a8o%rable conditions0C -o matter o@ t e prices are reg%lated, @e arri8e at t e !ollo@ing: 1C 5 e la@ o! 8al%e dominates price mo8ements @it red%ctions or increases in reD%ired labo%rtime making prices o! prod%ction !all or rise0 &t is in t is sense t at )icardo B@ o do%btlessly realised t at is prices o! prod%ction de8iated !rom t e 8al%e o! commoditiesC says t at Kt e inD%iry to @ ic & @is to dra@ t e reader"s attention relates to t e e!!ect o! t e 8ariations in t e relati8e 8al%e o! commodities, and not in t eir absol%te 8al%eL0

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< C 5 e a8erage pro!it determining t e prices o! prod%ction m%st al@ays be approximately eD%al to t at D%antity o! s%rpl%s-8al%e @ ic !alls to t e s are o! indi8id%al capital in its capacity o! an aliD%ot part o! t e total social capital0 $%ppose t at t e general rate o! pro!it, and t ere!ore t e a8erage pro!it, are expressed by money-8al%e greater t an t e money-8al%e o! t e act%al a8erage s%rpl%s-8al%e0 $o !ar as t e capitalists are concerned, it is t en immaterial @ et er t ey reciprocally c arge 1= or 1+T pro!it0 -eit er o! t ese percentages co8ers more act%al commodity-8al%e t an t e ot er, since t e o8erc arge in money is m%t%al0 ?s !or t e labo%rer Bt e ass%mption being t at e recei8es is normal @age and t e rise in t e a8erage pro!it does not t ere!ore imply an act%al ded%ction !rom is @age, i0e0, it expresses somet ing entirely di!!erent !rom t e normal s%rpl%s-8al%e o! t e capitalistC, t e rise in commodity-prices ca%sed by an increase o! t e a8erage pro!it m%st correspond to t e rise o! t e money-expression o! t e 8ariable capital0 $%c a general nominal increase in t e rate o! pro!it and t e a8erage pro!it abo8e t e limit pro8ided by t e ratio o! t e act%al s%rpl%s-8al%e to t e total in8ested capital is not, in e!!ect, possible @it o%t ca%sing an increase in @ages, and also an increase in t e prices o! commodities !orming t e constant capital0 5 e re8erse is tr%e in case o! a red%ction0 $ince t e total 8al%e o! t e commodities reg%lates t e total s%rpl%s-8al%e, and t is in t%rn reg%lates t e le8el o! a8erage pro!it and t ereby t e general rate o! pro!it I as a general la@ or a la@ go8erning !l%ct%ations I it !ollo@s t e la@ o! 8al%e reg%lates t e prices o! prod%ction0 W at competition, !irst in a single sp ere, ac ie8es is a single market-8al%e and market-price deri8ed !rom t e 8ario%s indi8id%al 8al%es o! commodities0 ?nd it is competition o! capitals in di!!erent sp eres, @ ic !irst brings o%t t e price o! prod%ction eD%aliEing t e rates o! pro!it in t e di!!erent sp eres0 5 e latter process reD%ires a ig er de8elopment o! capitalist prod%ction t at t e pre8io%s one0 For commodities o! t e same sp ere o! prod%ction, t e same kind, and approximately t e same D%ality, to be sold at t eir 8al%es, t e !ollo@ing t@o reD%irements are necessary: 'irst, t e di!!erent indi8id%al 8al%es m%st be eD%aliEed at one social 8al%e, t e abo8e-named market 8al%e, and t is implies competition among prod%cers o! t e same kind o! commodities and, like@ise, t e existence o! a common market in @ ic t ey o!!er t eir articles !or sale0 For t e market-price o! identical commodities, eac , o@e8er, prod%ced %nder di!!erent indi8id%al circ%mstances, to correspond to t e market-8al%e and not to de8iate !rom it eit er by rising abo8e or !alling belo@ it, it is necessary t at t e press%re exerted by di!!erent sellers %pon one anot er be s%!!icient to bring eno%g commodities to market to !ill t e social reD%irements, i0e0, a D%antity !or @ ic society is capable o! paying t e market-8al%e0 $ o%ld t e mass o! prod%cts exceed t is demand, t e commodities @o%ld a8e to be sold belo@ t eir market-8al%e# and con8ersely, abo8e t eir market-8al%e i! t e mass o! prod%cts @ere not large eno%g to meet t e demand, or, @ at amo%nts to t e same, i! t e press%re o! competition among sellers @ere not strong eno%g to bring t is mass o! prod%cts to market0 $ o%ld t e market-8al%e c ange, t is @o%ld also entail a c ange in t e conditions on @ ic t e total mass o! commodities co%ld be sold0 $ o%ld t e market-8al%e !all, t is @o%ld entail a rise in t e a8erage social demand Bt is al@ays taken to mean t e e!!ecti8e demandC, @ ic co%ld, @it in certain limits, absorb larger masses o! commodities0 $ o%ld t e market-8al%e rise, t is @o%ld entail a drop in t e social demand, and a smaller mass o! commodities @o%ld be absorbed0 6ence, i! s%pply and demand reg%late t e market-price, or rat er t e de8iations o! t e market-price !rom t e market-8al%e, t en, in t%rn, t e market-8al%e reg%lates t e ratio o! s%pply to demand, or t e centre ro%nd @ ic !l%ct%ations o! s%pply and demand ca%se market-prices to oscillate0 'ooking closer, @e !ind t at t e conditions applicable to t e 8al%e o! an indi8id%al commodity are ere reprod%ced as conditions go8erning t e 8al%e o! t e aggregate o! a certain kind o! commodity0 ;apitalist prod%ction is mass prod%ction !rom t e 8ery o%tset0 A%t e8en in ot er, less de8eloped, modes o! prod%ction t at @ ic is prod%ced in relati8ely small D%antities as a common prod%ct by small-scale, e8en i! n%mero%s, prod%cers, is concentrated in large D%antities

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I at least in t e case o! t e 8ital commodities I in t e ands o! relati8ely !e@ merc ants0 5 e latter acc%m%late t em and sell t em as t e common prod%ct o! an entire branc o! prod%ction, or o! a more or less considerable contingent o! it0 &t s o%ld be ere noted in passing t at t e Ksocial demand,L i0e0, t e !actor @ ic reg%lates t e principle o! demand, is essentially s%bHect to t e m%t%al relations ip o! t e di!!erent classes and t eir respecti8e economic position, notably t ere!ore to, !irstly, t e ratio o! total s%rpl%s-8al%e to @ages, and, secondly, to t e relation o! t e 8ario%s parts into @ ic s%rpl%s-8al%e is split %p Bpro!it, interest, gro%nd-rent, taxes, etc0C0 ?nd t is t %s again s o@s o@ absol%tely not ing can be explained by t e relation o! s%pply to demand be!ore ascertaining t e basis on @ ic t is relation rests0 ?lt o%g bot commodity and money represent a %nity o! exc ange-8al%e and %se-8al%e, @e a8e already seen t at in b%ying and selling bot o! t ese !%nctions are polarised at t e t@o extremes, t e commodity BsellerC representing t e %se-8al%e, and t e money Bb%yerC representing t e exc ange-8al%e0 3ne o! t e !irst premises o! selling @as t at a commodity s o%ld a8e %se8al%e and s o%ld t ere!ore satis!y a social need0 5 e ot er premise @as t at t e D%antity o! labo%r contained in t e commodity s o%ld represent socially necessary labo%r, i0e0, its indi8id%al 8al%e Band, @ at amo%nts to t e same %nder t e present ass%mption, its selling priceC s o%ld coincide @it its social 8al%e0 'et %s apply t is to t e mass o! commodities a8ailable in t e market, @ ic represents t e prod%ct o! a @ ole sp ere0 5 e matter @ill be most readily pict%red by regarding t is @ ole mass o! commodities, prod%ced by one branc o! ind%stry, as one commodity, and t e s%m o! t e prices o! t e many identical commodities as one price0 5 en, @ ate8er as been said o! a single commodity applies literally to t e mass o! commodities o! an entire branc o! prod%ction a8ailable in t e market0 5 e reD%irement t at t e indi8id%al 8al%e o! a commodity s o%ld correspond to its social 8al%e is no@ realised, or !%rt er determined, in t at t e mass contains social labo%r necessary !or its prod%ction, and t at t e 8al%e o! t is mass is eD%al to its market-8al%e0 -o@ s%ppose t at t e b%lk o! t ese commodities is prod%ced %nder approximately similar normal social conditions, so t at t is 8al%e is at t e same time t e indi8id%al 8al%e o! t e indi8id%al commodities @ ic make %p t is mass0 &! a relati8ely small portion o! t ese commodities may no@ a8e been prod%ced belo@, and anot er abo8e, t ese conditions, so t at t e indi8id%al 8al%e o! one portion is greater, and t at o! t e ot er smaller, t an t e a8erage 8al%e o! t e b%lk o! t e commodities, b%t in s%c proportions t at t ese extremes balance one anot er, so t at t e a8erage 8al%e o! t e commodities at t ese extremes is eD%al to t e 8al%e o! commodities in t e centre, t en t e market-8al%e is determined by t e 8al%e o! t e commodities prod%ced %nder a8erage conditions0 5 e 8al%e o! t e entire mass o! commodities is eD%al to t e act%al s%m o! t e 8al%es o! all indi8id%al commodities taken toget er, @ et er prod%ced %nder a8erage conditions, or %nder conditions abo8e or belo@ t e a8erage0 &n t at case, t e market-8al%e, or social 8al%e, o! t e mass o! commodities I t e necessary labo%r-time contained in t em I is determined by t e 8al%e o! t e preponderant mean mass0 $%ppose, on t e contrary, t at t e total mass o! t e commodities in D%estion bro%g t to market remains t e same, @ ile t e 8al%e o! t e commodities prod%ced %nder less !a8o%rable conditions !ails to balance o%t t e 8al%e o! commodities prod%ced %nder more !a8o%rable conditions, so t at t e part o! t e mass prod%ced %nder less !a8o%rable conditions !orms a relati8ely @eig ty D%antity as compared @it t e a8erage mass and @it t e ot er extreme0 &n t at case, t e mass prod%ced %nder less !a8o%rable conditions reg%lates t e market, or social, 8al%e0 $%ppose, !inally, t at t e mass o! commodities prod%ced %nder better t an a8erage conditions considerably exceeds t at prod%ced %nder @orse conditions, and is large e8en compared @it t at prod%ced %nder a8erage conditions0 &n t at case, t e part prod%ced %nder t e most !a8o%rable

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conditions determines t e market-8al%e0 We ignore ere t e o8erstocked market, in @ ic t e part prod%ced %nder most !a8o%rable conditions al@ays reg%lates t e market-price0 We are not dealing ere @it t e market-price, in so !ar as it di!!ers !rom t e market-8al%e, b%t @it t e 8ario%s determinations o! t e market-8al%e itsel!0 1 &n !act, strictly speaking B@ ic , o! co%rse, occ%rs in reality only in approximation and @it a t o%sand modi!icationsC t e market-8al%e o! t e entire mass, reg%lated as it is by t e a8erage 8al%es, is in case & eD%al to t e s%m o! t eir indi8id%al 8al%es# alt o%g in t e case o! t e commodities prod%ced at t e extremes, t is 8al%e is represented as an a8erage 8al%e @ ic is !orced %pon t em0 5 ose @ o prod%ce at t e @orst extreme m%st t en sell t eir commodities belo@ t e indi8id%al 8al%e# t ose prod%cing at t e best extreme sell t em abo8e it0 &n case && t e indi8id%al lots o! commodity-8al%es prod%ced at t e t@o extremes do not balance one anot er0 )at er, t e lot prod%ced %nder t e @orse conditions decides t e iss%e0 $trictly speaking, t e a8erage price, or t e market-8al%e, o! eac indi8id%al commodity, or eac aliD%ot part o! t e total mass, @o%ld no@ be determined by t e total 8al%e o! t e mass as obtained by adding %p t e 8al%es o! t e commodities prod%ced %nder di!!erent conditions, and in accordance @it t e aliD%ot part o! t is total 8al%e !alling to t e s are o! eac indi8id%al commodity0 5 e market-8al%e t %s obtained @o%ld exceed t e indi8id%al 8al%e not only o! t e commodities belonging to t e !a8o%rable extreme, b%t also o! t ose belonging to t e a8erage lot0 .et it @o%ld still be belo@ t e indi8id%al 8al%e o! t ose commodities prod%ced at t e %n!a8o%rable extreme0 6o@ close t e market-8al%e approac es, or !inally coincides @it , t e latter @o%ld depend entirely on t e 8ol%me occ%pied by commodities prod%ced at t e %n!a8o%rable extreme o! t e commodity sp ere in D%estion0 &! demand is only slig tly greater t an s%pply, t e indi8id%al 8al%e o! t e %n!a8o%rably prod%ced commodities reg%lates t e market-price0 Finally, i! t e lot o! commodities prod%ced at t e !a8o%rable extreme occ%pies greater place t an t e ot er extreme, and also t an t e a8erage lot, as it does in case &&&, t en t e market-8al%e !alls belo@ t e a8erage 8al%e0 5 e a8erage 8al%e, comp%ted by adding t e s%ms o! 8al%es at t e t@o extremes and at t e middle, stands ere belo@ t e 8al%e o! t e middle, @ ic it approac es, or 8ice 8ersa, depending on t e relati8e place occ%pied by t e !a8o%rable extreme0 $ o%ld demand be @eaker t an s%pply, t e !a8o%rably sit%ated part, @ ate8er its siEe, makes room !or itsel! !orcibly by paring its price do@n to its indi8id%al 8al%e0 5 e market-8al%e cannot e8er coincide @it t is indi8id%al 8al%e o! t e commodities prod%ced %nder t e most !a8o%rable conditions, except @ en s%pply !ar exceeds demand0 5 is mode o! determining market-8al%es, @ ic @e a8e ere o%tlined abstractly, is promoted in t e real market by competition among t e b%yers, pro8ided t e demand is large eno%g to absorb t e mass o! commodities at 8al%es so !ixed0 ?nd t is brings %s to t e ot er point0 Second, to say t at a commodity as a %se-8al%e is merely to say t at it satis!ies some social @ant0 $o long as @e dealt @it indi8id%al commodities only, @e co%ld ass%me t at t ere @as a need !or a partic%lar commodity I its D%antity already implied by its price @it o%t inD%iring !%rt er into t e D%antity reD%ired to satis!y t is @ant0 5 is D%antity is, o@e8er, o! essential importance, as soon as t e prod%ct o! an entire branc o! prod%ction is placed on one side, and t e social need !or it on t e ot er0 &t t en becomes necessary to consider t e extent, i0e0, t e amo%nt o! t is social @ant0 &n t e !oregoing determinations o! market-8al%e it @as ass%med t at t e mass o! t e prod%ced commodities is gi8en, i0e0, remains t e same, and t at t ere is a c ange only in t e proportions o! its constit%ent elements, @ ic are prod%ced %nder di!!erent conditions, and t at, ence, t e market-8al%e o! t e same mass o! commodities is di!!erently reg%lated0 $%ppose, t is mass corresponds in siEe to t e %s%al s%pply, lea8ing aside t e possibility t at a portion o! t e prod%ced commodities may be temporarily @it dra@n !rom t e market0 $ o%ld demand !or t is mass no@ also remain t e same, t is commodity @ill be sold at its market-8al%e, no matter @ ic o! t e

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t ree a!orementioned cases reg%lates t is market-8al%e0 5 is mass o! commodities does not merely satis!y a need, b%t satis!ies it to its !%ll social extent0 $ o%ld t eir D%antity be smaller or greater, o@e8er, t an t e demand !or t em, t ere @ill be de8iations o! t e market-price !rom t e market-8al%e0 ?nd t e !irst de8iation is t at i! t e s%pply is too small, t e market-8al%e is al@ays reg%lated by t e commodities prod%ced %nder t e least !a8o%rable circ%mstances and, i! t e s%pply is too large, al@ays by t e commodities prod%ced %nder t e most !a8o%rable conditions# t at t ere!ore it is one o! t e extremes @ ic determines t e market-8al%e, in spite o! t e !act t at in accordance @it t e mere proportion o! t e commodity masses prod%ced %nder di!!erent conditions, a di!!erent res%lt s o%ld obtain0 &! t e di!!erence bet@een demand and t e a8ailable D%antity o! t e prod%ct is more considerable, t e market-price @ill like@ise be considerably abo8e or belo@ t e market-8al%e0 -o@, t e di!!erence bet@een t e D%antity o! t e prod%ced commodities and t at D%antity o! t em at @ ic t ey are sold at market-8al%e may be d%e to t@o reasons0 Eit er t e D%antity itsel! c anges, becoming too small or too large, so t at reprod%ction @o%ld a8e taken place on a di!!erent scale t an t at @ ic reg%lated t e gi8en market-8al%e0 &n t at case, t e s%pply c anged, alt o%g demand remained t e same, and t ere @as, t ere!ore, relati8e o8er-prod%ction or %nder-prod%ction0 3r else reprod%ction, and t %s s%pply, remained t e same, @ ile demand s rank or increased, @ ic may be d%e to se8eral reasons0 ?lt o%g t e absol%te magnit%de o! t e s%pply @as t e same, its relati8e magnit%de, its magnit%de relati8e to, or meas%red by, t e demand, ad c anged0 5 e e!!ect is t e same as in t e !irst case, b%t in t e re8erse direction0 Finally, i! c anges take place on bot sides, b%t eit er in re8erse directions, or, i! in t e same direction, t en not to t e same extent, i! t ere!ore t ere are c anges on bot sides, b%t t ese alter t e !ormer proportion bet@een t e t@o sides, t en t e !inal res%lt m%st al@ays lead to one o! t e t@o abo8e-mentioned cases0 5 e real di!!ic%lty in !orm%lating t e general de!inition o! s%pply and demand is t at it seems to take on t e appearance o! a ta%tology0 First consider t e s%pply I t e prod%ct a8ailable in t e market, or t at @ ic can be deli8ered to it0 5o a8oid d@elling %pon %seless detail, @e s all ere consider only t e mass ann%ally reprod%ced in e8ery gi8en branc o! prod%ction and ignore t e greater or lesser !ac%lty possessed by t e di!!erent commodities to be @it dra@n !rom t e market and stored a@ay !or cons%mption, say, %ntil next year0 5 is ann%al reprod%ction is expressed by a certain D%antity I in @eig t or n%mbers I depending on @ et er t is mass o! commodities is meas%red in discrete elements or contin%o%sly0 5 ey are not only %se-8al%es satis!ying %man @ants, b%t t ese %se-8al%es are a8ailable in t e market in de!inite D%antities0 $econdly, o@e8er, t is D%antity o! commodities as a speci!ic market-8al%e, @ ic may be expressed by a m%ltiple o! t e market-8al%e o! t e commodity, or o! its meas%re, @ ic ser8es as %nit0 5 %s, t ere is no necessary connection bet@een t e D%antitati8e 8ol%me o! t e commodities in t e market and t eir market-8al%e, since, !or instance, many commodities a8e a speci!ically ig 8al%e, and ot ers a speci!ically lo@ 8al%e, so t at a gi8en s%m o! 8al%es may be represented by a 8ery large D%antity o! one commodity, and a 8ery small D%antity o! anot er0 5 ere is only t e !ollo@ing connection bet@een t e D%antity o! t e articles a8ailable in t e market and t e market-8al%e o! t ese articles: 3n a gi8en basis o! labo%r prod%cti8ity t e prod%ction o! a certain D%antity o! articles in e8ery partic%lar sp ere o! prod%ction reD%ires a de!inite D%antity o! social labo%r-time# alt o%g t is proportion 8aries in di!!erent sp eres o! prod%ction and as no inner relation to t e %se!%lness o! t ese articles or t e special nat%re o! t eir %se-8al%es0 ?ss%ming all ot er circ%mstances to be eD%al, and a certain D%antity a o! some commodity to cost b labo%r-time, a D%antity na o! t e same commodity @ill cost nb labo%r-time0 F%rt er, i! society @ants to satis!y some @ant and a8e an article prod%ced !or t is p%rpose, it m%st pay !or it0 &ndeed, since commodity-prod%ction necessitates a di8ision o! labo%r, society pays !or t is article by de8oting a portion o! t e a8ailable labo%r-time to its prod%ction0 5 ere!ore, society b%ys it @it a de!inite D%antity o! its disposable labo%r-time0 5 at part o! society @ ic t ro%g t e di8ision o! labo%r appens to employ its labo%r in prod%cing t is partic%lar article, m%st recei8e an eD%i8alent in social labo%r

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incorporated in articles @ ic satis!y its o@n @ants0 6o@e8er, t ere exists an accidental rat er t an a necessary connection bet@een t e total amo%nt o! social labo%r applied to a social article, i0e0, bet@een t e aliD%ot part o! society"s total labo%r-po@er allocated to prod%cing t is article, or bet@een t e 8ol%me @ ic t e prod%ction o! t is article occ%pies in total prod%ction, on t e one and, and t e 8ol%me @ ereby society seeks to satis!y t e @ant grati!ied by t e article in D%estion, on t e ot er0 E8ery indi8id%al article, or e8ery de!inite D%antity o! a commodity may, indeed, contain no more t an t e social labo%r reD%ired !or its prod%ction, and !rom t is point o! 8ie@ t e market-8al%e o! t is entire commodity represents only necessary labo%r, b%t i! t is commodity as been prod%ced in excess o! t e existing social needs, t en so m%c o! t e social labo%r-time is sD%andered and t e mass o! t e commodity comes to represent a m%c smaller D%antity o! social labo%r in t e market t an is act%ally incorporated in it0 B&t is only @ ere prod%ction is %nder t e act%al, predetermining control o! society t at t e latter establis es a relation bet@een t e 8ol%me o! social labo%r-time applied in prod%cing de!inite articles, and t e 8ol%me o! t e social @ant to be satis!ied by t ese articles0C For t is reason, t ese commodities m%st be sold belo@ t eir market-8al%e, and a portion o! t em may e8en be altoget er %nsaleable0 5 e re8erse applies i! t e D%antity o! social labo%r employed in t e prod%ction o! a certain kind o! commodity is too small to meet t e social demand !or t at commodity0 A%t i! t e D%antity o! social labo%r expended in t e prod%ction o! a certain article corresponds to t e social demand !or t at article, so t at t e prod%ced D%antity corresponds to t e %s%al scale o! reprod%ction and t e demand remains %nc anged, t en t e article is sold at its market-8al%e0 5 e exc ange, or sale, o! commodities at t eir 8al%e is t e rational state o! a!!airs, i0e0, t e nat%ral la@ o! t eir eD%ilibri%m0 &t is t is la@ t at explains t e de8iations, and not 8ice 8ersa, t e de8iations t at explain t e la@0 -o@ let %s look at t e ot er side I t e demand0 ;ommodities are bo%g t eit er as means o! prod%ction or means o! s%bsistence to enter prod%cti8e or indi8id%al cons%mption0 &t does not alter matters t at some commodities may ser8e bot p%rposes0 5 ere is, t en, a demand !or t em on t e part o! prod%cers B ere capitalists, since @e a8e ass%med t at means o! prod%ction a8e been trans!ormed into capitalC and o! cons%mers0 Aot appear at !irst sig t to pres%ppose a gi8en D%antity o! social @ant on t e side o! demand, corresponding on t e ot er side to a de!inite D%antity o! social o%tp%t in t e 8ario%s lines o! prod%ction0 &! t e cotton ind%stry is to accomplis its ann%al reprod%ction on a gi8en scale, it m%st a8e t e %s%al s%pply o! cotton, and, ot er circ%mstances remaining t e same, an additional amo%nt o! cotton corresponding to t e ann%al extension o! reprod%ction ca%sed by t e acc%m%lation o! capital0 5 is is eD%ally tr%e @it regard to means o! s%bsistence0 5 e @orkingclass m%st !ind at least t e same D%antity o! necessities on and i! it is to contin%e li8ing in its acc%stomed a8erage @ay, alt o%g t ey may be more or less di!!erently distrib%ted among t e di!!erent kinds o! commodities0 Moreo8er, t ere m%st be an additional D%antity to allo@ !or t e ann%al increase o! pop%lation0 5 e same, @it more or less modi!ication, applies to ot er classes0 &t @o%ld seem, t en, t at t ere is on t e side o! demand a certain magnit%de o! de!inite social @ants @ ic reD%ire !or t eir satis!action a de!inite D%antity o! a commodity on t e market0 A%t D%antitati8ely, t e de!inite social @ants are 8ery elastic and c anging0 5 eir !ixedness is only apparent0 &! t e means o! s%bsistence @ere c eaper, or money-@ages ig er, t e labo%rers @o%ld b%y more o! t em, and a greater social need @o%ld arise !or t em, lea8ing aside t e pa%pers, etc0, @ ose demand is e8en belo@ t e narro@est limits o! t eir p ysical @ants0 3n t e ot er and, i! cotton @ere c eaper, !or example, t e capitalists" demand !or it @o%ld increase, more additional capital @o%ld be t ro@n into t e cotton ind%stry, etc0 We m%st ne8er !orget t at t e demand !or prod%cti8e cons%mption is, %nder o%r ass%mption, a demand o! t e capitalist, @ ose essential p%rpose is t e prod%ction o! s%rpl%s-8al%e, so t at e prod%ces a partic%lar commodity to t is sole end0 $till, t is does not inder t e capitalist, so long as e appears in t e market as a b%yer o!, say, cotton, !rom representing t e need !or t is cotton, H%st as it is immaterial to t e seller o! cotton @ et er t e b%yer con8erts it into s irting or g%n-cotton, or @ et er e intends to t%rn it

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into @ads !or is o@n, and t e @orld"s, ears0 A%t t is does exert a considerable in!l%ence on t e kind o! b%yer t e capitalist is0 6is demand !or cotton is s%bstantially modi!ied by t e !act t at it disg%ises is real need !or making pro!it0 5 e limits @it in @ ic t e need !or commodities in t e mar-et, t e demand, di!!ers D%antitati8ely !rom t e actual social need, nat%rally 8ary considerably !or di!!erent commodities# @ at & mean is t e di!!erence bet@een t e demanded D%antity o! commodities and t e D%antity @ ic @o%ld a8e been in demand at ot er moneyprices or ot er money or li8ing conditions o! t e b%yers0 -ot ing is easier t an to realise t e inconsistencies o! demand and s%pply, and t e res%lting de8iation o! market-prices !rom market-8al%es0 5 e real di!!ic%lty consists in determining @ at is meant by t e eD%ation o! s%pply and demand0 $%pply and demand coincide @ en t eir m%t%al proportions are s%c t at t e mass o! commodities o! a de!inite line o! prod%ction can be sold at t eir market-8al%e, neit er abo8e nor belo@ it0 5 at is t e !irst t ing @e ear0 5 e second is t is: &! commodities are sold at t eir market-8al%es, s%pply and demand coincide0 &! s%pply eD%als demand, t ey cease to act, and !or t is 8ery reason commodities are sold at t eir market-8al%es0 W ene8er t@o !orces operate eD%ally in opposite directions, t ey balance one anot er, exert no o%tside in!l%ence, and any p enomena taking place in t ese circ%mstances m%st be explained by ca%ses ot er t an t e e!!ect o! t ese t@o !orces0 &! s%pply and demand balance one anot er, t ey cease to explain anyt ing, do not a!!ect market-8al%es, and t ere!ore lea8e %s so m%c more in t e dark abo%t t e reasons @ y t e market-8al%e is expressed in H%st t is s%m o! money and no ot er0 &t is e8ident t at t e real inner la@s o! capitalist prod%ction cannot be explained by t e interaction o! s%pply and demand BD%ite aside !rom a deeper analysis o! t ese t@o social moti8e !orces, @ ic @o%ld be o%t o! place ereC, beca%se t ese la@s cannot be obser8ed in t eir p%re state, %ntil s%pply and demand cease to act, i0e0, are eD%ated0 &n reality, s%pply and demand ne8er coincide, or, i! t ey do, it is by mere accident, ence scienti!ically R =, and to be regarded as not a8ing occ%rred0 A%t political economy ass%mes t at s%pply and demand coincide @it one anot er0 W yQ 5o be able to st%dy p enomena in t eir !%ndamental relations, in t e !orm corresponding to t eir conception, t at is, is to st%dy t em independent o! t e appearances ca%sed by t e mo8ement o! s%pply and demand0 5 e ot er reason is to !ind t e act%al tendencies o! t eir mo8ements and to some extent to record t em0 $ince t e inconsistencies are o! an antagonistic nat%re, and since t ey contin%ally s%cceed one anot er, t ey balance o%t one anot er t ro%g t eir opposing mo8ements, and t eir m%t%al contradiction0 $ince, t ere!ore, s%pply and demand ne8er eD%al one anot er in any gi8en case, t eir di!!erences !ollo@ one anot er in s%c a @ay I and t e res%lt o! a de8iation in one direction is t at it calls !ort a de8iation in t e opposite direction I t at s%pply and demand are al@ays eD%ated @ en t e @ ole is 8ie@ed o8er a certain period, b%t only as an a8erage o! past mo8ements, and only as t e contin%o%s mo8ement o! t eir contradiction0 &n t is @ay, t e market-prices @ ic a8e de8iated !rom t e market-8al%es adH%st t emsel8es, as 8ie@ed !rom t e standpoint o! t eir a8erage n%mber, to eD%al t e market-8al%es, in t at de8iations !rom t e latter cancel eac ot er as pl%s and min%s0 ?nd t is a8erage is not merely o! t eoretical, b%t also o! practical importance to capital, @ ose in8estment is calc%lated on t e !l%ct%ations and compensations o! a more or less !ixed period0 3n t e one and, t e relation o! demand and s%pply, t ere!ore, only explains t e de8iations o! market-prices !rom market-8al%es0 3n t e ot er, it explains t e tendency to eliminate t ese de8iations, i0e0, to eliminate t e e!!ect o! t e relation o! demand and s%pply0 B$%c exceptions as commodities @ ic a8e a price @it o%t a8ing a 8al%e are not considered ere0C $%pply and demand may eliminate t e e!!ect ca%sed by t eir di!!erence in many di!!erent @ays0 For instance, i! t e demand, and conseD%ently t e market-price, !all, capital may be @it dra@n, t %s ca%sing s%pply to s rink0 &t may also be t at t e market-8al%e itsel! s rinks and balances @it t e marketprice as a res%lt o! in8entions @ ic red%ce t e necessary labo%r-time0 ;on8ersely, i! t e demand

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increases, and conseD%ently t e market-price rises abo8e t e market-8al%e, t is may lead to too m%c capital !lo@ing into t is line o! prod%ction and prod%ction may s@ell to s%c an extent t at t e market-price @ill e8en !all belo@ t e market-8al%e0 3r, it may lead to a price increase, @ ic c%ts t e demand0 &n some lines o! prod%ction it may also bring abo%t a rise in t e market-8al%e itsel! !or a s orter or longer period, @it a portion o! t e desired prod%cts a8ing to be prod%ced %nder @orse conditions d%ring t is period0 $%pply and demand determine t e market-price, and so does t e market-price, and t e market8al%e in t e !%rt er analysis, determine s%pply and demand0 5 is is ob8io%s in t e case o! demand, since it mo8es in a direction opposite to prices, s@elling @ en prices !all, and 8ice 8ersa0 A%t t is is also tr%e o! s%pply0 Aeca%se t e prices o! means o! prod%ction incorporated in t e o!!ered commodities determine t e demand !or t ese means o! prod%ction, and t %s t e s%pply o! commodities @ ose s%pply embraces t e demand !or t ese means o! prod%ction0 5 e prices o! cotton are determinants in t e s%pply o! cotton goods0 5o t is con!%sion I determining prices t ro%g demand and s%pply, and, at t e same time, determining s%pply and demand t ro%g prices I m%st be added t at demand determines s%pply, H%st as s%pply determines demand, and prod%ction determines t e market, as @ell as t e market determines prod%ction0< E8en t e ordinary economist Bsee !ootnoteC agrees t at t e proportion bet@een s%pply and demand may 8ary in conseD%ence o! a c ange in t e market-8al%e o! commodities, @it o%t a c ange being bro%g t abo%t in demand or s%pply by extraneo%s circ%mstances0 E8en e m%st admit t at, @ ate8er t e market-8al%e, s%pply and demand m%st coincide in order !or it to be establis ed0 &n ot er @ords, t e ratio o! s%pply to demand does not explain t e market-8al%e, b%t con8ersely, t e latter rat er explains t e !l%ct%ations o! s%pply and demand0 5 e a%t or o! t e :bservations contin%es a!ter t e passage D%oted in t e !ootnote: K5 is proportionL Bbet@een demand and s%pplyC, K o@e8er, i! @e still mean by "demand" and "nat%ral price", @ at @e meant H%st no@, @ en re!erring to ?dam $mit , m%st al@ays be a proportion o! eD%ality# !or it is only @ en t e s%pply is eD%al to t e e!!ect%al demand, t at is, to t at demand @ ic @ill neit er more nor less t an pay t e nat%ral price, t at t e nat%ral price is in !act paid# conseD%ently, t ere may be t@o 8ery di!!erent nat%ral prices, at di!!erent times, !or t e same commodity, and yet t e proportion, @ ic t e s%pply bears to t e demand, be in bot cases t e same, namely, t e proportion o! eD%ality0L &t is admitted, t en, t at @it t@o di!!erent nat%ral prices o! t e same commodity, at di!!erent times, demand and s%pply are al@ays able to, and m%st, balance one anot er i! t e commodity is to be sold at its nat%ral price in bot instances0 $ince t ere is no di!!erence in t e ratio o! s%pply to demand in eit er case, b%t a di!!erence in t e magnit%de o! t e nat%ral price itsel!, it !ollo@s t at t is price is ob8io%sly determined independently o! demand and s%pply, and t %s t at it can least o! all be determined by t em0 For a commodity to be sold at its market-8al%e, i0e0, proportionally to t e necessary social labo%r contained in it, t e total D%antity o! social labo%r %sed in prod%cing t e total mass o! t is

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commodity m%st correspond to t e D%antity o! t e social @ant !or it, i0e0, t e e!!ecti8e social @ant0 ;ompetition, t e !l%ct%ations o! market-prices @ ic correspond to t e !l%ct%ations o! demand and s%pply, tend contin%ally to red%ce to t is scale t e total D%antity o! labo%r de8oted to eac kind o! commodity0 5 e proportion o! s%pply and demand recapit%lates, !irst, t e relation o! %se-8al%e to exc ange8al%e, o! commodity to money, and o! b%yer to seller# and, second, t at o! prod%cer to cons%mer, alt o%g bot o! t em may be represented by t ird parties, t e merc ants0 &n considering b%yer and seller, it s%!!ices to co%nterpose t em indi8id%ally in order to present t eir relations ip0 5 ree indi8id%als are eno%g !or t e complete metamorp osis o! a commodity, and t ere!ore !or t e process o! sale and p%rc ase taken as a @ ole0 ? con8erts is commodity into t e money o! A, to @ om e sells is commodity, and recon8erts is money again into commodities, @ en e %ses it to make p%rc ases !rom ;# t e @ ole process takes place among t ese t ree0 F%rt er, in t e st%dy o! money it ad been ass%med t at t e commodities are sold at t eir 8al%es beca%se t ere @as absol%tely no reason to consider prices di8ergent !rom 8al%es, it being merely a matter o! c anges o! !orm @ ic commodities %ndergo in t eir trans!ormation into money and t eir recon8ersion !rom money into commodities0 ?s soon as a commodity as been sold and a ne@ commodity bo%g t @it t e receipts, @e a8e be!ore %s t e entire metamorp osis, and to t is process as s%c it is immaterial @ et er t e price o! t e commodity lies abo8e or belo@ its 8al%e0 5 e 8al%e o! t e commodity remains important as a basis, beca%se t e concept o! money cannot be de8eloped on any ot er !o%ndation, and price, in its general meaning, is b%t 8al%e in t e !orm o! money0 ?t any rate, it is ass%med in t e st%dy o! money as a medi%m o! circ%lation t at t ere is not H%st one metamorp osis o! a certain commodity0 &t is rat er t e social interrelation o! t ese metamorp oses @ ic is st%died0 3nly t %s do @e arri8e at t e circ%lation o! money and t e de8elopment o! its !%nction as a medi%m o! circ%lation0 A%t o@e8er important t is connection may be !or t e con8ersion o! money into a circ%lating medi%m, and !or its res%lting c ange o! !orm, it is o! no moment to t e transaction bet@een indi8id%al b%yers and sellers0 &n t e case o! s%pply and demand, o@e8er, t e s%pply is eD%al to t e s%m o! sellers, or prod%cers, o! a certain kind o! commodity, and t e demand eD%als t e s%m o! b%yers or cons%mers Bbot prod%cti8e and indi8id%alC o! t e same kind o! commodity0 5 e s%ms react on one anot er as %nits, as aggregate !orces0 5 e indi8id%al co%nts ere only as part o! a social !orce, as an atom o! t e mass, and it is in t is !orm t at competition brings o%t t e socialc aracter o! prod%ction and cons%mption0 5 e side o! competition @ ic appens !or t e moment to be @eaker is also t e side in @ ic t e indi8id%al acts independently o!, and o!ten directly against, t e mass o! is competitors, and precisely in t is manner is t e dependence o! one %pon t e ot er impressed %pon t em, @ ile t e stronger side acts al@ays more or less as a %nited @ ole against its antagonist0 &! t e demand !or t is partic%lar kind o! commodity is greater t an t e s%pply, one b%yer o%tbids anot er I @it in certain limits I and so raises t e price o! t e commodity !or all o! t em abo8e t e market-8al%e, @ ile on t e ot er and t e sellers %nite in trying to sell at a ig market-price0 &!, con8ersely, t e s%pply exceeds t e demand, one begins to dispose o! is goods at a c eaper rate and t e ot ers m%st !ollo@, @ ile t e b%yers %nite in t eir e!!orts to depress t e market-price as m%c as possible belo@ t e market-8al%e0 5 e common interest is appreciated by eac only so long as e gains more by it t an @it o%t it0 ?nd %nity o! action ceases t e moment one or t e ot er side becomes t e @eaker, @ en eac tries to extricate imsel! on is o@n as ad8antageo%sly as e possibly can0 ?gain, i! one prod%ces more c eaply and can sell more goods, t %s possessing imsel! o! a greater place in t e market by selling belo@ t e c%rrent market-price, or market8al%e, e @ill do so, and @ill t ereby begin a mo8ement @ ic grad%ally compels t e ot ers to introd%ce t e c eaper mode o! prod%ction, and one @ ic red%ces t e socially necessary labo%r to a ne@, and lo@er, le8el0 &! one side as t e ad8antage, all belonging to it gain0 &t is as t o%g t ey exerted t eir common monopoly0 &! one side is @eaker, t en one may try on is o@n ook to

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become t e stronger B!or instance, one @ o @orks @it lo@er costs o! prod%ctionC, or at least to get o!! as lig tly as possible, and in s%c cases eac !or imsel! and t e de8il take t e indmost, alt o%g is actions a!!ect not only imsel!, b%t also all is boon companions0 3 7emand and s%pply imply t e con8ersion o! 8al%e into market-8al%e, and so !ar as t ey proceed on a capitalist basis, so !ar as t e commodities are prod%cts o! capital, t ey are based on capitalist prod%ction processes, i0e0, on D%ite di!!erent relations ips t an t e mere p%rc ase and sale o! goods0 6ere it is not a D%estion o! t e !ormal con8ersion o! t e 8al%e o! commodities into prices, i0e0, not o! a mere c ange o! !orm0 &t is a D%estion o! de!inite de8iations in D%antity o! t e marketprices !rom t e market-8al%es, and, !%rt er, !rom t e prices o! prod%ction0 &n simple p%rc ase and sale it s%!!ices to a8e t e prod%cers o! commodities as s%c co%nterposed to one anot er0 &n !%rt er analysis s%pply and demand pres%ppose t e existence o! di!!erent classes and sections o! classes @ ic di8ide t e total re8en%e o! a society and cons%me it among t emsel8es as re8en%e, and, t ere!ore, make %p t e demand created by re8en%e0 W ile on t e ot er and it reD%ires an insig t into t e o8er-all str%ct%re o! t e capitalist prod%ction process !or an %nderstanding o! t e s%pply and demand created among t emsel8es by prod%cers as s%c 0 (nder capitalist prod%ction it is not merely a matter o! obtaining an eD%al mass o! 8al%e in anot er !orm I be it t at o! money or some ot er commodity I !or a mass o! 8al%es t ro@n into circ%lation in t e !orm o! a commodity, b%t it is rat er a matter o! realising as m%c s%rpl%s8al%e, or pro!it, on capital ad8anced !or prod%ction, as any ot er capital o! t e same magnit%de, or pro rata to its magnit%de in @ ic e8er line it is applied0 &t is, t ere!ore, a matter, at least as a minim%m, o! selling t e commodities at prices @ ic yield t e a8erage pro!it, i0e0, at prices o! prod%ction0 &n t is !orm capital becomes conscio%s o! itsel! as a social power in @ ic e8ery capitalist participates proportionally to is s are in t e total social capital0 First, capitalist prod%ction is in itsel! indi!!erent to t e partic%lar %se-8al%e, and distincti8e !eat%res o! any commodity it prod%ces0 &n e8ery sp ere o! prod%ction it is only concerned @it prod%cing s%rpl%s-8al%e, and appropriating a certain D%antity o! %npaid labo%r incorporated in t e prod%ct o! labo%r0 ?nd it is like@ise in t e nat%re o! t e @age-labo%r s%bordinated by capital t at it is indi!!erent to t e speci!ic c aracter o! its labo%r and m%st s%bmit to being trans!ormed in accordance @it t e reD%irements o! capital and to being trans!erred !rom one sp ere o! prod%ction to anot er0 $econd, one sp ere o! prod%ction is, in !act, H%st as good or H%st as bad as anot er0 E8ery one o! t em yields t e same pro!it, and e8ery one o! t em @o%ld be %seless i! t e commodities it prod%ced did not satis!y some social need0 -o@, i! t e commodities are sold at t eir 8al%es, t en, as @e a8e s o@n, 8ery di!!erent rates o! pro!it arise in t e 8ario%s sp eres o! prod%ction, depending on t e di!!erent organic composition o! t e masses o! capital in8ested in t em0 A%t capital @it dra@s !rom a sp ere @it a lo@ rate o! pro!it and in8ades ot ers, @ ic yield a ig er pro!it0 5 ro%g t is incessant o%t!lo@ and in!l%x, or, brie!ly, t ro%g its distrib%tion among t e 8ario%s sp eres, @ ic depends on o@ t e rate o! pro!it !alls ere and rises t ere, it creates s%c a ratio o! s%pply to demand t at t e a8erage pro!it in t e 8ario%s sp eres o! prod%ction becomes t e same, and 8al%es are, t ere!ore, con8erted into prices o! prod%ction0 ;apital s%cceeds in t is eD%alisation, to a greater or lesser degree, depending on t e extent o! capitalist de8elopment in t e gi8en nation# i0e0, on t e extent t e conditions in t e co%ntry in D%estion are adapted !or t e capitalist mode o! prod%ction0 Wit t e progress o! capitalist prod%ction, it also de8elops its o@n conditions and s%bordinates to its speci!ic c aracter and its immanent la@s all t e social prereD%isites on @ ic t e prod%ction process is based0 5 e incessant eD%ilibration o! constant di8ergences is accomplis ed so m%c more D%ickly, 1C t e more mobile t e capital, i0e0, t e more easily it can be s i!ted !rom one sp ere and !rom one place to anot er# <C t e more D%ickly labo%r-po@er can be trans!erred !rom one sp ere to anot er and !rom one prod%ction locality to anot er0 5 e !irst condition implies complete !reedom o! trade

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@it in t e society and t e remo8al o! all monopolies @it t e exception o! t e nat%ral ones, t ose, t at is, @ ic nat%rally arise o%t o! t e capitalist mode o! prod%ction0 &t implies, !%rt ermore, t e de8elopment o! t e credit system, @ ic concentrates t e inorganic mass o! t e disposable social capital 8is-a-8is t e indi8id%al capitalist0 Finally, it implies t e s%bordination o! t e 8ario%s sp eres o! prod%ction to t e control o! capitalists0 5 is last implication is incl%ded in o%r premises, since @e ass%med t at it @as a matter o! con8erting 8al%es into prices o! prod%ction in all capitalistically exploited sp eres o! prod%ction0 A%t t is eD%ilibration itsel! r%ns into greater obstacles, @ ene8er n%mero%s and large sp eres o! prod%ction not operated on a capitalist basis Bs%c as soil c%lti8ation by small !armersC, !ilter in bet@een t e capitalist enterprises and become linked @it t em0 ? great density o! pop%lation is anot er reD%irement0I 5 e second condition implies t e abolition o! all la@s pre8enting t e labo%rers !rom trans!erring !rom one sp ere o! prod%ction to anot er and !rom one local centre o! prod%ction to anot er# indi!!erence o! t e labo%rer to t e nat%re o! is labo%r# t e greatest possible red%ction o! labo%r in all sp eres o! prod%ction to simple labo%r# t e elimination o! all 8ocational preH%dices among labo%rers# and last b%t not least, a s%bH%gation o! t e labo%rer to t e capitalist mode o! prod%ction0 F%rt er re!erence to t is belongs to a special analysis o! competition0 &t !ollo@s !rom t e !oregoing t at in eac partic%lar sp ere o! prod%ction t e indi8id%al capitalist, as @ell as t e capitalists as a @ ole, take direct part in t e exploitation o! t e total @orking-class by t e totality o! capital and in t e degree o! t at exploitation, not only o%t o! general class sympat y, b%t also !or direct economic reasons0 For, ass%ming all ot er conditions I among t em t e 8al%e o! t e total ad8anced constant capital I to be gi8en, t e a8erage rate o! pro!it depends on t e intensity o! exploitation o! t e s%m total o! labo%r by t e s%m total o! capital0 5 e a8erage pro!it coincides @it t e a8erage s%rpl%s-8al%e prod%ced !or eac 1== o! capital, and so !ar as t e s%rpl%s-8al%e is concerned t e !oregoing statements apply as a matter o! co%rse0 &n t e case o! t e a8erage pro!it t e 8al%e o! t e ad8anced capital becomes an additional element determining t e rate o! pro!it0 &n !act, t e direct interest taken by t e capitalist, or t e capital, o! any indi8id%al sp ere o! prod%ction in t e exploitation o! t e labo%rers @ o are directly employed is con!ined to making an extra gain, a pro!it exceeding t e a8erage, eit er t ro%g exceptional o8er@ork, or red%ction o! t e @age belo@ t e a8erage, or t ro%g t e exceptional prod%cti8ity o! t e labo%r employed0 ?side !rom t is, a capitalist @ o @o%ld not in is line o! prod%ction employ any 8ariable capital, and t ere!ore any labo%rer Bin reality an exaggerated ass%mptionC, @o%ld nonet eless be as m%c interested in t e exploitation o! t e @orking-class by capital, and @o%ld deri8e is pro!it D%ite as m%c !rom %npaid s%rpl%s-labo%r, as, say, a capitalist @ o @o%ld employ only 8ariable capital Banot er exaggerationC, and @ o @o%ld t %s in8est is entire capital in @ages0 A%t t e degree o! exploitation o! labo%r depends on t e a8erage intensity o! labo%r i! t e @orking-day is gi8en, and on t e lengt o! t e @orking-day i! t e intensity o! exploitation is gi8en0 5 e degree o! exploitation o! labo%r determines t e rate o! s%rpl%s-8al%e, and t ere!ore t e mass o! s%rpl%s-8al%e !or a gi8en total mass o! 8ariable capital, and conseD%ently t e magnit%de o! t e pro!it0 5 e indi8id%al capitalist, as distinct !rom is sp ere as a @ ole, as t e same special interest in exploiting t e labo%rers e personally employs as t e capital o! a partic%lar sp ere, as distinct !rom t e total social capital, as in exploiting t e labo%rers directly employed in t at sp ere0 3n t e ot er and, e8ery partic%lar sp ere o! capital, and e8ery indi8id%al capitalist, a8e t e same interest in t e prod%cti8ity o! t e social labo%r employed by t e s%m total o! capital0 For t@o t ings depend on t is prod%cti8ity: First, t e mass o! %se-8al%es in @ ic t e a8erage pro!it is expressed# and t is is do%bly important, since t is a8erage pro!it ser8es as a !%nd !or t e acc%m%lation o! ne@ capital and as a !%nd !or re8en%e to be spent !or cons%mption0 $econd, t e 8al%e o! t e total capital in8ested Bconstant and 8ariableC, @ ic , t e amo%nt o! s%rpl%s-8al%e, or pro!it, !or t e @ ole capitalist class being gi8en, determines t e rate o! pro!it, or t e pro!it on a certain D%antity o! capital0 5 e special prod%cti8ity o! labo%r in any partic%lar sp ere, or in any

12=

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indi8id%al enterprise o! t is sp ere, is o! interest only to t ose capitalists @ o are directly engaged in it, since it enables t at partic%lar sp ere, 8is-a-8is t e total capital, or t at indi8id%al capitalist, 8is-a-8is is sp ere, to make an extra pro!it0 6ere, t en, @e a8e a mat ematically precise proo! @ y capitalists !orm a 8eritable !reemason society 8is-a-8is t e @ ole @orking-class, @ ile t ere is little lo8e lost bet@een t em in competition among t emsel8es0 5 e price o! prod%ction incl%des t e a8erage pro!it0 We call it price o! prod%ction0 &t is really @ at ?dam $mit calls natural price, )icardo calls price of production, or cost of production, and t e p ysiocrats call pri n7cessaire, beca%se in t e long r%n it is a prereD%isite o! s%pply, o! t e reprod%ction o! commodities in e8ery indi8id%al sp ere0 A%t none o! t em as re8ealed t e di!!erence bet@een price o! prod%ction and 8al%e0 We can @ell %nderstand @ y t e same economists @ o oppose determining t e 8al%e o! commodities by labo%r-time, i0e0, by t e D%antity o! labo%r contained in t em, @ y t ey al@ays speak o! prices o! prod%ction as centres aro%nd @ ic market-prices !l%ct%ate0 5 ey can a!!ord to do it beca%se t e price o! prod%ction is an %tterly external and prima facie meaningless !orm o! t e 8al%e o! commodities, a !orm as it appears in competition, t ere!ore in t e mind o! t e 8%lgar capitalist, and conseD%ently in t at o! t e 8%lgar economist0 3%r analysis as re8ealed o@ t e market-8al%e Band e8eryt ing said concerning it applies @it appropriate modi!ications to t e price o! prod%ctionC embraces a s%rpl%s-pro!it !or t ose @ o prod%ce in any partic%lar sp ere o! prod%ction %nder t e most !a8o%rable conditions0 Wit t e exception o! crises, and o! o8erprod%ction in general, t is applies to all market-prices, no matter o@ m%c t ey may de8iate !rom market-8al%es or market-prices o! prod%ction0 For t e marketprice signi!ies t at t e same price is paid !or commodities o! t e same kind, alt o%g t ey may a8e been prod%ced %nder 8ery di!!erent indi8id%al conditions and ence may a8e di!!erent costprices0 BWe do not speak at t is point o! any s%rpl%s-pro!its d%e to monopolies in t e %s%al sense o! t e term, @ et er nat%ral or arti!icial0C ? s%rpl%s-pro!it may also arise i! certain sp eres o! prod%ction are in a position to e8ade t e con8ersion o! t e 8al%es o! t eir commodities into prices o! prod%ction, and t %s t e red%ction o! t eir pro!its to t e a8erage pro!it0 We s all de8ote more attention to t e !%rt er modi!ications o! t ese t@o !orms o! s%rpl%s-pro!it in t e part dealing @it gro%nd-rent0

Chapter 11. Effects of +eneral 2a)e #luctuations on Prices of Production

'et t e a8erage composition o! social capital be 8= c U <=8, and t e pro!it <=T0 5 e rate o! s%rpl%s-8al%e is t en 1==T0 ? general increase o! @ages, all else remaining t e same, is tantamo%nt to a red%ction in t e rate o! s%rpl%s-8al%e0 &n t e case o! a8erage capital, pro!it and s%rpl%s-8al%e are identical0 'et @ages rise <+T0 5 en t e same D%antity o! labo%r, !ormerly set in motion @it <=, @ill cost <+0 We s all t en a8e a t%rno8er 8al%e o! 8= c U <+8 U 1+p, instead o! 8=c U <=8 U <=p0 ?s be!ore, t e labo%r set in motion by t e 8ariable capital prod%ces a 8al%e o! 2=0 &! 8 rises !rom <= to <+, t e s%rpl%s s, or p, @ill amo%nt to only 1+0 5 e pro!it o! 1+ on a capital o! 1=+ is 12 <N>T, and t is @o%ld be t e ne@ a8erage rate o! pro!it0 $ince t e price o! prod%ction o! commodities prod%ced by t e a8erage capital coincides @it t eir 8al%e, t e price o! prod%ction o! t ese commodities @o%ld a8e remained %nc anged0 ? @age increase @o%ld t ere!ore a8e ca%sed a drop in pro!it, b%t no c ange in t e 8al%e and price o! t e commodities0 Formerly, as long as t e a8erage pro!it @as <=T, t e price o! prod%ction o! commodities prod%ced in one period o! t%rno8er @as eD%al to t eir cost-price pl%s a pro!it o! <=T on t is cost-price, t ere!ore R k U kp" R k U <=kN1==0 &n t is !orm%la k is a 8ariable magnit%de, c anging in accordance @it t e 8al%e o! t e means o! prod%ction t at go into t e commodities, and @it t e amo%nt o! depreciation gi8en %p by t e !ixed capital to t e prod%ct0 5 e price o! prod%ction @o%ld t en amo%nt to k U 12 <N> kN1==0 'et %s no@ select a capital, @ ose composition is lo@er t an t e original composition o! t e a8erage social capital o! 8= c U <=8 B@ ic as no@ c anged into >6 2N<1c U <3 1>N<18C# say, +=c U +=80 &n t is case, t e price o! prod%ction o! t e ann%al prod%ct be!ore t e @age increase @o%ld a8e been += c U +=8 U <=p R 1<=, ass%ming !or t e sake o! simplicity t at t e entire !ixed capital passes t ro%g depreciation into t e prod%ct and t at t e period o! t%rno8er is t e same as in t e !irst case0 For t e same D%antity o! labo%r set in motion a @age increase o! <+T means an increase o! t e 8ariable capital !rom += to 6<Z0 &! t e ann%al prod%ct @ere sold at t e !ormer price o! prod%ction o! 1<=, t is @o%ld gi8e %s += c U 6<Z8 U >Zp, or a rate o! pro!it o! 6WT0 A%t t e ne@ a8erage rate o! pro!it is 12 <N>T, and since @e ass%me all ot er circ%mstances to remain t e same, t e capital o! += c U 6<Z 8 m%st also make t is pro!it0 -o@ a capital o! 11<Z makes a pro!it o! 16 1N12 at a rate o! pro!it o! 12 <N>T0 5 ere!ore, t e price o! prod%ction o! t e commodities prod%ced by t is capital is no@ += c U 6<Z 8 U 16[p R 1<8 8N120 3@ing to a @age rise o! <++, t e price o! prod%ction o! t e same D%antity o! t e same commodities, t ere!ore, as ere risen !rom 1<= to 1<8 8N12, or more t an >T0 ;on8ersely, s%ppose @e take a sp ere o! prod%ction o! a ig er composition t an t e a8erage capital# say, *<c U 880 5 e original a8erage pro!it in t is case @o%ld still be <=, and i! @e again ass%me t at t e entire !ixed capital passes into t e ann%al prod%ct and t at t e period o! t%rno8er is t e same as in cases & and &&, t e price o! prod%ction o! t e commodity is ere also 1<=0 3@ing to t e rise in @ages o! <+T t e 8ariable capital !or t e same D%antity o! labo%r rises !rom 8 to 1=, t e cost-price o! t e commodities !rom 1== to 1=<, @ ile t e a8erage rate o! pro!it !alls !rom <=T to 12 <N>T0 A%t 1==:12 <N> R 1=<:12 2N>0 5 e pro!it no@ !alling to t e s are o! 1=< is t ere!ore 12 2N>0 For t is reason, t e total prod%ct sells at k U kp" R 1=< U 12 2N> R 116 2N>0 5 e price o! prod%ction as t ere!ore !allen !rom 1<= to 116 2N>, or 3 3N>0 ;onseD%ently, i! @ages are raised <+T: 1C t e price o! prod%ction o! t e commodities o! a capital o! a8erage social composition does not c ange# <C t e price o! prod%ction o! t e commodities o! a capital o! lo@er composition rises, b%t not in

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proportion to t e !all in pro!it# 3C t e price o! prod%ction o! t e commodities o! a capital o! ig er composition !alls, b%t also not in t e same proportion as pro!it0 $ince t e price o! prod%ction o! t e commodities o! t e a8erage capital remained t e same, eD%al to t e 8al%e o! t e prod%ct, t e s%m o! t e prices o! prod%ction o! t e prod%cts o! all capitals remained t e same as @ell, and eD%al to t e s%m total o! t e 8al%es prod%ced by t e aggregate capital0 5 e increase on one side and t e decrease on t e ot er balance !or t e aggregate capital on t e le8el o! t e a8erage social capital0 &! t e price o! prod%ction rises in case && and !alls in case &&&, t ese opposite e!!ects alone, @ ic are bro%g t abo%t by a !all in t e rate o! s%rpl%s-8al%e or by a general @age increase, s o@ t at t is cannot be a matter o! compensation in t e price !or t e rise in @ages, since t e !all in t e price o! prod%ction in case &&& cannot compensate t e capitalist !or t e !all in pro!it, and since t e rise o! t e price in case && does not pre8ent a !all in pro!it0 )at er, in eit er case, @ et er t e price rises or !alls, t e pro!it remains t e same as t at o! t e a8erage capital, in @ ic case t e price remains %nc anged0 &t is t e same a8erage pro!it @ ic as !allen by + +N>, or some@ at o8er <+T, in t e case o! && as @ell as &&&0 &t !ollo@s !rom t is t at i! t e price did not rise in && and !all in &&&, && @o%ld a8e to sell belo@ and &&& abo8e t e ne@ red%ced a8erage pro!it0 &t is sel!-e8ident t at, depending on @ et er +=, <+, or 1= per 1== %nits o! capital are laid o%t !or @ages, t e e!!ect o! a @age increase on a capitalist @ o as in8ested 1N1= o! is capital in @ages m%st be D%ite di!!erent !rom t at on one @ o as in8ested [ or Z0 ?n increase in t e price o! prod%ction on t e one side, a !all on t e ot er, depending on a capital being belo@ or abo8e t e a8erage social composition, occ%rs solely by 8irt%e o! t e process o! le8elling t e pro!it to t e ne@ red%ced a8erage pro!it0 6o@ @o%ld a general red%ction in @ages, and a corresponding general rise o! t e rate o! pro!it, and t %s o! t e a8erage pro!it, no@ a!!ect t e prices o! prod%ction o! commodities prod%ced by capitals de8iating in opposite directions !rom t e a8erage social compositionQ We a8e b%t to re8erse t e !oregoing exposition to obtain t e res%lt B@ ic )icardo !ails to analyseC0 &0 ?8erage capital R 8=c U <=8 R 1==# rate o! s%rpl%s-8al%e R 1==T# price o! prod%ctionR8al%e o! commodities R 8=c U <=8 U <=p R 1<=# rate o! pro!it R <=T0 $%ppose @ages !all by one-!o%rt 0 5 en t e same constant capital is set in motion by 1+ 8, instead o! <=80 5 en t e 8al%e o! commodities R 8=c U 1+8 U <+p R 1<=0 5 e D%antity o! labo%r per!ormed by 8 remains %nc anged, except t at t e 8al%e ne@ly created by it is distrib%ted di!!erently bet@een t e capitalist and t e labo%rer0 5 e s%rpl%s-8al%e rises !rom <= to <+ and t e rate o! s%rpl%s-8al%e !rom <=N<= to <+N1+, or !rom 1==T to 166WT0 5 e pro!it on *+ no@ R <+, so t at t e rate o! pro!it per 1== R <6 6N1*0 5 e ne@ composition o! t e capital in per cent is no@ 82 2N1* c U 1+ 1+N1*8 R 1==0 &&0 'o@er composition0 3riginally +=c U +=8, as abo8e0 7%e to t e !all o! @ages by one-!o%rt 8 is red%ced to 3>Z, and conseD%ently t e ad8anced total capital to += c U 3>Z 8 R 8>Z0 &! @e apply t e ne@ rate o! pro!it o! <6 6N1*T to t is, @e get 1==:<6 6N1* R 8>Z:<3 1N380 5 e same mass o! commodities @ ic !ormerly cost 1<=, no@ costs 8>Z U <3 1N38 R 11= 1=N1*, t is being a price red%ction o! almost 1=T0 &&&0 6ig er composition0 3riginally *< c U 88 R 1==0 5 e red%ction o! @ages by one-!o%rt red%ces 88 to 68, and t e total capital to *80 ;onseD%ently, 1==:<6 6N1* R *8:<+ 16N1*0 5 e price o! prod%ction o! t e commodity, !ormerly 1== U <= R 1<=, is no@, a!ter t e !all in @ages, *8 U <+ 1+N1* R 1<3 1+N1*, t is being a rise o! almost 20 &t is e8ident, t ere!ore, t at @e a8e b%t to !ollo@ t e same de8elopment in t e opposite direction @it t e appropriate modi!ications# t at a general red%ction o! @ages is attended by a general rise o! s%rpl%s-8al%e, o! t e rate o! s%rpl%s-8al%e and, ot er circ%mstances remaining t e same, o! t e rate o! pro!it, e8en i! expressed in a di!!erent proportion# a !all in t e prices o! prod%ction !or commodities prod%ced by capitals o! lo@er composition, and a rise in t e prices o! prod%ction !or

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commodities prod%ced by capitals o! ig er composition0 5 e res%lt is H%st t e re8erse o! t at obser8ed !or a general rise o! @ages0 1 &n bot cases I rise or !all o! @ages I it is ass%med t at t e @orking-day remains t e same, and also t e prices o! t e means o! s%bsistence0 &n t ese circ%mstances a !all in @ages is possible only i! t ey stood ig er t an t e normal price o! labo%r, or i! t ey are depressed belo@ t is price0 5 e @ay in @ ic t e matter is modi!ied i! t e rise or !all o! @ages is d%e to a c ange in 8al%e, and conseD%ently t e price o! prod%ction o! commodities %s%ally cons%med by t e labo%rer, @ill be analysed at some lengt in t e part dealing @it gro%nd-rent0 ?t t is point, o@e8er, t e !ollo@ing remarks are to be made once and !or all: $ o%ld t e rise or !all in @ages be d%e to a c ange in t e 8al%e o! t e necessities o! li!e, a modi!ication o! t e !oregoing !indings can take place only to t e extent t at commodities, @ ose c ange o! price raises or lo@ers t e 8ariable capital, also go into t e constant capital as constit%ent elements and t ere!ore a!!ect more t an H%st t e @ages alone0 A%t i! t ey a!!ect only @ages, t e abo8e analysis contains all t at needs to be said0 &n t is entire c apter, t e establis ment o! t e general rate o! pro!it and t e a8erage pro!it, and conseD%ently, t e transm%tation o! 8al%es into prices o! prod%ction, are ass%med as gi8en0 5 e D%estion merely @as, o@ a general rise or !all in @ages a!!ected t e ass%med prices o! prod%ction o! commodities0 5 is is b%t a 8ery secondary D%estion compared @it t e ot er important points analysed in t is part0 A%t it is t e only rele8ant D%estion treated by )icardo, and, as @e s all see, e treated it one-sidedly and %nsatis!actorily0

Chapter 12. Supple entar! Re ar%s

I. Causes Impl#ing a Change in the Price of Production
5 ere are H%st t@o ca%ses t at can c ange t e price o! prod%ction o! a commodity: 'irst0 ? c ange in t e general rate o! pro!it0 5 is can solely be d%e to a c ange in t e a8erage rate o! s%rpl%s-8al%e, or, i! t e a8erage rate o! s%rpl%s-8al%e remains t e same, to a c ange in t e ratio o! t e s%m o! t e appropriated s%rpl%s-8al%es to t e s%m o! t e ad8anced total social capital0 &! t e c ange in t e rate o! s%rpl%s-8al%e is not d%e to a depression o! @ages belo@ normal, or t eir rise abo8e normal I and mo8ements o! t at kind are to be regarded merely as oscillations I it can only occ%r eit er t ro%g a rise, or !all, in t e 8al%e o! labo%r-po@er, t e one being H%st as impossible as t e ot er %nless t ere is a c ange in t e prod%cti8ity o! t e labo%r prod%cing means o! s%bsistence, i0e0, in t e 8al%e o! commodities cons%med by t e labo%rer0 3r, t ro%g a c ange in t e proportion o! t e s%m o! appropriated s%rpl%s-8al%es to t e ad8anced total capital o! society0 $ince t e c ange in t is case is not ca%sed by t e rate o! s%rpl%s-8al%e, it m%st be ca%sed by t e total capital, or rat er its constant part0 5 e mass o! t is part, tec nically considered, increases or decreases in proportion to t e D%antity o! labo%r-po@er bo%g t by t e 8ariable capital, and t e mass o! its 8al%e t %s increases or decreases @it t e increase or decrease o! its o@n mass0 &t also increases or decreases, t ere!ore, proportionately to t e mass o! t e 8al%e o! t e 8ariable capital0 &! t e same labo%r sets more constant capital in motion, it as become more prod%cti8e0 &! t e re8erse, t en less prod%cti8e0 5 %s, t ere as been a c ange in t e prod%cti8ity o! labo%r, and t ere m%st a8e occ%rred a c ange in t e 8al%e o! certain commodities0 5 e !ollo@ing la@, t en, applies to bot cases: &! t e price o! prod%ction o! a commodity c anges in conseD%ence o! a c ange in t e general rate o! pro!it, its o@n 8al%e may a8e remained %nc anged0 6o@e8er, a c ange m%st a8e occ%rred in t e 8al%e o! ot er commodities0 Second0 5 e general rate o! pro!it remains %nc anged0 &n t is case t e price o! prod%ction o! a commodity can c ange only i! its o@n 8al%e as c anged0 5 is may be d%e to more, or less, labo%r being reD%ired to reprod%ce t e commodity in D%estion, eit er beca%se o! a c ange in t e prod%cti8ity o! labo%r @ ic prod%ces t is commodity in its !inal !orm, or o! t e labo%r @ ic prod%ces t ose commodities t at go into its prod%ction0 5 e price o! prod%ction o! cotton yarn may !all, eit er beca%se ra@ cotton is prod%ced c eaper t an be!ore, or beca%se t e labo%r o! spinning as become more prod%cti8e d%e to impro8ed mac inery0 5 e price o! prod%ction, as @e a8e seen, R k U p, eD%al to cost-price pl%s pro!it0 5 is, o@e8er, R k U kp", in @ ic k, t e cost-price, is a 8ariable magnit%de, @ ic c anges !or di!!erent sp eres o! prod%ction and is e8ery@ ere eD%al to t e 8al%e o! t e constant and 8ariable capital cons%med in t e prod%ction o! t e commodity, and p" is t e a8erage rate o! pro!it in percentage !orm0 &! k R <==, and p" R <=T, t e price o! prod%ction k U kp" R <== U <== \ <=N1== R <== U 2= R <2=0 5 is price o! prod%ction may clearly remain t e same, in spite o! a c ange in t e 8al%e o! t e commodities0 ?ll c anges in t e price o! prod%ction o! commodities are red%ced, in t e last analysis, to c anges in 8al%e0 A%t not all c anges in t e 8al%e o! commodities need express t emsel8es in c anges in t e price o! prod%ction0 5 e price o! prod%ction is not determined by t e 8al%e o! any one commodity alone, b%t by t e aggregate 8al%e o! all commodities0 ? c ange in commodity ? may t ere!ore be balanced by an opposite c ange in commodity A, so t at t e general relation remains t e same0

12+

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II. Price of Production of Commodities of Average Composition

We a8e seen o@ a de8iation in prices o! prod%ction !rom 8al%es arises !rom: 1C adding t e a8erage pro!it instead o! t e s%rpl%s-8al%e contained in a commodity to is cost-price# <C t e price o! prod%ction, @ ic so de8iates !rom t e 8al%e o! a commodity, entering into t e cost-price o! ot er commodities as one o! its elements, so t at t e cost-price o! a commodity may already contain a de8iation !rom 8al%e in t ose means o! prod%ction cons%med by it, D%ite aside !rom a de8iation o! its o@n @ ic may arise t ro%g a di!!erence bet@een t e a8erage pro!it and t e s%rpl%s-8al%e0 &t is t ere!ore possible t at e8en t e cost-price o! commodities prod%ced by capitals o! a8erage composition may di!!er !rom t e s%m o! t e 8al%es o! t e elements @ ic make %p t is component o! t eir price o! prod%ction0 $%ppose, t e a8erage composition is 8= c U <=80 -o@, it is possible t at in t e act%al capitals o! t is composition 8= c may be greater or smaller t an t e 8al%e o! c, i0e0, t e constant capital, beca%se t is c may be made %p o! commodities @ ose price o! prod%ction di!!ers !rom t eir 8al%e0 &n t e same @ay, <= 8 mig t di8erge !rom its 8al%e i! t e cons%mption o! t e @age incl%des commodities @ ose price o! prod%ction di8erges !rom t eir 8al%e# in @ ic case t e labo%rer @o%ld @ork a longer, or s orter, time to b%y t em back Bto replace t emC and @o%ld t %s per!orm more, or less, necessary labo%r t an @o%ld be reD%ired i! t e price o! prod%ction o! s%c necessities o! li!e coincided @it t eir 8al%e0 6o@e8er, t is possibility does not detract in t e least !rom t e correctness o! t e t eorems demonstrated @ ic old !or commodities o! a8erage composition0 5 e D%antity o! pro!it !alling to t ese commodities is eD%al to t e D%antity o! s%rpl%s-8al%e contained in t em0 For instance, in a capital o! t e gi8en composition 8= c U <=8, t e most important t ing in determining s%rpl%s8al%e is not @ et er t ese !ig%res are expressions o! act%al 8al%es, b%t o@ t ey are related to one anot er, i0e0, @ et er 8 R lN+ o! t e total capital, and c R 2N+0 W ene8er t is is t e case, t e s%rpl%s-8al%e prod%ced by 8 is, as @as ass%med, eD%al to t e a8erage pro!it0 3n t e ot er and, since it eD%als t e a8erage pro!it, t e price o! prod%ction R cost-price pl%s pro!it R k U p R k U s# i0e0, in practice it is eD%al to t e 8al%e o! t e commodity0 5 is implies t at a rise or !all in @ages @o%ld not c ange t e price o! prod%ction, k U p, any more t an it @o%ld c ange t e 8al%e o! t e commodities, and @o%ld merely e!!ect a corresponding opposite mo8ement, a !all or a rise, in t e rate o! pro!it0 For i! a rise or !all o! @ages @ere ere to bring abo%t a c ange in t e price o! commodities, t e rate o! pro!it in t ese sp eres o! a8erage composition @o%ld rise abo8e, or !all belo@, t e le8el pre8ailing in ot er sp eres0 5 e sp ere o! a8erage composition maintains t e same le8el o! pro!it as t e ot er sp eres only so long as t e price remains %nc anged0 5 e practical res%lt is t ere!ore t e same as it @o%ld be i! its prod%cts @ere sold at t eir real 8al%e0 For i! commodities are sold at t eir act%al 8al%es, it is e8ident t at, ot er conditions being eD%al, a rise, or !all, in @ages @ill ca%se a corresponding !all or rise in pro!it, b%t no c ange in t e 8al%e o! commodities, and t at %nder all circ%mstances a rise or !all in @ages can ne8er a!!ect t e 8al%e o! commodities, b%t only t e magnit%de o! t e s%rpl%s-8al%e0

III. The Capitalist1s Grounds for Compensating

&t as been said t at competition le8els t e rates o! pro!it o! t e di!!erent sp eres o! prod%ction into an a8erage rate o! pro!it and t ereby t%rns t e 8al%es o! t e prod%cts o! t ese di!!erent sp eres into prices o! prod%ction0 5 is occ%rs t ro%g t e contin%al trans!er o! capital !rom one sp ere to anot er, in @ ic , !or t e moment, t e pro!it appens to lie abo8e a8erage0 5 e !l%ct%ations o! pro!it ca%sed by t e cycle o! !at and lean years s%cceeding one anot er in any gi8en branc o! ind%stry @it in gi8en periods m%st, o@e8er, recei8e d%e consideration0 5 is incessant o%t!lo@ and in!lo@ o! capital bet@een t e di!!erent sp eres o! prod%ction creates trends

126

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o! rise and !all in t e rate o! pro!it, @ ic eD%alise one anot er more or less and t %s a8e a tendency to red%ce t e rate o! pro!it e8ery@ ere to t e same common and general le8el0 5 is mo8ement o! capitals is primarily ca%sed by t e le8el o! market-prices, @ ic li!t pro!its abo8e t e general a8erage in one place and depress t em belo@ it in anot er0 Merc ant"s capital is le!t o%t o! consideration as it is irrele8ant at t is point, !or @e kno@ !rom t e s%dden paroxysms o! spec%lation appearing in certain pop%lar articles t at it can @it dra@ masses o! capital !rom one line o! b%siness @it extraordinary rapidity and t ro@ t em @it eD%al rapidity into anot er0 .et @it respect to eac sp ere o! act%al prod%ction I ind%stry, agric%lt%re, mining, etc0 I t e trans!er o! capital !rom one sp ere to anot er o!!ers considerable di!!ic%lties, partic%larly on acco%nt o! t e existing !ixed capital0 Experience s o@s, moreo8er, t at i! a branc o! ind%stry, s%c as, say, t e cotton ind%stry, yields %n%s%ally ig pro!its at one period, it makes 8ery little pro!it, or e8en s%!!ers losses, at anot er, so t at in a certain cycle o! years t e a8erage pro!it is m%c t e same as in ot er branc es0 ?nd capital soon learns to take t is experience into acco%nt0 W at competition does not s o@, o@e8er, is t e determination o! 8al%e, @ ic dominates t e mo8ement o! prod%ction# and t e 8al%es t at lie beneat t e prices o! prod%ction and t at determine t em in t e last instance0 ;ompetition, on t e ot er and, s o@s: 1C t e a8erage pro!its, @ ic are independent o! t e organic composition o! capital in t e di!!erent sp eres o! prod%ction, and t ere!ore also o! t e mass o! li8ing labo%r appropriated by any gi8en capital in any gi8en sp ere o! exploitation# <C t e rise and !all o! prices o! prod%ction ca%sed by c anges in t e le8el o! @ages, a p enomenon @ ic at !irst glance completely contradicts t e 8al%e relation o! commodities# 3C t e !l%ct%ations o! market-prices, @ ic red%ce t e a8erage market-price o! commodities in a gi8en period o! time, not to t e market- value, b%t to a 8ery di!!erent marketprice o! prod%ction, @ ic di8erges considerably !rom t is market-8al%e0 ?ll t ese p enomena seem to contradict t e determination o! 8al%e by labo%r-time as m%c as t e nat%re o! s%rpl%s8al%e consisting o! %npaid s%rpl%s-labo%r0 4hus everything appears reversed in competition 0 5 e !inal pattern o! economic relations as seen on t e s%r!ace, in t eir real existence and conseD%ently in t e conceptions by @ ic t e bearers and agents o! t ese relations seek to %nderstand t em, is 8ery m%c di!!erent !rom, and indeed D%ite t e re8erse o!, t eir inner b%t concealed essential pattern and t e conception corresponding to it0 F%rt er0 ?s soon as capitalist prod%ction reac es a certain le8el o! de8elopment, t e eD%alisation o! t e di!!erent rates o! pro!it in indi8id%al sp eres to general rate o! pro!it no longer proceeds solely t ro%g t e play o! attraction and rep%lsion, by @ ic market-prices attract or repel capital0 ?!ter a8erage prices, and t eir corresponding market-prices, become stable !or a time it reac es t e consciousness o! t e indi8id%al capitalists t at t is eD%alisation balances definite differences, so t at t ey incl%de t ese in t eir m%t%al calc%lations0 5 e di!!erences exist in t e mind o! t e capitalists and are taken into acco%nt as gro%nds !or compensating0 ?8erage pro!it is t e basic conception, t e conception t at capitals o! eD%al magnit%de m%st yield eD%al pro!its in eD%al time spans0 5 is, again, is based on t e conception t at t e capital in eac sp ere o! prod%ction m%st s are pro rata to its magnit%de in t e total s%rpl%s-8al%e sD%eeEed o%t o! t e labo%rers by t e total social capital# or, t at e8ery indi8id%al capital s o%ld be regarded merely as a part o! t e total social capital, and e8ery capitalist act%ally as a s are older in t e total social enterprise, eac s aring in t e total pro!it pro rata to t e magnit%de o! is s are o! capital0 5 is conception ser8es as a basis !or t e capitalist"s calc%lations, !or instance, t at a capital @ ose t%rno8er is slo@er t an anot er"s, beca%se its commodities take longer to be prod%ced, or beca%se t ey are sold in remoter markets, ne8ert eless c arges t e pro!it it loses in t is @ay, and compensates itsel! by raising t e price0 3r else, t at in8estments o! capital in lines exposed to greater aEards, !or instance in s ipping, are compensated by ig er prices0 ?s soon as capitalist prod%ction, and @it it t e ins%rance b%siness, are de8eloped, t e aEards are, in e!!ect, made eD%al !or all sp eres o! prod%ction Bc!0 ;orbetC# b%t t e more aEardo%s lines pay ig er

12>

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ins%rance rates, and reco8er t em in t e prices o! t eir commodities0 &n practice all t is means t at e8ery circ%mstance, @ ic renders one line o! prod%ction I and all o! t em are considered eD%ally necessary @it in certain limits I less pro!itable, and anot er more pro!itable, is taken into acco%nt once and !or all as 8alid gro%nd !or compensation, @it o%t al@ays reD%iring t e rene@ed action o! competition to H%sti!y t e moti8es or !actors !or calc%lating t is compensation0 5 e capitalist simply !orgets I or rat er !ails to see, beca%se competition does not point it o%t to im I t at all t ese gro%nds !or compensation m%t%ally ad8anced by capitalists in calc%lating t e prices o! commodities o! di!!erent lines o! prod%ction merely come do@n to t e !act t at t ey all a8e an eD%al claim, pro rata to t e magnit%de o! t eir respecti8e capitals, to t e common loot, t e total s%rpl%s-8al%e0 &t rat er seems to t em t at since t e pro!it pocketed by t em di!!ers !rom t e s%rpl%s-8al%e t ey appropriated, t ese gro%nds !or compensation do not le8el o%t t eir participation in t e total s%rpl%s-8al%e, b%t create the profit itself, @ ic seems to be deri8ed !rom t e additions made on one or anot er gro%nd to t e cost-price o! t eir commodities0 &n ot er respects t e statements made in ; apter 4&& concerning t e capitalists" ass%mptions as to t e so%rce o! s%rpl%s-8al%e, apply also to a8erage pro!it0 5 e present case appears di!!erent only in so !ar as a sa8ing in cost-price depends on indi8id%al b%siness ac%men, alertness, etc0, ass%ming t e market-price o! commodities and t e exploitation o! labo%r to be gi8en0

Part III. The %a& of the Ten"enc' of the #ate of Profit to (all
Chapter 13. The 3a4 -s Such
?ss%ming a gi8en @age and @orking-day, a 8ariable capital, !or instance o! 1==, represents a certain n%mber o! employed labo%rers0 &t is t e index o! t is n%mber0 $%ppose V1== are t e @ages o! 1== labo%rers !or, say, one @eek0 &! t ese labo%rers per!orm eD%al amo%nts o! necessary and s%rpl%s-labo%r, i! t ey @ork daily as many o%rs !or t emsel8es, i.e., !or t e reprod%ction o! t eir @age, as t ey do !or t e capitalist, i.e., !or t e prod%ction o! s%rpl%s-8al%e, t en t e 8al%e o! t eir total prod%ct R V<==, and t e s%rpl%s-8al%e t ey prod%ce @o%ld amo%nt to V1==0 5 e rate o! s%rpl%s-8al%e, sN8, @o%ld R 1==T0 A%t, as @e a8e seen, t is rate o! s%rpl%s-8al%e @o%ld nonet eless express itsel! in 8ery di!!erent rates o! pro!it, depending on t e di!!erent 8ol%mes o! constant capital c and conseD%ently o! t e total capital ;, beca%se t e rate o! pro!it R sN;0 5 e rate o! s%rpl%s-8al%e is 1==T: &! c R +=, and 8 R 1==, t en p" R 1==N1+= R 66WT# c R 1==, and 8 R 1==, t en p" R 1==N<== R +=T# c R <==, and 8 R 1==, t en p" R 1==N3== R 33XT# c R 3==, and 8 R 1==, t en p" R 1==N2== R <+T# c R 2==, and 8 R 1==, t en p" R 1==N+== R <=T0 5 is is o@ t e same rate o! s%rpl%s-8al%e @o%ld express itsel! %nder t e same degree o! labo%r exploitation in a !alling rate o! pro!it, beca%se t e material gro@t o! t e constant capital implies also a gro@t I albeit not in t e same proportion I in its 8al%e, and conseD%ently in t at o! t e total capital0 &! it is !%rt er ass%med t at t is grad%al c ange in t e composition o! capital is not con!ined only to indi8id%al sp eres o! prod%ction, b%t t at it occ%rs more or less in all, or at least in t e key sp eres o! prod%ction, so t at it in8ol8es c anges in t e a8erage organic composition o! t e total capital o! a certain society, t en t e grad%al gro@t o! constant capital in relation to 8ariable capital m%st necessarily lead to a gradual fall of the general rate of profit, so long as t e rate o! s%rpl%s-8al%e, or t e intensity o! exploitation o! labo%r by capital, remain t e same0 -o@ @e a8e seen t at it is a la@ o! capitalist prod%ction t at its de8elopment is attended by a relati8e decrease o! 8ariable in relation to constant capital, and conseD%ently to t e total capital set in motion0 5 is is H%st anot er @ay o! saying t at o@ing to t e distincti8e met ods o! prod%ction de8eloping in t e capitalist system t e same n%mber o! labo%rers, i.e., t e same D%antity o! labo%r-po@er set in motion by a 8ariable capital o! a gi8en 8al%e, operate, @ork %p and prod%cti8ely cons%me in t e same time span an e8er-increasing D%antity o! means o! labo%r, mac inery and !ixed capital o! all sorts, ra@ and a%xiliary materials I and conseD%ently a constant capital o! an e8er-increasing 8al%e0 5 is contin%al relati8e decrease o! t e 8ariable capital 8is-a-8is t e constant, and conseD%ently t e total capital, is identical @it t e progressi8ely ig er organic composition o! t e social capital in its a8erage0 &t is like@ise H%st anot er expression !or t e progressi8e de8elopment o! t e social prod%cti8ity o! labo%r, @ ic is demonstrated precisely by t e !act t at t e same n%mber o! labo%rers, in t e same time, i.e., @it less labo%r, con8ert an e8er-increasing D%antity o! ra@ and a%xiliary materials into prod%cts, t anks to t e gro@ing application o! mac inery and !ixed capital in general0 5o t is gro@ing D%antity o! 8al%e o! t e constant capital I alt o%g indicating t e gro@t o! t e real mass o! %se-8al%es o! @ ic t e constant capital

12*

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materially consists only approximately I corresponds a progressi8e c eapening o! prod%cts0 E8ery indi8id%al prod%ct, considered by itsel!, contains a smaller D%antity o! labo%r t an it did on a lo@er le8el o! prod%ction, @ ere t e capital in8ested in @ages occ%pies a !ar greater place compared to t e capital in8ested in means o! prod%ction0 5 e ypot etical series dra@n %p at t e beginning o! t is c apter expresses, t ere!ore, t e act%al tendency o! capitalist prod%ction0 5 is mode o! prod%ction prod%ces a progressi8e relati8e decrease o! t e 8ariable capital as compared to t e constant capital, and conseD%ently a contin%o%sly rising organic composition o! t e total capital0 5 e immediate res%lt o! t is is t at t e rate o! s%rpl%s-8al%e, at t e same, or e8en a rising, degree o! labo%r exploitation, is represented by a contin%ally !alling general rate o! pro!it0 BWe s all see later /,resent edition: ; 0 J&40 I 0d01 @ y t is !all does not mani!est itsel! in an absol%te !orm, b%t rat er as a tendency to@ard a progressi8e !all0C 5 e progressi8e tendency o! t e general rate o! pro!it to !all is, t ere!ore, H%st an e pression peculiar to the capitalist mode of production o! t e progressi8e de8elopment o! t e social prod%cti8ity o! labo%r0 5 is does not mean to say t at t e rate o! pro!it may not !all temporarily !or ot er reasons0 A%t proceeding !rom t e nat%re o! t e capitalist mode o! prod%ction, it is t ereby pro8ed logical necessity t at in its de8elopment t e general a8erage rate o! s%rpl%s-8al%e m%st express itsel! in a !alling general rate o! pro!it0 $ince t e mass o! t e employed li8ing labo%r is contin%ally on t e decline as compared to t e mass o! materialised labo%r set in motion by it, i.e., to t e prod%cti8ely cons%med means o! prod%ction, it !ollo@s t at t e portion o! li8ing labo%r, %npaid and congealed in s%rpl%s-8al%e, m%st also be contin%ally on t e decrease compared to t e amo%nt o! 8al%e represented by t e in8ested total capital0 $ince t e ratio o! t e mass o! s%rpl%s-8al%e to t e 8al%e o! t e in8ested total capital !orms t e rate o! pro!it, t is rate m%st constantly !all0 $imple as t is la@ appears !rom t e !oregoing statements, all o! political economy as so !ar ad little s%ccess in disco8ering it, as @e s all see in a later part0 /K0 Marx, 4heorien ber den Mehrwert0 K0 MarxNF0 Engels, "er-e, Aand <6, 5eil <, $0 23+-66, +21-23 . J 0d.1 5 e economists percei8ed t e p enomenon and c%dgelled t eir brains in tort%o%s attempts to interpret it0 $ince t is la@ is o! great importance to capitalist prod%ction, it may be said to be a mystery @ ose sol%tion as been t e goal o! all political economy since ?dam $mit , t e di!!erence bet@een t e 8ario%s sc ools since ?dam $mit a8ing been in t e di8ergent approac es to a sol%tion0 W en @e consider, on t e ot er and, t at %p to t e present political economy as been r%nning in circles ro%nd t e distinction bet@een constant and 8ariable capital, b%t as ne8er kno@n o@ to de!ine it acc%rately# t at it as ne8er separated s%rpl%s-8al%e !rom pro!it, and ne8er e8en considered pro!it in its p%re !orm as distinct !rom its di!!erent, independent components, s%c as ind%strial pro!it, commercial pro!it, interest, and gro%nd-rent# t at it as ne8er t oro%g ly analysed t e di!!erences in t e organic composition o! capital, and, !or t is reason, as ne8er t o%g t o! analysing t e !ormation o! t e general rate o! pro!it I i! @e consider all t is, t e !ail%re to sol8e t is riddle is no longer s%rprising0 We intentionally present t is la@ be!ore going on to t e di8ision o! pro!it into di!!erent independent categories0 5 e !act t at t is analysis is made independently o! t e di8ision o! pro!it into di!!erent parts, @ ic !all to t e s are o! di!!erent categories o! people, s o@s !rom t e o%tset t at t is la@ is, in its entirety, independent o! t is di8ision, and H%st as independent o! t e m%t%al relations o! t e res%ltant categories o! pro!it0 5 e pro!it to @ ic @e are ere re!erring is b%t anot er name !or s%rpl%s-8al%e itsel!, @ ic is presented only in its relation to total capital rat er t an to 8ariable capital, !rom @ ic it arises0 5 e drop in t e rate o! pro!it, t ere!ore, expresses t e !alling relation o! s%rpl%s-8al%e to ad8anced total capital, and is !or t is reason independent o! any di8ision @ atsoe8er o! t is s%rpl%s-8al%e among t e 8ario%s categories0 We a8e seen t at at a certain stage o! capitalist de8elopment, @ ere t e organic composition o! capital c : 8 @as += : 1==, a rate o! s%rpl%s-8al%e o! 1==T @as expressed in a rate o! pro!it o! 66W T, and t at at a ig er stage, @ ere c : 8 @as 2== : 1==, t e same rate o! s%rpl%s-8al%e @as expressed in a rate o! pro!it o! only <=T0 W at is tr%e o! di!!erent s%ccessi8e stages o!

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de8elopment in one co%ntry, is also tr%e o! di!!erent coexisting stages o! de8elopment in di!!erent co%ntries0 &n an %nde8eloped co%ntry, in @ ic t e !ormer composition o! capital is t e a8erage, t e general rate o! pro!it @o%ld R 66WT, @ ile in a co%ntry @it t e latter composition and a m%c ig er stage o! de8elopment it @o%ld R <=T0 5 e di!!erence bet@een t e t@o national rates o! pro!it mig t disappear, or e8en be re8ersed, i! labo%r @ere less prod%cti8e in t e less de8eloped co%ntry, so t at a larger D%antity o! labo%r @ere to be represented in a smaller D%antity o! t e same commodities, and a larger exc ange-8al%e @ere represented in less %se-8al%e0 5 e labo%rer @o%ld t en spend more o! is time in reprod%cing is o@n means o! s%bsistence, or t eir 8al%e, and less time in prod%cing s%rpl%s8al%e# conseD%ently, e @o%ld per!orm less s%rpl%s-labo%r, @it t e res%lt t at t e rate o! s%rpl%s8al%e @o%ld be lo@er0 $%ppose, t e labo%rer o! t e less de8eloped co%ntry @ere to @ork W o! t e @orking-day !or imsel! and X !or t e capitalist# in accordance @it t e abo8e ill%stration, t e same labo%r-po@er @o%ld t en be paid @it 133X and @o%ld !%rnis a s%rpl%s o! only 6=W0 ? constant capital o! += @o%ld correspond to a 8ariable capital o! 233X0 5 e rate o! s%rpl%s-8al%e @o%ld amo%nt to 66W : 133X R +=T, and t e rate o! pro!it to 66W : 133X, or approximately 36T0 $ince @e a8e not so !ar analysed t e di!!erent component parts o! pro!it, i.e., t ey do not !or t e present exist !or %s, @e make t e !ollo@ing remarks be!ore and merely to a8oid mis%nderstanding: &n comparing co%ntries in di!!erent stages o! de8elopment it @o%ld be a big mistake to meas%re t e le8el o! t e national rate o! pro!it by, say, t e le8el o! t e national rate o! interest, namely @ en comparing co%ntries @it a de8eloped capitalist prod%ction @it co%ntries in @ ic labo%r as not yet been !ormally s%bHected to capital, alt o%g in reality t e labo%rer is exploited by t e capitalist Bas, !or instance, in &ndia, @ ere t e ryot manages is !arm as an independent prod%cer @ ose prod%ction as s%c is not, t ere!ore, as yet s%bordinated to capital, alt o%g t e %s%rer may not only rob im o! is entire s%rpl%s-labo%r by means o! interest, b%t may also, to %se a capitalist term, ack o!! a part o! is @ageC0 5 is interest comprises all t e pro!it, and more t an t e pro!it, instead o! merely expressing an aliD%ot part o! t e prod%ced s%rpl%s-8al%e, or pro!it, as it does in co%ntries @it a de8eloped capitalist prod%ction0 3n t e ot er and, t e rate o! interest is, in t is case, mostly determined by relations Bloans granted by %s%rers to o@ners o! larger estates @ o dra@ gro%nd-rentC @ ic a8e not ing to do @it pro!it, and rat er indicate to @ at extent %s%ry appropriates gro%nd-rent0 ?s regards co%ntries possessing di!!erent stages o! de8elopment o! capitalist prod%ction, and conseD%ently capitals o! di!!erent organic composition, a co%ntry @ ere t e normal @orking-day is s orter t an anot er"s may a8e a ig er rate o! s%rpl%s-8al%e Bone o! t e !actors @ ic determines t e rate o! pro!itC0 'irst, i! t e Englis ten- o%r @orking-day is, on acco%nt o! its ig er intensity, eD%al to an ?%strian @orking-day o! 12 o%rs, t en, di8iding t e @orking-day eD%ally in bot instances, + o%rs o! Englis s%rpl%s-labo%r may represent a greater 8al%e on t e @orld-market t an > o%rs o! ?%strian s%rpl%s-labo%r0 Second, a larger portion o! t e Englis @orking-day t an o! t e ?%strian may represent s%rpl%s-labo%r0 5 e la@ o! t e !alling rate o! pro!it, @ ic expresses t e same, or e8en a ig er, rate o! s%rpl%s8al%e, states, in ot er @ords, t at any D%antity o! t e a8erage social capital, say, a capital o! 1==, comprises an e8er larger portion or means o! labo%r, and an e8er smaller portion o! li8ing labo%r0 5 ere!ore, since t e aggregate mass o! li8ing labo%r operating t e means o! prod%ction decreases in relation to t e 8al%e o! t ese means o! prod%ction, it !ollo@s t at t e %npaid labo%r and t e portion o! 8al%e in @ ic it is expressed m%st decline as compared to t e 8al%e o! t e ad8anced total capital0 3r: ?n e8er smaller aliD%ot part o! in8ested total capital is con8erted into li8ing labo%r, and t is total capital, t ere!ore, absorbs in proportion to its magnit%de less and less s%rpl%s-labo%r, alt o%g t e %npaid part o! t e labo%r applied may at t e same time gro@ in relation to t e paid part0 5 e relati8e decrease o! t e 8ariable and increase o! t e constant capital, o@e8er m%c bot parts may gro@ in absol%te magnit%de, is, as @e a8e said, b%t anot er expression !or greater prod%cti8ity o! labo%r0

1+1

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'et a capital o! 1== consist o! 8= c U <=8, and t e latter R <= labo%rers0 'et t e rate o! s%rpl%s8al%e be 1==T, i.e., t e labo%rers @ork al! t e day !or t emsel8es and t e ot er al! !or t e capitalist0 -o@ let t e capital o! 1== in a less de8eloped co%ntry R <= c U 8=8, and let t e latter R 8= labo%rers0 A%t t ese labo%rers reD%ire <N3 o! t e day !or t emsel8es, and @ork only 1N3 !or t e capitalist0 E8eryt ing else being eD%al, t e labo%rers in t e !irst case prod%ce a 8al%e o! 2=, and in t e second o! 1<=0 5 e !irst capital prod%ces 8= c U <=8 U <=s R 1<=# rate o! pro!it R <=T0 5 e second capital, <=c U 8=8 U 2=s R 12=# rate o! pro!it 2=T0 &n t e second case t e rate o! pro!it is, t ere!ore, do%ble t e !irst, alt o%g t e rate o! s%rpl%s-8al%e in t e !irst R 1==T, @ ic is do%ble t at o! t e second, @ ere it is only +=T0 A%t t en, a capital o! t e same magnit%de appropriates t e s%rpl%s-labo%r o! only <= labo%rers in t e !irst case, and o! 8= labo%rers in t e second case0 5 e la@ o! t e progressi8e !alling o! t e rate o! pro!it, or t e relati8e decline o! appropriated s%rpl%s-labo%r compared to t e mass o! materialised labo%r set in motion by li8ing labo%r, does not r%le o%t in any @ay t at t e absol%te mass o! exploited labo%r set in motion by t e social capital, and conseD%ently t e absol%te mass o! t e s%rpl%s-labo%r it appropriates, may gro@# nor, t at t e capitals controlled by indi8id%al capitalists may dispose o! a gro@ing mass o! labo%r and, ence, o! s%rpl%s-labo%r, t e latter e8en t o%g t e n%mber o! labo%rers t ey employ does not increase0 5ake a certain @orking pop%lation o!, say, t@o million0 ?ss%me, !%rt ermore, t at t e lengt and intensity o! t e a8erage @orking-day, and t e le8el o! @ages, and t ereby t e proportion bet@een necessary and s%rpl%s-labo%r, are gi8en0 &n t at case t e aggregate labo%r o! t ese t@o million, and t eir s%rpl%s-labo%r expressed in s%rpl%s-8al%e, al@ays prod%ces t e same magnit%de o! 8al%e0 A%t @it t e gro@t o! t e mass o! t e constant B!ixed and circ%latingC capital set in motion by t is labo%r, t is prod%ced D%antity o! 8al%e declines in relation to t e 8al%e o! t is capital, @ ic 8al%e gro@s @it its mass, e8en i! not in D%ite t e same proportion0 5 is ratio, and conseD%ently t e rate o! pro!it, s rinks in spite o! t e !act t at t e mass o! commanded li8ing labo%r is t e same as be!ore, and t e same amo%nt o! s%rpl%s-labo%r is s%cked o%t o! it by t e capital0 &t c anges beca%se t e mass o! materialised labo%r set in motion by li8ing labo%r increases, and not beca%se t e mass o! li8ing labo%r as s r%nk0 &t is a relati8e decrease, not an absol%te one, and as, in !act, not ing to do @it t e absol%te magnit%de o! t e labo%r and s%rpl%s-labo%r set in motion0 5 e drop in t e rate o! pro!it is not d%e to an absol%te, b%t only to a relati8e decrease o! t e 8ariable part o! t e total capital, i.e., to its decrease in relation to t e constant part0 W at applies to any gi8en mass o! labo%r and s%rpl%s-labo%r, also applies to a gro@ing n%mber o! labo%rers, and, t %s, %nder t e abo8e ass%mption, to any gro@ing mass o! commanded labo%r in general, and to its %npaid part, t e s%rpl%s-labo%r, in partic%lar0 &! t e @orking pop%lation increases !rom t@o million to t ree, and i! t e 8ariable capital in8ested in @ages also rises to t ree million !rom its !ormer t@o million, @ ile t e constant capital rises !rom !o%r million to !i!teen million, t en, %nder t e abo8e ass%mption o! a constant @orking-day and a constant rate o! s%rpl%s-8al%e, t e mass o! s%rpl%s-labo%r, and o! s%rpl%s-8al%e, rises by one- al!, i.e., +=T, !rom t@o million to t ree0 -e8ert eless, in spite o! t is gro@t o! t e absol%te mass o! s%rpl%s-labo%r, and ence o! s%rpl%s-8al%e, by +=T, t e ratio o! 8ariable to constant capital @o%ld !all !rom < : 2 to 3 : 1+, and t e ratio o! s%rpl%s-8al%e to total capital @o%ld be Bin millionsC &0 2c U <8 U <s# ; R 6, p" R 33XT0 &&0 1+c U 38 U 3s# ; R 18, p" R 16WT0 W ile t e mass o! s%rpl%s-8al%e as increased by one- al!, t e rate o! pro!it as !allen by oneal!0 6o@e8er, t e pro!it is only t e s%rpl%s-8al%e calc%lated in relation to t e total social capital, and t e mass o! pro!it, its absol%te magnit%de, is socially eD%al to t e absol%te magnit%de o! t e s%rpl%s-8al%e0 5 e absol%te magnit%de o! t e pro!it, its total amo%nt, @o%ld, t ere!ore, a8e gro@n by +=T, in spite o! its enormo%s relati8e decrease compared to t e ad8anced total capital,

1+<

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or in spite o! t e enormo%s decrease in t e general rate o! pro!it0 5 e n%mber o! labo%rers employed by capital, ence t e absol%te mass o! t e labo%r set in motion by it, and t ere!ore t e absol%te mass o! s%rpl%s-labo%r absorbed by it, t e mass o! t e s%rpl%s-8al%e prod%ced by it, and t ere!ore t e absol%te mass o! t e pro!it prod%ced by it, can, conseD%ently, increase, and increase progressi8ely, in spite o! t e progressi8e drop in t e rate o! pro!it0 ?nd t is not only can be so0 ?side !rom temporary !l%ct%ations it must be so, on t e basis o! capitalist prod%ction0 Essentially, t e capitalist process o! prod%ction is sim%ltaneo%sly a process o! acc%m%lation0 We a8e s o@n t at @it t e de8elopment o! capitalist prod%ction t e mass o! 8al%es to be simply reprod%ced, or maintained, increases as t e prod%cti8ity o! labo%r gro@s, e8en i! t e labo%rpo@er employed s o%ld remain constant0 A%t @it t e de8elopment o! social prod%cti8ity o! labo%r t e mass o! prod%ced %se-8al%es, o! @ ic t e means o! prod%ction !orm a part, gro@s still more0 ?nd t e additional labo%r, t ro%g @ ose appropriation t is additional @ealt can be recon8erted into capital, does not depend on t e 8al%e, b%t on t e mass o! t ese means o! prod%ction Bincl%ding means o! s%bsistenceC, beca%se in t e prod%ction process t e labo%rers a8e not ing to do @it t e 8al%e, b%t @it t e %se-8al%e, o! t e means o! prod%ction0 ?cc%m%lation itsel!, o@e8er, and t e concentration o! capital t at goes @it it, is a material means o! increasing prod%cti8eness0 -o@, t is gro@t o! t e means o! prod%ction incl%des t e gro@t o! t e @orking pop%lation, t e creation o! a @orking pop%lation, @ ic corresponds to t e s%rpl%s-capital, or e8en exceeds its general reD%irements, t %s leading to an o8er-pop%lation o! @orkers0 ? momentary excess o! s%rpl%s-capital o8er t e @orking pop%lation it as commandeered, @o%ld a8e a t@o-!old e!!ect0 &t co%ld, on t e one and, by raising @ages, mitigate t e ad8erse conditions @ ic decimate t e o!!spring o! t e labo%rers and @o%ld make marriages easier among t em, so as grad%ally to increase t e pop%lation0 3n t e ot er and, by applying met ods @ ic yield relati8e s%rpl%s-8al%e Bintrod%ction and impro8ement o! mac ineryC it @o%ld prod%ce a !ar more rapid, arti!icial, relati8e o8er-pop%lation, @ ic in its t%rn, @o%ld be a breeding-gro%nd !or a really s@i!t propagation o! t e pop%lation, since %nder capitalist prod%ction misery prod%ces pop%lation0 &t t ere!ore !ollo@s o! itsel! !rom t e nat%re o! t e capitalist process o! acc%m%lation, @ ic is b%t one !acet o! t e capitalist prod%ction process, t at t e increased mass o! means o! prod%ction t at is to be con8erted into capital al@ays !inds a correspondingly increased, e8en excessi8e, exploitable @orker pop%lation0 ?s t e process o! prod%ction and acc%m%lation ad8ances t ere!ore, t e mass o! a8ailable and appropriated s%rpl%slabo%r, and ence t e absol%te mass o! pro!it appropriated by t e social capital, must gro@0 ?long @it t e 8ol%me, o@e8er, t e same la@s o! prod%ction and acc%m%lation increase also t e 8al%e o! t e constant capital in a mo%nting progression more rapidly t an t at o! t e 8ariable part o! capital, in8ested as it is in li8ing labo%r0 6ence, t e same la@s prod%ce !or t e social capital a gro@ing absol%te mass o! pro!it, and a !alling rate o! pro!it0 We s all entirely ignore ere t at @it t e ad8ance o! capitalist prod%ction and t e attendant de8elopment o! t e prod%cti8eness o! social labo%r and m%ltiplication o! prod%ction branc es, ence prod%cts, t e same amo%nt o! 8al%e represents a progressi8ely increasing mass o! %se8al%es and enHoyments0 5 e de8elopment o! capitalist prod%ction and acc%m%lation li!ts labo%r-processes to an increasingly enlarged scale and t %s imparts to t em e8er greater dimensions, and in8ol8es accordingly larger in8estments o! capital !or eac indi8id%al establis ment0 ? mo%nting concentration o! capitals Baccompanied, t o%g on a smaller scale, by an increase in t e n%mber o! capitalistsC is, t ere!ore, one o! its material reD%irements as @ell as one o! its res%lts0 6and in and @it it, m%t%ally interacting, t ere occ%rs a progressi8e expropriation o! t e more or less direct prod%cers0 &t is, t en, nat%ral !or t e indi8id%al capitalists to command increasingly large armies o! labo%rers Bno matter o@ m%c t e 8ariable capital may decrease in relation to t e constantC, and nat%ral, too, t at t e mass o! s%rpl%s-8al%e, and ence pro!it, appropriated by t em, s o%ld gro@ sim%ltaneo%sly @it , and in spite o!, t e !all in t e rate o! pro!it0 5 e ca%ses @ ic

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concentrate masses o! labo%rers %nder t e command o! indi8id%al capitalists, are t e 8ery same t at s@ell t e mass o! t e in8ested !ixed capital, and a%xiliary and ra@ materials, in mo%nting proportion as compared to t e mass o! employed li8ing labo%r0 &t reD%ires no more t an a passing remark at t is point to indicate t at, gi8en a certain labo%ring pop%lation, t e mass o! s%rpl%s-8al%e, ence t e absol%te mass o! pro!it, m%st gro@ i! t e rate o! s%rpl%s-8al%e increases, be it t ro%g a lengt ening or intensi!ication o! t e @orking-day, or t ro%g a drop in t e 8al%e o! @ages d%e to an increase in t e prod%cti8eness o! labo%r, and t at it m%st do so in spite o! t e relati8e decrease o! 8ariable capital in respect to constant0 5 e same de8elopment o! t e prod%cti8eness o! social labo%r, t e same la@s @ ic express t emsel8es in a relati8e decrease o! 8ariable as compared to total capital, and in t e t ereby !acilitated acc%m%lation, @ ile t is acc%m%lation in its t%rn becomes a starting-point !or t e !%rt er de8elopment o! t e prod%cti8eness and !or a !%rt er relati8e decrease o! 8ariable capital I t is same de8elopment mani!ests itsel!, aside !rom temporary !l%ct%ations, in a progressi8e increase o! t e total employed labo%r-po@er and a progressi8e increase o! t e absol%te mass o! s%rpl%s-8al%e, and ence o! pro!it0 -o@, @ at m%st be t e !orm o! t is do%ble-edged la@ o! a decrease in t e rate o! pro!it and a sim%ltaneo%s increase in t e absol%te mass o! pro!it arising !rom t e same ca%sesQ ?s a la@ based on t e !act t at %nder gi8en conditions t e appropriated mass o! s%rpl%s-labo%r, ence o! s%rpl%s8al%e, increases, and t at, so !ar as t e total capital is concerned, or t e indi8id%al capital as an aliD%ot part o! t e total capital, pro!it and s%rpl%s-8al%e are identical magnit%desQ 'et %s take an aliD%ot part o! capital %pon @ ic @e calc%late t e rate o! pro!it, e.g., 1==0 5 ese 1== represent t e a8erage composition o! t e total capital, say, 8= c U <=80 We a8e seen in t e second part o! t is book t at t e a8erage rate o! pro!it in t e 8ario%s branc es o! prod%ction is determined not by t e partic%lar composition o! eac indi8id%al capital, b%t by t e a8erage social composition0 ?s t e 8ariable capital decreases relati8e to t e constant, ence t e total capital o! 1==, t e rate o! pro!it, or t e relati8e magnit%de o! s%rpl%s-8al%e, i.e., its ratio to t e ad8anced total capital o! 1==, !alls e8en t o%g t e intensity o! exploitation @ere to remain t e same, or e8en to increase0 A%t it is not t is relati8e magnit%de alone @ ic !alls0 5 e magnit%de o! t e s%rpl%s-8al%e or pro!it absorbed by t e total capital o! 1== also !alls absol%tely0 ?t a rate o! s%rpl%s-8al%e o! 1==T, a capital o! 6= c U 2=8 prod%ces a mass o! s%rpl%s-8al%e, and ence o! pro!it, amo%nting to 2=# a capital o! 8= c U <=8 a mass o! pro!it o! 3=# and !or a capital o! 8= c U <=8 t e pro!it !alls to <=0 5 is !alling applies to t e mass o! s%rpl%s-8al%e, and ence o! pro!it, and is d%e to t e !act t at t e total capital o! 1== employs less li8ing labo%r, and, t e intensity o! labo%r exploitation remaining t e same, sets in motion less s%rpl%s-labo%r, and t ere!ore prod%ces less s%rpl%s-8al%e0 5aking any aliD%ot part o! t e social capital, i.e., a capital o! a8erage composition, as a standard by @ ic to meas%re s%rpl%s-8al%e I and t is is done in all pro!it calc%lations I a relati8e !all o! s%rpl%s-8al%e is generally identical @it its absol%te !all0 &n t e cases gi8en abo8e, t e rate o! pro!it sinks !rom 2=T to 3=T and to <=T, beca%se, in !act, t e mass o! s%rpl%s-8al%e, and ence o! pro!it, prod%ced by t e same capital !alls absol%tely !rom 2= to 3= and to <=0 $ince t e magnit%de o! t e 8al%e o! t e capital, by @ ic t e s%rpl%s-8al%e is meas%red, is gi8en as 1==, a !all in t e proportion o! s%rpl%s-8al%e to t is gi8en magnit%de can be only anot er expression !or t e decrease o! t e absol%te magnit%de o! s%rpl%s-8al%e and pro!it0 5 is is, indeed, a ta%tology0 A%t, as s o@n, t e !act t at t is decrease occ%rs at all, arises !rom t e nat%re o! t e de8elopment o! t e capitalist process o! prod%ction0 3n t e ot er and, o@e8er, t e same ca%ses @ ic bring abo%t an absol%te decrease o! s%rpl%s8al%e, and ence pro!it, on a gi8en capital, and conseD%ently o! t e rate o! pro!it calc%lated in per cent, prod%ce an increase in t e absol%te mass o! s%rpl%s-8al%e, and ence o! pro!it, appropriated by t e social capital Bi.e., by all capitalists taken as a @ oleC0 6o@ does t is occ%r, @ at is t e only @ay in @ ic t is can occ%r, or @ at are t e conditions obtaining in t is seeming contradictionQ

1+2

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&! any aliD%ot part R 1== o! t e social capital, and ence any 1== o! a8erage social composition, is a gi8en magnit%de, !or @ ic t ere!ore a !all in t e rate o! pro!it coincides @it a !all in t e absol%te magnit%de o! t e pro!it beca%se t e capital @ ic ere ser8es as a standard o! meas%rement is a constant magnit%de, t en t e magnit%de o! t e social capital like t at o! t e capital in t e ands o! indi8id%al capitalists, is 8ariable, and in keeping @it o%r ass%mptions it m%st 8ary in8ersely @it t e decrease o! its 8ariable portion0 &n o%r !ormer ill%stration, @ en t e percentage o! composition @as 6= c U 2=8, t e corresponding s%rpl%s-8al%e, or pro!it, @as 2=, and ence t e rate o! pro!it 2=T0 $%ppose, t e total capital in t is stage o! composition @as one million0 5 en t e total s%rpl%s-8al%e, and ence t e total pro!it, amo%nted to 2==,===0 -o@, i! t e composition later R 8= c U <=8, @ ile t e degree o! labo%r exploitation remained t e same, t en t e s%rpl%s-8al%e or pro!it !or eac 1== R <=0 A%t since t e absol%te mass o! s%rpl%s-8al%e or pro!it increases, as demonstrated, in spite o! t e decreasing rate o! pro!it or t e decreasing prod%ction o! s%rpl%s-8al%e by e8ery 1== o! capital I increases, say, !rom 2==,=== to 22=,===, t en t is occ%rs solely beca%se t e total capital @ ic !ormed at t e time o! t is ne@ composition as risen to <,<==,===0 5 e mass o! t e total capital set in motion as risen to <<=T, @ ile t e rate o! pro!it as !allen by +=T0 6ad t e total capital no more t an do%bled, it @o%ld a8e to prod%ce as m%c s%rpl%s-8al%e and pro!it to obtain a rate o! pro!it o! <=T as t e old capital o! 1,===,=== prod%ced at 2=T0 6ad it gro@n to less t an do%ble, it @o%ld a8e prod%ced less s%rpl%s-8al%e, or pro!it, t an t e old capital o! 1,===,===, @ ic , in its !ormer composition, @o%ld a8e ad to gro@ !rom 1,===,=== to no more t an 1,1==,=== to raise its s%rpl%s-8al%e !rom 2==,=== to 22=,===0 We again meet ere t e pre8io%sly de!ined la@ t at t e relati8e decrease o! t e 8ariable capital, ence t e de8elopment o! t e social prod%cti8eness o! labo%r, in8ol8es an increasingly large mass o! total capital to set in motion t e same D%antity o! labo%r-po@er and sD%eeEe o%t t e same D%antity o! s%rpl%s-labo%r0 ;onseD%ently, t e possibility o! a relati8e s%rpl%s o! labo%ring people de8elops proportionately to t e ad8ances made by capitalist prod%ction not beca%se t e prod%cti8eness o! social labo%r decreases, b%t beca%se it increases0 &t does not t ere!ore arise o%t o! an absol%te disproportion bet@een labo%r and t e means o! s%bsistence, or t e means !or t e prod%ction o! t ese means o! s%bsistence, b%t o%t o! a disproportion occasioned by capitalist exploitation o! labo%r, a disproportion bet@een t e progressi8e gro@t o! capital and its relati8ely s rinking need !or an increasing pop%lation0 $ o%ld t e rate o! pro!it !all by +=T, it @o%ld s rink one- al!0 &! t e mass o! pro!it is to remain t e same, t e capital m%st be do%bled0 For t e mass o! pro!it made at a declining rate o! pro!it to remain t e same, t e m%ltiplier indicating t e gro@t o! t e total capital m%st be eD%al to t e di8isor indicating t e !all o! t e rate o! pro!it0 &! t e rate o! pro!it !alls !rom 2= to <=, t e total capital m%st rise in8ersely at t e rate o! <= : 2= to obtain t e same res%lt0 &! t e rate o! pro!it !alls !rom 2= to 8, t e capital @o%ld a8e to increase at t e rate o! 8 : 2=, or !i8e-!old0 ? capital o! 1,===,=== at 2=T prod%ces 2==,===, and a capital o! +,===,=== at 8T like@ise prod%ces 2==,===0 5 is applies i! @e @ant t e res%lt to remain t e same0 A%t i! t e res%lt is to be ig er, t en t e capital m%st gro@ at a greater rate t an t e rate o! pro!it !alls0 &n ot er @ords, !or t e 8ariable portion o! t e total capital not to remain t e same in absol%te terms, b%t to increase absol%tely in spite o! its !alling in percentage o! t e total capital, t e total capital m%st gro@ at a !aster rate t an t e percentage o! t e 8ariable capital !alls0 &t m%st gro@ so considerably t at in its ne@ composition it s o%ld reD%ire more t an t e old portion o! 8ariable capital to p%rc ase labo%rpo@er0 &! t e 8ariable portion o! a capital R 1== s o%ld !all !rom 2= to <=, t e total capital m%st rise ig er t an <== to be able to employ a larger 8ariable capital t an 2=0 E8en i! t e exploited mass o! t e @orking pop%lation @ere to remain constant, and only t e lengt and intensity o! t e @orking-day @ere to increase, t e mass o! t e in8ested capital @o%ld a8e to increase, since it @o%ld a8e to be greater in order to employ t e same mass o! labo%r %nder t e old conditions o! exploitation a!ter t e composition o! capital c anges0

1++

; apter J&&&

5 %s, t e same de8elopment o! t e social prod%cti8eness o! labo%r expresses itsel! @it t e progress o! capitalist prod%ction on t e one and in a tendency o! t e rate o! pro!it to !all progressi8ely and, on t e ot er, in a progressi8e gro@t o! t e absol%te mass o! t e appropriated s%rpl%s-8al%e, or pro!it# so t at on t e @ ole a relati8e decrease o! 8ariable capital and pro!it is accompanied by an absol%te increase o! bot 0 5 is t@o-!old e!!ect, as @e a8e seen, can express itsel! only in a gro@t o! t e total capital at a pace more rapid t an t at at @ ic t e rate o! pro!it !alls0 For an absol%tely increased 8ariable capital to be employed in a capital o! ig er composition, or one in @ ic t e constant capital as increased relati8ely more, t e total capital m%st not only gro@ proportionately to its ig er composition, b%t still more rapidly0 &t !ollo@s, t en, t at as t e capitalist mode o! prod%ction de8elops, an e8er larger D%antity o! capital is reD%ired to employ t e same, let alone an increased, amo%nt o! labo%r-po@er0 5 %s, on a capitalist !o%ndation, t e increasing prod%cti8eness o! labo%r necessarily and permanently creates a seeming o8er-pop%lation o! labo%ring people0 &! t e 8ariable capital !orms H%st 1N6 o! t e total capital instead o! t e !ormer Z, t e total capital m%st be trebled to employ t e same amo%nt o! labo%r-po@er0 ?nd i! t@ice as m%c labo%r-po@er is to be employed, t e total capital m%st increase six-!old0 ,olitical economy, @ ic as %ntil no@ been %nable to explain t e la@ o! t e tendency o! t e rate o! pro!it to !all, pointed sel!-consolingly to t e increasing mass o! pro!it, i.e., to t e gro@t o! t e absol%te magnit%de o! pro!it, be it !or t e indi8id%al capitalist or !or t e social capital, b%t t is @as also based on mere platit%de and spec%lation0 5o say t at t e mass o! pro!it is determined by t@o !actors I !irst, t e rate o! pro!it, and, secondly, t e mass o! capital in8ested at t is rate, is mere ta%tology0 &t is t ere!ore b%t a corollary o! t is ta%tology to say t at t ere is a possibility !or t e mass o! pro!it to gro@ e8en t o%g t e rate o! pro!it may !all at t e same time0 &t does not elp %s one step !art er, since it is H%st as possible !or t e capital to increase @it o%t t e mass o! pro!it gro@ing, and !or it to increase e8en @ ile t e mass o! pro!it !alls0 For 1== at <+T yields <+, and 2== at +T yields only <=0 1 A%t i! t e same ca%ses @ ic make t e rate o! pro!it !all, entail t e acc%m%lation, i.e., t e !ormation, o! additional capital, and i! eac additional capital employs additional labo%r and prod%ces additional s%rpl%s8al%e# i!, on t e ot er and, t e mere !all in t e rate o! pro!it implies t at t e constant capital, and @it it t e total old capital, a8e increased, t en t is process ceases to be mysterio%s0 We s all see later /K0 Marx, 4heorien ber den Mehrwert. K0 MarxNF0 Engels, "er-e, Aand <6, 5eil <,0 $0 23+-66, +21- 23. J 0d1 to @ at deliberate !alsi!ications some people resort in t eir calc%lations to spirit a@ay t e possibility o! an increase in t e mass o! pro!it sim%ltaneo%s @it a decrease in t e rate o! pro!it0 We a8e s o@n o@ t e same ca%ses t at bring abo%t a tendency !or t e general rate o! pro!it to !all necessitate an accelerated acc%m%lation o! capital and, conseD%ently, an increase in t e absol%te magnit%de, or total mass, o! t e s%rpl%s-labo%r Bs%rpl%s-8al%e, pro!itC appropriated by it0 P%st as e8eryt ing appears re8ersed in competition, and t %s in t e conscio%sness o! t e agents o! competition, so also t is la@, t is inner and necessary connection bet@een t@o seeming contradictions0 &t is e8ident t at @it in t e proportions indicated abo8e a capitalist disposing o! a large capital @ill recei8e a larger mass o! pro!it t an a small capitalist making seemingly ig pro!its0 E8en a c%rsory examination o! competition s o@s, !%rt ermore, t at %nder certain circ%mstances, @ en t e greater capitalist @is es to make room !or imsel! on t e market, and to cro@d o%t t e smaller ones, as appens in times o! crises, e makes practical %se o! t is, i.e., e deliberately lo@ers is rate o! pro!it in order to dri8e t e smaller ones to t e @all0 Merc ants capital, @ ic @e s all describe in detail later, also notably ex ibits p enomena @ ic appear to attrib%te a !all in pro!it to an expansion o! b%siness, and t %s o! capital0 5 e scienti!ic expression !or t is !alse conception @ill be gi8en later0 $imilar s%per!icial obser8ations res%lt !rom a comparison o! rates o! pro!it in indi8id%al lines o! b%siness, disting%is ed eit er as s%bHect to !ree competition, or to monopoly0 5 e %tterly s allo@ conception existing in t e minds o! t e agents

1+6

; apter J&&&

o! competition is !o%nd in )osc er, namely, t at a red%ction in t e rate o! pro!it is Kmore pr%dent and %maneL0 /)osc er, Die Grundlage der $ationalK-onomie, 3 ?%!lage, 18+8, 1=8, $0 1*< . J 0d.1 5 e !all in t e rate o! pro!it appears in t is case as an effect o! an increase in capital and o! t e concomitant calc%lation o! t e capitalist t at t e mass o! pro!its pocketed by im @ill be greater at a smaller rate o! pro!it0 5 is entire conception B@it t e exception o! ?dam $mit "s, @ ic @e s all mention laterC /K0 Marx, 4heorien ber den Mehrwert. K0 MarxNF0 Engels, "er-e, Aand <6, 5eil <, $0 <12-<80 I 0d01 rests on an %tter misappre ension o! @ at t e general rate o! pro!it is, and on t e cr%de notion t at prices are act%ally determined by adding a more or less arbitrary D%ota o! pro!it to t e tr%e 8al%e o! commodities0 ;r%de as t ese ideas are, t ey arise necessarily o%t o! t e in8erted aspect @ ic t e immanent la@s o! capitalist prod%ction represent in competition0 5 e la@ t at a !all in t e rate o! pro!it d%e to t e de8elopment o! prod%cti8eness is accompanied by an increase in t e mass o! pro!it, also expresses itsel! in t e !act t at a !all in t e price o! commodities prod%ced by a capital is accompanied by a relati8e increase o! t e masses o! pro!it contained in t em and realised by t eir sale0 $ince t e de8elopment o! t e prod%cti8eness and t e correspondingly ig er composition o! capital sets in motion an e8er-increasing D%antity o! means o! prod%ction t ro%g a constantly decreasing D%antity o! labo%r, e8ery aliD%ot part o! t e total prod%ct, i.e., e8ery single commodity, or eac partic%lar lot o! commodities in t e total mass o! prod%cts, absorbs less li8ing labo%r, and also contains less materialised labo%r, bot in t e depreciation o! t e !ixed capital applied and in t e ra@ and a%xiliary materials cons%med0 6ence e8ery single commodity contains a smaller s%m o! labo%r materialised in means o! prod%ction and o! labo%r ne@ly added d%ring prod%ction0 5 is ca%ses t e price o! t e indi8id%al commodity to !all0 A%t t e mass o! pro!its contained in t e indi8id%al commodities may ne8ert eless increase i! t e rate o! t e absol%te or relati8e s%rpl%s-8al%e gro@s0 5 e commodity contains less ne@ly added labo%r, b%t its %npaid portion gro@s in relation to its paid portion0 6o@e8er, t is is t e case only @it in certain limits0 Wit t e absol%te amo%nt o! li8ing labo%r ne@ly incorporated in indi8id%al commodities decreasing enormo%sly as prod%ction de8elops, t e absol%te mass o! %npaid labo%r contained in t em @ill like@ise decrease, o@e8er m%c it may a8e gro@n as compared to t e paid portion0 5 e mass o! pro!it on eac indi8id%al commodity @ill s rink considerably @it t e de8elopment o! t e prod%cti8eness o! labo%r, in spite o! a gro@t in t e rate o! s%rpl%s-8al%e0 ?nd t is red%ction, H%st as t e !all in t e rate o! pro!it, is only delayed by t e c eapening o! t e elements o! constant capital and by t e ot er circ%mstances set !ort in t e !irst part o! t is book, @ ic increase t e rate o! pro!it at a gi8en, or e8en !alling, rate o! s%rpl%s-8al%e0 5 at t e price o! indi8id%al commodities @ ose s%m makes %p t e total prod%ct o! capital !alls, means simply t at a certain D%antity o! labo%r is realised in a larger D%antity o! commodities, so t at eac indi8id%al commodity contains less labo%r t an be!ore0 5 is is t e case e8en i! t e price o! one part o! constant capital, s%c as ra@ material, etc0, s o%ld rise0 3%tside o! a !e@ cases B!or instance, i! t e prod%cti8eness o! labo%r %ni!ormly c eapens all elements o! t e constant, and t e 8ariable, capitalC, t e rate o! pro!it @ill !all, in spite o! t e ig er rate o! s%rpl%s-8al%e, 1C beca%se e8en a larger %npaid portion o! t e smaller total amo%nt o! ne@ly added labo%r is smaller t an a smaller aliD%ot %npaid portion o! t e !ormer larger amo%nt and <C beca%se t e ig er composition o! capital is expressed in t e indi8id%al commodity by t e !act t at t e portion o! its 8al%e in @ ic ne@ly added labo%r is materialised decreases in relation to t e portion o! its 8al%e @ ic represents ra@ and a%xiliary material, and t e @ear and tear o! !ixed capital0 5 is c ange in t e proportion o! t e 8ario%s component parts in t e price o! indi8id%al commodities, i.e., t e decrease o! t at portion o! t e price in @ ic ne@ly added li8ing labo%r is materialised, and t e increase o! t at portion o! it in @ ic !ormerly materialised labo%r is represented, is t e !orm @ ic expresses t e decrease o! t e 8ariable in relation to t e constant capital t ro%g t e price o! t e indi8id%al commodities0 P%st as t is decrease is absol%te !or a certain amo%nt o! capital, say o!

1+>

; apter J&&&

1==, it is also absol%te !or e8ery indi8id%al commodity as an aliD%ot part o! t e reprod%ced capital0 6o@e8er, t e rate o! pro!it, i! calc%lated merely on t e elements o! t e price o! an indi8id%al commodity, @o%ld be di!!erent !rom @ at it act%ally is0 ?nd !or t e !ollo@ing reason: /5 e rate o! pro!it is calc%lated on t e total capital in8ested, b%t !or a de!inite time, act%ally a year0 5 e rate o! pro!it is t e ratio o! t e s%rpl%s-8al%e, or pro!it, prod%ced and realised in a year, to t e total capital calc%lated in per cent0 &t is, t ere!ore, not necessarily eD%al to a rate o! pro!it calc%lated !or t e period o! t%rno8er o! t e in8ested capital rat er t an !or a year0 &t is only i! t e capital is t%rned o8er exactly in one year t at t e t@o coincide0 3n t e ot er and, t e pro!it made in t e co%rse o! a year is merely t e s%m o! pro!its on commodities prod%ced and sold d%ring t at same year0 -o@, i! @e calc%late t e pro!it on t e cost-price o! commodities, @e obtain a rate o! pro!it R pNk in @ ic p stands !or t e pro!it realised d%ring one year, and k !or t e s%m o! t e cost-prices o! commodities prod%ced and sold @it in t e same period0 &t is e8ident t at t is rate o! pro!it pNk @ill not coincide @it t e act%al rate o! pro!it pN;, mass o! pro!it di8ided by total capital, %nless k R ;, t at is, %nless t e capital is t%rned o8er in exactly one year0 'et %s take t ree di!!erent conditions o! an ind%strial capital0 &0 ? capital o! V8,=== prod%ces and sells ann%ally +,=== pieces o! a commodity at 3=s0 per piece, t %s making an ann%al t%rno8er o! V>,+==0 &t makes a pro!it o! 1=s0 on eac piece, or V<,+== per year0 E8ery piece, t en, contains <=s0 ad8anced capital and 1=s0 pro!it, so t at t e rate o! pro!it per piece is 1=N<= R +=T0 5 e t%rned-o8er s%m o! V>,+== contains V+,=== ad8anced capital and V<,+== pro!it0 )ate o! pro!it per t%rno8er, pNk, like@ise +=T0 A%t calc%lated on t e total capital t e rate o! pro!it pN; R <,+==N8,=== R 31[T &&0 5 e capital rises to V1=,===0 3@ing to increased prod%cti8ity o! labo%r it is able to prod%ce ann%ally 1=,=== pieces o! t e commodity at a cost-price o! <=s0 per piece0 $%ppose t e commodity is sold at a pro!it o! 2s0, ence at <2s0 per piece0 &n t at case t e price o! t e ann%al prod%ct R V1<,===, o! @ ic V1=,=== is ad8anced capital and V<,=== is pro!it0 5 e rate o! pro!it pNk R 2N<= per piece, and <,===N1=,=== !or t e ann%al t%rno8er, or in bot cases R <=T0 ?nd since t e total capital is eD%al to t e s%m o! t e cost-prices, namely V1=,===, it !ollo@s t at pN;, t e act%al rate o! pro!it, is in t is case also <=T0 &&&0 'et t e capital rise to V1+,=== o@ing to a constant gro@t o! t e prod%cti8eness o! labo%r, and let it ann%ally prod%ce 3=,=== pieces o! t e commodity at a cost-price o! 13s0 per piece, eac piece being sold at a pro!it o! <s0, or at 1+s0 5 e ann%al t%rno8er t ere!ore R 3=,===\1+s0 R V<<,+==, o! @ ic V1*,+== is ad8anced capital and V3,=== pro!it0 5 e rate o! pro!it pNk t en R <N13 R 3,===N1*,+== R 1+ +N13T0 A%t pN; R 3,===N1+,=== R <=T0 We see, t ere!ore, t at only in case &&, @ ere t e t%rned-o8er capital-8al%e is eD%al to t e total capital, t e rate o! pro!it per piece, or per total amo%nt o! t%rno8er, is t e same as t e rate o! pro!it calc%lated on t e total capital0 &n case &, in @ ic t e amo%nt o! t e t%rno8er is smaller t an t e total capital, t e rate o! pro!it calc%lated on t e cost-price o! t e commodity is ig er# and in case &&&, in @ ic t e total capital is smaller t an t e amo%nt o! t e t%rno8er, it is lo@er t an t e act%al rate calc%lated on t e total capital0 5 is is a general r%le0 &n commercial practice, t e t%rno8er is generally calc%lated inacc%rately0 &t is ass%med t at t e capital as been t%rned o8er once as soon as t e s%m o! t e realised commodity-prices eD%als t e s%m o! t e in8ested total capital0 A%t t e capital can complete one @ ole t%rno8er only @ en t e s%m o! t e cost1prices o! t e realised commodities eD%als t e s%m o! t e total capital0 I '.0.1 5 is again s o@s o@ important it is in capitalist prod%ction to regard indi8id%al commodities, or t e commodity-prod%ct o! a certain period, as prod%cts o! ad8anced capital and in relation to t e total capital @ ic prod%ces t em, rat er t an in isolation, by t emsel8es, as mere commodities0

1+8

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5 e rate o! pro!it m%st be calc%lated by meas%ring t e mass o! prod%ced and realised s%rpl%s8al%e not only in relation to t e cons%med portion o! capital reappearing in t e commodities, b%t also to t is part pl%s t at portion o! %ncons%med b%t applied capital @ ic contin%es to operate in prod%ction0 6o@e8er, t e mass o! pro!it cannot be eD%al to anyt ing b%t t e mass o! pro!it or s%rpl%s-8al%e, contained in t e commodities t emsel8es, and to be realised by t eir sale0 &! t e prod%cti8ity o! ind%stry increases, t e price o! indi8id%al commodities !alls0 5 ere is less labo%r in t em, less paid and %npaid labo%r0 $%ppose, t e same labo%r prod%ces, say, triple its !ormer prod%ct0 5 en W less labo%r yields indi8id%al prod%ct0 ?nd since pro!it can make %p b%t a portion o! t e amo%nt o! labo%r contained in an indi8id%al commodity, t e mass o! pro!it in t e indi8id%al commodity m%st decrease, and t is takes place @it in certain limits, e8en i! t e rate o! s%rpl%s-8al%e s o%ld rise0 &n any case, t e mass o! pro!it on t e total prod%ct does not !all belo@ t e original mass o! pro!it so long as t e capital employs t e same n%mber o! labo%rers at t e same degree o! exploitation0 B5 is may also occ%r i! !e@er labo%rers are employed at a ig er rate o! exploitation0C For t e mass o! pro!it on t e indi8id%al prod%ct decreases proportionately to t e increase in t e n%mber o! prod%cts0 5 e mass o! pro!it remains t e same, b%t it is distrib%ted di!!erently o8er t e total amo%nt o! commodities0 -or does t is alter t e distrib%tion bet@een t e labo%rers and capitalists o! t e amo%nt o! 8al%e created by ne@ly added labo%r0 5 e mass o! pro!it cannot increase so long as t e same amo%nt o! labo%r is employed, %nless t e %npaid s%rpl%s-labo%r increases, or, s o%ld intensity o! exploitation remain t e same, %nless t e n%mber o! labo%rers gro@s0 3r, bot t ese ca%ses may combine to prod%ce t is res%lt0 &n all t ese cases I @ ic , o@e8er, in accordance @it o%r ass%mption, pres%ppose an increase o! constant capital as compared to 8ariable, and an increase in t e magnit%de o! total capital I t e indi8id%al commodity contains a smaller mass o! pro!it and t e rate o! pro!it !alls e8en i! calc%lated on t e indi8id%al commodity0 ? gi8en D%antity o! ne@ly added labo%r materialises in a larger D%antity o! commodities0 5 e price o! t e indi8id%al commodity !alls0 ;onsidered abstractly t e rate o! pro!it may remain t e same, e8en t o%g t e price o! t e indi8id%al commodity may !all as a res%lt o! greater prod%cti8eness o! labo%r and a sim%ltaneo%s increase in t e n%mber o! t is c eaper commodity i!, !or instance, t e increase in prod%cti8eness o! labo%r acts %ni!ormly and sim%ltaneo%sly on all t e elements o! t e commodity, so t at its total price !alls in t e same proportion in @ ic t e prod%cti8ity o! labo%r increases, @ ile, on t e ot er and, t e m%t%al relation o! t e di!!erent elements o! t e price o! t e commodity remains t e same0 5 e rate o! pro!it co%ld e8en rise i! a rise in t e rate o! s%rpl%s-8al%e @ere accompanied by a s%bstantial red%ction in t e 8al%e o! t e elements o! constant, and partic%larly o! !ixed, capital0 A%t in reality, as @e a8e seen, t e rate o! pro!it @ill !all in t e long r%n0 &n no case does a !all in t e price o! any indi8id%al commodity by itsel! gi8e a cl%e to t e rate o! pro!it0 E8eryt ing depends on t e magnit%de o! t e total capital in8ested in its prod%ction0 For instance, i! t e price o! one yard o! !abric !alls !rom 3s0 to 1Ws0, i! @e kno@ t at be!ore t is price red%ction it contained 1Ws0 constant capital, yarn, etc0, Ws0 @ages, and Ws0 pro!it, @ ile a!ter t e red%ction it contains 1s0 constant capital, ab8+31s0 @ages, and Xs0 pro!it, @e cannot tell i! t e rate o! pro!it as remained t e same or not0 5 is depends on @ et er, and by o@ m%c , t e ad8anced total capital as increased, and o@ many yards more it prod%ces in a gi8en time0 5 e p enomenon, springing !rom t e nat%re o! t e capitalist mode o! prod%ction, t at increasing prod%cti8ity o! labo%r implies a drop in t e price o! t e indi8id%al commodity, or o! a certain mass o! commodities, an increase in t e n%mber o! commodities, a red%ction in t e mass o! pro!it on t e indi8id%al commodity and in t e rate o! pro!it on t e aggregate o! commodities, and an increase in t e mass o! pro!it on t e total D%antity o! commodities I t is p enomenon appears on t e s%r!ace only in a red%ction o! t e mass o! pro!it on t e indi8id%al commodity, a !all in its price, an increase in t e mass o! pro!it on t e a%gmented total n%mber o! commodities prod%ced by t e total social capital or an indi8id%al capitalist0 &t t en appears as i! t e capitalist adds less pro!it to t e price o! t e indi8id%al commodity o! is o@n !ree @ill, and makes %p !or it t ro%g

1+*

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t e greater n%mber o! commodities e prod%ces0 5 is conception rests %pon t e notion o! pro!it %pon alienation, @ ic , in its t%rn, is ded%ced !rom t e conception o! merc ant capital0 We a8e pre8io%sly seen in Aook & B2 and > ?bsc nittC /Englis edition: ,arts &4 and 4&&0 I 0d01 t at t e mass o! commodities gro@ing along @it t e prod%cti8ity o! labo%r and t e c eapening o! t e indi8id%al commodity as s%c Bas long as t ese commodities do not enter t e price o! labo%r-po@er as determinantsC I t at t is does not a!!ect t e proportion bet@een paid and %npaid labo%r in t e indi8id%al commodity, in spite o! t e !alling price0 $ince all t ings appear distorted, namely, re8ersed in competition, t e indi8id%al capitalist may imagine: 1C t at e is red%cing is pro!it on t e indi8id%al commodity by c%tting its price, b%t still making a greater pro!it by selling a larger D%antity o! commodities# <C t at e !ixes t e price o! t e indi8id%al commodities and t at e determines t e price o! t e total prod%ct by m%ltiplication, @ ile t e original process is really one o! di8ision Bsee Aook &, Kap0 J, $0 <81 /Englis edition: ; 0 J&&0 I 0d1C, and m%ltiplication is only correct secondarily, since it is based on t at di8ision0 5 e 8%lgar economist does practically no more t an translate t e sing%lar concepts o! t e capitalists, @ o are in t e t rall o! competition, into a seemingly more t eoretical and generalised lang%age, and attempt to s%bstantiate t e H%stice o! t ose conceptions0 5 e !all in commodity-prices and t e rise in t e mass o! pro!it on t e a%gmented mass o! t ese c eapened commodities is, in !act, b%t anot er expression !or t e la@ o! t e !alling rate o! pro!it attended by a sim%ltaneo%sly increasing mass o! pro!it0 5 e analysis o! o@ !ar a !alling rate o! pro!it may coincide @it rising prices no more belongs ere t an t at o! t e point pre8io%sly disc%ssed in Aook & B$0 <8=-81 /Englis edition: ; 0 J&&0 I 0d.1C, concerning relati8e s%rpl%s-8al%e0 ? capitalist @orking @it impro8ed b%t not as yet generally adopted met ods o! prod%ction sells belo@ t e market-price, b%t abo8e is indi8id%al price o! prod%ction# is rate o! pro!it rises %ntil competition le8els it o%t0 7%ring t is eD%alisation period t e second reD%isite, expansion o! t e in8ested capital, makes its appearance0 ?ccording to t e degree o! t is expansion t e capitalist @ill be able to employ a part o! is !ormer labo%rers, act%ally per aps all o! t em, or e8en more, %nder t e ne@ conditions, and ence to prod%ce t e same, or a greater, mass o! pro!it0

Chapter 14. Counteractin) 5nfluences

&! @e consider t e enormo%s de8elopment o! t e prod%cti8e !orces o! social labo%r in t e last 3= years alone as compared @it all preceding periods# i! @e consider, in partic%lar, t e enormo%s mass o! !ixed capital, aside !rom t e act%al mac inery, @ ic goes into t e process o! social prod%ction as a @ ole, t en t e di!!ic%lty @ ic as it erto tro%bled t e economist, namely to explain t e !alling rate o! pro!it, gi8es place to its opposite, namely to explain @ y t is !all is not greater and more rapid0 5 ere m%st be some co%nteracting in!l%ences at @ork, @ ic cross and ann%l t e e!!ect o! t e general la@, and @ ic gi8e it merely t e c aracteristic o! a tendency, !or @ ic reason @e a8e re!erred to t e !all o! t e general rate o! pro!it as a tendency to !all0 5 e !ollo@ing are t e most general co%nterbalancing !orces:

I. Increasing Intensit# "f !ploitation

5 e degree o! exploitation o! labo%r, t e appropriation o! s%rpl%s-labo%r and s%rpl%s-8al%e, is raised notably by lengt ening t e @orking-day and intensi!ying labo%r0 5 ese t@o points a8e been compre ensi8ely treated in Aook & as incidental to t e prod%ction o! absol%te and relati8e s%rpl%s-8al%e0 5 ere are many @ays o! intensi!ying labo%r @ ic imply an increase o! constant, as compared to 8ariable, capital, and ence a !all in t e rate o! pro!it, s%c as compelling a labo%rer to operate a larger n%mber o! mac ines0 &n s%c cases I and in most proced%res ser8ing t e prod%ction o! relati8e s%rpl%s-8al%es I t e same ca%ses @ ic increase t e rate o! s%rpl%s8al%e, may also, !rom t e standpoint o! gi8en D%antities o! in8ested total capital, in8ol8e a !all in t e mass o! s%rpl%s-8al%e0 A%t t ere are ot er aspects o! intensi!ication, s%c as t e greater 8elocities o! mac inery, @ ic cons%me more ra@ material in t e same time, b%t, so !ar as t e !ixed capital is concerned, @ear o%t t e mac inery so m%c !aster, and yet do not in any @ay a!!ect t e relation o! its 8al%e to t e price o! t e labo%r @ ic sets it in motion0 A%t notably, it is prolongation o! t e @orking-day, t is in8ention o! modern ind%stry, @ ic increases t e mass o! appropriated s%rpl%s-labo%r @it o%t essentially altering t e proportion o! t e employed labo%rpo@er to t e constant capital set in motion by it, and @ ic rat er tends to red%ce t is capital relati8ely0 Moreo8er, it as already been demonstrated I and t is constit%tes t e real secret o! t e tendency o! t e rate o! pro!it to !all I t at t e manip%lations to prod%ce relati8e s%rpl%s-8al%e amo%nt, on t e @ ole, to trans!orming as m%c as possible o! a certain D%antity o! labo%r into s%rpl%s-8al%e, on t e one and, and employing as little labo%r as possible in proportion to t e in8ested capital, on t e ot er, so t at t e same reasons @ ic permit raising t e intensity o! exploitation r%le o%t exploiting t e same D%antity o! labo%r as be!ore by t e same capital0 5 ese are t e co%nteracting tendencies, @ ic , @ ile e!!ecting a rise in t e rate o! s%rpl%s-8al%e, also tend to decrease t e mass o! s%rpl%s-8al%e, and ence t e rate o! pro!it prod%ced by a certain capital0 Mention s o%ld also be made ere o! t e @idespread introd%ction o! !emale and c ild labo%r, in so !ar as t e @ ole !amily m%st no@ per!orm more s%rpl%s-labo%r !or capital t an be!ore, e8en @ en t e total amo%nt o! t eir @ages increases, @ ic is by no means al@ays t e case0 I E8eryt ing t at promotes t e prod%ction o! relati8e s%rpl%s-8al%e by mere impro8ement in met ods, as in agric%lt%re, @it o%t altering t e magnit%de o! t e in8ested capital, as t e same e!!ect0 5 e constant capital, it is tr%e, does not, in s%c cases, increase in relation to t e 8ariable, inasm%c as @e regard t e 8ariable capital as an index o! t e amo%nt o! labo%r-po@er employed, b%t t e mass o! t e prod%ct does increase in proportion to t e labo%r-po@er employed0 5 e same occ%rs, i! t e prod%cti8eness o! labo%r Bno matter, @ et er its prod%ct goes into t e labo%rer"s cons%mption or into t e elements o! constant capitalC is !reed !rom indrances in comm%nications, !rom arbitrary or ot er restrictions @ ic a8e become obstacles in t e co%rse

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o! time# !rom !etters o! all kinds, @it o%t directly a!!ecting t e ratio o! 8ariable to constant capital0 &t mig t be asked @ et er t e !actors t at c eck t e !all o! t e rate o! pro!it, b%t t at al@ays asten its !all in t e last analysis, @ et er t ese incl%de t e temporary, b%t al@ays rec%rring, ele8ations in s%rpl%s-8al%e abo8e t e general le8el, @ ic keep occ%rring no@ in t is and no@ in t at line o! prod%ction redo%nding to t e bene!it o! t ose indi8id%al capitalists, @ o make %se o! in8entions, etc0, be!ore t ese are introd%ced else@ ere0 5 is D%estion m%st be ans@ered in t e a!!irmati8e0 5 e mass o! s%rpl%s-8al%e prod%ced by a capital o! a gi8en magnit%de is t e prod%ct o! t@o !actors I t e rate o! s%rpl%s-8al%e m%ltiplied by t e n%mber o! labo%rers employed at t is rate0 ?t a gi8en rate o! s%rpl%s-8al%e it t ere!ore depends on t e n%mber o! labo%rers, and it depends on t e rate o! s%rpl%s-8al%e @ en t e n%mber o! labo%rers is gi8en0 :enerally, t ere!ore, it depends on t e composite ratio o! t e absol%te magnit%des o! t e 8ariable capital and t e rate o! s%rpl%s8al%e0 -o@ @e a8e seen t at, on t e a8erage, t e same !actors @ ic raise t e rate o! relati8e s%rpl%s-8al%e lo@er t e mass o! t e employed labo%r-po@er0 &t is e8ident, o@e8er, t at t is @ill occ%r to a greater or lesser extent, depending on t e de!inite proportion in @ ic t is con!licting mo8ement obtains, and t at t e tendency to@ards a red%ction in t e rate o! pro!it is notably @eakened by a rise in t e rate o! absol%te s%rpl%s-8al%e, @ ic originates @it t e lengt ening o! t e @orking-day0 We sa@ in t e case o! t e rate o! pro!it t at a drop in t e rate @as generally accompanied by an increase in t e mass o! pro!it, d%e to t e increasing mass o! total capital employed0 From t e standpoint o! t e total 8ariable capital o! society, t e s%rpl%s-8al%e it as prod%ced is eD%al to t e pro!it it as prod%ced0 Aot t e absol%te mass and t e rate o! s%rpl%s-8al%e a8e increased# t e one beca%se t e D%antity o! labo%r-po@er employed by society as gro@n, and t e ot er, beca%se t e intensity o! exploitation o! t is labo%r-po@er as increased0 A%t in t e case o! a capital o! a gi8en magnit%de, e.g., 1==, t e rate o! s%rpl%s-8al%e may increase, @ ile t e a8erage mass may decrease# !or t e rate is determined by t e proportion, in @ ic t e 8ariable capital prod%ces 8al%e, @ ile t e mass is determined by t e proportion o! 8ariable capital to t e total capital0 5 e rise in t e rate o! s%rpl%s-8al%e is a !actor @ ic determines t e mass o! s%rpl%s-8al%e, and ence also t e rate o! pro!it, !or it takes place especially %nder conditions, in @ ic , as @e a8e pre8io%sly seen, t e constant capital is eit er not increased at all, or not proportionately increased, in relation to t e 8ariable capital0 5 is !actor does not abolis t e general la@0 A%t it ca%ses t at la@ to act rat er as a tendency, i.e., as a la@ @ ose absol%te action is c ecked, retarded, and @eakened, by co%nteracting circ%mstances0 A%t since t e same in!l%ences @ ic raise t e rate o! s%rpl%s-8al%e Be8en a lengt ening o! t e @orking-time is a res%lt o! large-scale ind%stryC tend to decrease t e labo%r-po@er employed by a certain capital, it !ollo@s t at t ey also tend to red%ce t e rate o! pro!it and to retard t is red%ction0 &! one labo%rer is compelled to per!orm as m%c labo%r as @o%ld rationally be per!ormed by at least t@o, and i! t is is done %nder circ%mstances in @ ic t is one labo%rer can replace t ree, t en t is one labo%rer @ill per!orm as m%c s%rpl%slabo%r as @as !ormerly per!ormed by t@o, and t e rate o! s%rpl%s-8al%e @ill a8e risen accordingly0 A%t e @ill not per!orm as m%c as t ree ad per!ormed, and t e mass o! s%rpl%s8al%e @ill a8e decreased accordingly0 A%t t is red%ction in mass @ill be compensated, or limited, by t e rise in t e rate o! s%rpl%s-8al%e0 &! t e entire pop%lation is employed at a ig er rate o! s%rpl%s-8al%e, t e mass o! s%rpl%s-8al%e @ill increase, in spite o! t e pop%lation remaining t e same0 &t @ill increase still more i! t e pop%lation increases0 ?nd alt o%g t is is tied %p @it a relati8e red%ction o! t e n%mber o! employed labo%rers in proportion to t e magnit%de o! t e total capital, t is red%ction is moderated, or c ecked, by t e rise in t e rate o! s%rpl%s-8al%e0 Ae!ore lea8ing t is point, it is to be emp asised once more t at @it a capital o! a gi8en magnit%de t e rate o! s%rpl%s-8al%e may rise, @ ile its mass is decreasing, and 8ice 8ersa0 5 e mass o! s%rpl%s-8al%e is eD%al to t e rate m%ltiplied by t e n%mber o! labo%rers# o@e8er, t e rate

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is ne8er calc%lated on t e total, b%t only on t e 8ariable capital, act%ally only !or e8ery @orkingday0 3n t e ot er and, @it a gi8en magnit%de o! capital-8al%e, t e rate of profit can neit er rise nor !all @it o%t t e mass of surplus1value also rising or !alling0

II. +epression "f Wages &elo$ The Value "f Labour,Po$er

5 is is mentioned ere only empirically, since, like many ot er t ings @ ic mig t be en%merated, it as not ing to do @it t e general analysis o! capital, b%t belongs in an analysis o! competition, @ ic is not presented in t is @ork0 6o@e8er, it is one o! t e most important !actors c ecking t e tendency o! t e rate o! pro!it to !all0

III. Cheapening "f lements "f Constant Capital

E8eryt ing said in ,art & o! t is book abo%t !actors @ ic raise t e rate o! pro!it @ ile t e rate o! s%rpl%s-8al%e remains t e same, or regardless o! t e rate o! s%rpl%s-8al%e, belongs ere0 6ence also, @it respect to t e total capital, t at t e 8al%e o! t e constant capital does not increase in t e same proportion as its material 8ol%me0 For instance, t e D%antity o! cotton @orked %p by a single E%ropean spinner in a modern !actory as gro@n tremendo%sly compared to t e D%antity !ormerly @orked %p by a E%ropean spinner @it a spinning-@ eel0 .et t e 8al%e o! t e @orked-%p cotton as not gro@n in t e same proportion as its mass0 5 e same applies to mac inery and ot er !ixed capital0 &n s ort, t e same de8elopment @ ic increases t e mass o! t e constant capital in relation to t e 8ariable red%ces t e 8al%e o! its elements as a res%lt o! t e increased prod%cti8ity o! labo%r, and t ere!ore pre8ents t e 8al%e o! constant capital, alt o%g it contin%ally increases, !rom increasing at t e same rate as its material 8ol%me, i.e., t e material 8ol%me o! t e means o! prod%ction set in motion by t e same amo%nt o! labo%r-po@er0 &n isolated cases t e mass o! t e elements o! constant capital may e8en increase, @ ile its 8al%e remains t e same, or !alls0 5 e !oregoing is bo%nd %p @it t e depreciation o! existing capital Bt at is, o! its material elementsC, @ ic occ%rs @it t e de8elopment o! ind%stry0 5 is is anot er contin%ally operating !actor @ ic c ecks t e !all o! t e rate o! pro!it, alt o%g it may %nder certain circ%mstances encroac on t e mass o! pro!it by red%cing t e mass o! t e capital yielding a pro!it0 5 is again s o@s t at t e same in!l%ences @ ic tend to make t e rate o! pro!it !all, also moderate t e e!!ects o! t is tendency0

IV. )elative "ver,Population

&ts propagation is inseparable !rom, and astened by, t e de8elopment o! t e prod%cti8ity o! labo%r as expressed by a !all in t e rate o! pro!it0 5 e relati8e o8er-pop%lation becomes so m%c more apparent in a co%ntry, t e more t e capitalist mode o! prod%ction is de8eloped in it0 5 is, again, is t e reason @ y, on t e one and, t e more or less imper!ect s%bordination o! labo%r to capital contin%es in many branc es o! prod%ction, and contin%es longer t an seems at !irst glance compatible @it t e general stage o! de8elopment0 5 is is d%e to t e c eapness and ab%ndance o! disposable or %nemployed @age-labo%rers, and to t e greater resistance, @ ic some branc es o! prod%ction, by t eir 8ery nat%re, render to t e trans!ormation o! man%al @ork into mac ine prod%ction0 3n t e ot er and, ne@ lines o! prod%ction are opened %p, especially !or t e prod%ction o! l%x%ries, and it is t ese t at take as t eir basis t is relati8e o8er-pop%lation, o!ten set !ree in ot er lines o! prod%ction t ro%g t e increase o! t eir constant capital0 5 ese ne@ lines start o%t predominantly @it li8ing labo%r, and by degrees pass t ro%g t e same e8ol%tion as t e ot er lines o! prod%ction0 &n eit er case t e 8ariable capital makes %p a considerable portion o! t e total capital and @ages are belo@ t e a8erage, so t at bot t e rate and mass o! s%rpl%s-8al%e in t ese lines o! prod%ction are %n%s%ally ig 0 $ince t e general rate o! pro!it is !ormed by le8elling t e rates o! pro!it in t e indi8id%al branc es o! prod%ction, o@e8er, t e same !actor

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@ ic brings abo%t t e tendency in t e rate o! pro!it to !all, again prod%ces a co%nterbalance to t is tendency and more or less paralyses its e!!ects0

V. (oreign Trade
$ince !oreign trade partly c eapens t e elements o! constant capital, and partly t e necessities o! li!e !or @ ic t e 8ariable capital is exc anged, it tends to raise t e rate o! pro!it by increasing t e rate o! s%rpl%s-8al%e and lo@ering t e 8al%e o! constant capital0 &t generally acts in t is direction by permitting an expansion o! t e scale o! prod%ction0 &t t ereby astens t e process o! acc%m%lation, on t e one and, b%t ca%ses t e 8ariable capital to s rink in relation to t e constant capital, on t e ot er, and t %s astens a !all in t e rate o! pro!it0 &n t e same @ay, t e expansion o! !oreign trade, alt o%g t e basis o! t e capitalist mode o! prod%ction in its in!ancy, as become its o@n prod%ct, o@e8er, @it t e !%rt er progress o! t e capitalist mode o! prod%ction, t ro%g t e innate necessity o! t is mode o! prod%ction, its need !or an e8er-expanding market0 6ere @e see once more t e d%al nat%re o! t is e!!ect0 B)icardo as entirely o8erlooked t is side o! !oreign trade0 /70 )icardo, :n the &rinciples of &olitical 0conomy, and 4a ation, 4hird edition, ,ondon, ;<F=, Ch. LDD. J 0d.M* ?not er D%estion I really beyond t e scope o! o%r analysis beca%se o! its special nat%re I is t is: &s t e general rate o! pro!it raised by t e ig er rate o! pro!it prod%ced by capital in8ested in !oreign, and partic%larly colonial, tradeQ ;apitals in8ested in !oreign trade can yield a ig er rate o! pro!it, beca%se, in t e !irst place, t ere is competition @it commodities prod%ced in ot er co%ntries @it in!erior prod%ction !acilities, so t at t e more ad8anced co%ntry sells its goods abo8e t eir 8al%e e8en t o%g c eaper t an t e competing co%ntries0 &n so !ar as t e labo%r o! t e more ad8anced co%ntry is ere realised as labo%r o! a ig er speci!ic @eig t, t e rate o! pro!it rises, beca%se labo%r @ ic as not been paid as being o! a ig er D%ality is sold as s%c 0 5 e same may obtain in relation to t e co%ntry, to @ ic commodities are exported and to t at !rom @ ic commodities are imported# namely, t e latter may o!!er more materialised labo%r in -ind t an it recei8es, and yet t ereby recei8e commodities c eaper t an it co%ld prod%ce t em0 P%st as a man%!act%rer @ o employs a ne@ in8ention be!ore it becomes generally %sed, %ndersells is competitors and yet sells is commodity abo8e its indi8id%al 8al%e, t at is, realises t e speci!ically ig er prod%cti8eness o! t e labo%r e employs as s%rpl%s-labo%r0 6e t %s sec%res a s%rpl%s-pro!it0 ?s concerns capitals in8ested in colonies, etc0, on t e ot er and, t ey may yield ig er rates o! pro!it !or t e simple reason t at t e rate o! pro!it is ig er t ere d%e to back@ard de8elopment, and like@ise t e exploitation o! labo%r, beca%se o! t e %se o! sla8es, coolies, etc0 W y s o%ld not t ese ig er rates o! pro!it, realised by capitals in8ested in certain lines and sent ome by t em, enter into t e eD%alisation o! t e general rate o! pro!it and t %s tend, pro tanto, to raise it, %nless it is t e monopolies t at stand in t e @ay0 1 5 ere is so m%c less reason !or it, since t ese sp eres o! in8estment o! capital are s%bHect to t e la@s o! !ree competition0 W at )icardo !ancies is mainly t is: @it t e ig er prices realised abroad commodities are bo%g t t ere in ret%rn and sent ome0 5 ese commodities are t %s sold on t e ome market, @ ic !act can at best be b%t a temporary extra disad8antage o! t ese !a8o%red sp eres o! prod%ction o8er ot ers0 5 is ill%sion !alls a@ay as soon as it is di8ested o! its money-!orm0 5 e !a8o%red co%ntry reco8ers more labo%r in exc ange !or less labo%r, alt o%g t is di!!erence, t is excess is pocketed, as in any exc ange bet@een labo%r and capital, by a certain class0 $ince t e rate o! pro!it is ig er, t ere!ore, beca%se it is generally ig er in a colonial co%ntry, it may, pro8ided nat%ral conditions are !a8o%rable, go and in and @it lo@ commodity-prices0 ? le8elling takes place b%t not a le8elling to t e old le8el, as )icardo !eels0 5 is same !oreign trade de8elops t e capitalist mode o! prod%ction in t e ome co%ntry, @ ic implies t e decrease o! 8ariable capital in relation to constant, and, on t e ot er and, ca%ses

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o8er-prod%ction in respect to !oreign markets, so t at in t e long r%n it again as an opposite e!!ect0 We a8e t %s seen in a general @ay t at t e same in!l%ences @ ic prod%ce a tendency in t e general rate o! pro!it to !all, also call !ort co%nter-e!!ects, @ ic amper, retard, and partly paralyse t is !all0 5 e latter do not do a@ay @it t e la@, b%t impair its e!!ect0 3t er@ise, it @o%ld not be t e !all o! t e general rate o! pro!it, b%t rat er its relati8e slo@ness, t at @o%ld be incompre ensible0 5 %s, t e la@ acts only as a tendency0 ?nd it is only %nder certain circ%mstances and only a!ter long periods t at its e!!ects become strikingly prono%nced0 Ae!ore @e go on, in order to a8oid mis%nderstandings, @e s o%ld recall t@o, repeatedly treated, points0 'irst: 5 e same process @ ic brings abo%t a c eapening o! commodities in t e co%rse o! t e de8elopment o! t e capitalist mode o! prod%ction, ca%ses a c ange in t e organic composition o! t e social capital in8ested in t e prod%ction o! commodities, and conseD%ently lo@ers t e rate o! pro!it0 We m%st be care!%l, t ere!ore, not to identi!y t e red%ction in t e relati8e cost o! an indi8id%al commodity, incl%ding t at portion o! it @ ic represents @ear and tear o! mac inery, @it t e rise in t e 8al%e o! t e constant in relation to 8ariable capital, alt o%g , con8ersely, e8ery red%ction in t e relati8e cost o! t e constant capital ass%ming t e 8ol%me o! its material elements remains t e same, or increases, tends to raise t e rate o! pro!it, i.e., to red%ce pro tanto t e 8al%e o! t e constant capital in relation to t e s rinking proportions o! t e employed 8ariable capital0 Second: 5 e !act t at t e ne@ly added li8ing labo%r contained in t e indi8id%al commodities, @ ic taken toget er make %p t e prod%ct o! capital, decreases in relation to t e materials t ey contain and t e means o! labo%r cons%med by t em# t e !act, t ere!ore, t at an e8er-decreasing D%antity o! additional li8ing labo%r is materialised in t em, beca%se t eir prod%ction reD%ires less labo%r @it t e de8elopment o! t e social prod%cti8eness I t is !act does not a!!ect t e ratio, in @ ic t e li8ing labo%r contained in t e commodities breaks %p into paid and %npaid labo%r0 M%ite t e contrary0 ?lt o%g t e total D%antity o! additional li8ing labo%r contained in t e commodities decreases, t e %npaid portion increases in relation to t e paid portion, eit er by an absol%te or a relati8e s rinking o! t e paid portion# !or t e same mode o! prod%ction @ ic red%ces t e total D%antity o! additional li8ing labo%r in a commodity is accompanied by a rise in t e absol%te and relati8e s%rpl%s-8al%e0 5 e tendency o! t e rate o! pro!it to !all is bo%nd %p @it a tendency o! t e rate o! s%rpl%s-8al%e to rise, ence @it a tendency !or t e rate o! labo%r exploitation to rise0 -ot ing is more abs%rd, !or t is reason, t an to explain t e !all in t e rate o! pro!it by a rise in t e rate o! @ages, alt o%g t is may be t e case by @ay o! an exception0 $tatistics is not able to make act%al analyses o! t e rates o! @ages in di!!erent epoc s and co%ntries, %ntil t e conditions @ ic s ape t e rate o! pro!it are t oro%g ly %nderstood0 5 e rate o! pro!it does not !all beca%se labo%r becomes less prod%cti8e, b%t beca%se it becomes more prod%cti8e0 Aot t e rise in t e rate o! s%rpl%s-8al%e and t e !all in t e rate o! pro!it are b%t speci!ic !orms t ro%g @ ic gro@ing prod%cti8ity o! labo%r is expressed %nder capitalism0

VI. The Increase "f Stoc2 Capital

5 e !oregoing !i8e points may still be s%pplemented by t e !ollo@ing, @ ic , o@e8er, cannot be more !%lly treated !or t e present0 Wit t e progress o! capitalist prod%ction, @ ic goes and in and @it accelerated acc%m%lation, a portion o! capital is calc%lated and applied only as interestbearing capital0 -ot in t e sense in @ ic e8ery capitalist @ o lends o%t capital is satis!ied @it interest, @ ile t e ind%strial capitalist pockets t e in8estor"s pro!it0 5 is as no bearing on t e le8el o! t e general rate o! pro!it, beca%se !or t e latter pro!it R interest U pro!it o! all kinds U gro%nd rent, t e di8ision into t ese partic%lar categories being immaterial to it0 A%t in t e sense t at t ese capitals, alt o%g in8ested in large prod%cti8e enterprises, yield only large or small

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amo%nts o! interest, so-called di8idends, a!ter all costs a8e been ded%cted0 &n rail@ays, !or instance0 5 ese do not t ere!ore go into le8elling t e general rate o! pro!it, beca%se t ey yield a lo@er t an a8erage rate o! pro!it0 &! t ey did enter into it, t e general rate o! pro!it @o%ld !all m%c lo@er0 5 eoretically, t ey may be incl%ded in t e calc%lation, and t e res%lt @o%ld t en be a lo@er rate o! pro!it t an t e seemingly existing rate, @ ic is decisi8e !or t e capitalists# it @o%ld be lo@er, beca%se t e constant capital partic%larly in t ese enterprises is largest in its relation to t e 8ariable capital0

Chapter 15. E6position of the 5nternal Contradictions of the 3a4

I. General
We a8e seen in t e !irst part o! t is book t at t e rate o! pro!it expresses t e rate o! s%rpl%s8al%e al@ays lo@er t an it act%ally is0 We a8e H%st seen t at e8en a rising rate o! s%rpl%s-8al%e as a tendency to express itsel! in a !alling rate o! pro!it0 5 e rate o! pro!it @o%ld eD%al t e rate o! s%rpl%s-8al%e only i! c R =, i.e. , i! t e total capital @ere paid o%t in @ages0 ? !alling rate o! pro!it does not express a !alling rate o! s%rpl%s-8al%e, %nless t e proportion o! t e 8al%e o! t e constant capital to t e D%antity o! labo%r-po@er @ ic sets it in motion remains %nc anged or t e amo%nt o! labo%r-po@er increases in relation to t e 8al%e o! t e constant capital0 3n t e plea o! analysing t e rate o! pro!it, )icardo act%ally analyses t e rate o! s%rpl%s-8al%e alone, and t is only on t e ass%mption t at t e @orking-day is intensi8ely and extensi8ely a constant magnit%de0 ? !all in t e rate o! pro!it and accelerated acc%m%lation are di!!erent expressions o! t e same process only in so !ar as bot re!lect t e de8elopment o! prod%cti8eness0 ?cc%m%lation, in t%rn, astens t e !all o! t e rate o! pro!it, inasm%c as it implies concentration o! labo%r on a large scale, and t %s a ig er composition o! capital0 3n t e ot er and, a !all in t e rate o! pro!it again astens t e concentration o! capital and its centralisation t ro%g expropriation o! minor capitalists, t e !e@ direct prod%cers @ o still a8e anyt ing le!t to be expropriated0 5 is accelerates acc%m%lation @it regard to mass, alt o%g t e rate o! acc%m%lation !alls @it t e rate o! pro!it0 3n t e ot er and, t e rate o! sel!-expansion o! t e total capital, or t e rate o! pro!it, being t e goad o! capitalist prod%ction BH%st as sel!-expansion o! capital is its only p%rposeC, its !all c ecks t e !ormation o! ne@ independent capitals and t %s appears as a t reat to t e de8elopment o! t e capitalist prod%ction process0 &t breeds o8er-prod%ction, spec%lation, crises, and s%rpl%s-capital alongside s%rpl%s-pop%lation0 5 ose economists, t ere!ore, @ o, like )icardo, regard t e capitalist mode o! prod%ction as absol%te, !eel at t is point t at it creates a barrier itsel!, and !or t is reason attrib%te t e barrier to -at%re Bin t e t eory o! rentC, not to prod%ction0 A%t t e main t ing abo%t t eir orror o! t e !alling rate o! pro!it is t e !eeling t at capitalist prod%ction meets in t e de8elopment o! its prod%cti8e !orces a barrier @ ic as not ing to do @it t e prod%ction o! @ealt as s%c # and t is pec%liar barrier testi!ies to t e limitations and to t e merely istorical, transitory c aracter o! t e capitalist mode o! prod%ction# testi!ies t at !or t e prod%ction o! @ealt , it is not an absol%te mode, moreo8er, t at at a certain stage it rat er con!licts @it its !%rt er de8elopment0 5r%e, )icardo and is sc ool considered only ind%strial pro!it, @ ic incl%des interest0 A%t t e rate o! gro%nd-rent like@ise as a tendency to !all, alt o%g its absol%te mass increases, and may also increase proportionately more t an ind%strial pro!it0 BE0 West, / 0ssay on the +pplication of Capital to ,and,'ondon, 181+. J 0d1 @ o de8eloped t e la@ o! gro%nd-rent before )icardo0C &! @e consider t e total social capital ;, and %se p 1 !or t e ind%strial pro!it t at remains a!ter ded%cting interest and gro%nd-rent, i !or interest, and r !or gro%nd-rent, t en sN; R pN; R p 1 U i U rN; R p1N; U iN; U rN;0 We a8e seen t at @ ile s, t e total amo%nt o! s%rpl%s-8al%e, is contin%ally increasing in t e co%rse o! capitalist de8elopment, sN; is H%st as steadily declining, beca%se ; gro@s still more rapidly t an s0 5 ere!ore it is by no means a contradiction !or p 1, i, and r to be steadily increasing, eac indi8id%ally, @ ile sN; R pN;, as @ell as p 1N;, iN;, and rN;, s o%ld eac

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by itsel! be steadily s rinking, or t at p 1 s o%ld increase in relation to i, or r in relation to p 1 or to p1 and i0 Wit a rising total s%rpl%s-8al%e or pro!it s R p, and a sim%ltaneo%sly !alling rate o! pro!it sN; R pN;, t e proportions o! t e parts p 1, i, and r, @ ic make %p s R p, may c ange at @ill @it in t e limits set by t e total amo%nt o! s @it o%t t ereby a!!ecting t e magnit%de o! s or sN;0 5 e m%t%al 8ariation o! p1, i, and r is merely a 8arying distrib%tion o! s among di!!erent classes0 ;onseD%ently, p1N;, iN;, or rN;, t e rate o! indi8id%al ind%strial pro!it, t e rate o! interest, and t e ratio o! gro%nd-rent to t e total capital, may rise in relation to one anot er, @ ile sN;, t e general rate o! pro!it, !alls0 5 e only condition is t at t e s%m o! all t ree R sN;0 &! t e rate o! pro!it !alls !rom +=T to <+T, beca%se t e composition o! a certain capital @it , say, a rate o! s%rpl%s-8al%e R 1==T as c anged !rom +=c U +=8 to >+c U <+8, t en a capital o! 1,=== @ill yield a pro!it o! +== in t e !irst case, and in t e second a ;apital o! 2,=== @ill yield a pro!it o! 1,===0 We see t at s or p a8e do%bled, @ ile p" as !allen by one- al!0 ?nd i! t at +=T @as !ormerly di8ided into <= pro!it, 1= interest, and <= rent, t en p 1N; R <=T, iN; R 1=T, and rN; R <=T0 &! t e proportions ad remained t e same a!ter t e c ange !rom +=T to <+T, t en p 1N; R 1=T, iN; R +T, and rN; R 1=T0 &!, o@e8er, p1N; s o%ld !all to 8T and iN; to 2T, t en rN; @o%ld rise to 13T0 5 e relati8e magnit%de o! r @o%ld a8e risen as against p 1 and i, @ ile p @o%ld a8e remained t e same0 (nder bot ass%mptions, t e s%m o! p 1, i, and r @o%ld a8e increased, beca%se prod%ced by a capital !o%r times as large0 F%rt ermore, )icardo"s ass%mption t at originally ind%strial pro!it Bpl%s interestC contains t e entire s%rpl%s-8al%e is istorically and logically !alse0 &t is rat er t e progress o! capitalist prod%ction @ ic 1C gi8es t e @ ole pro!it directly to t e ind%strial and commercial capitalists !or !%rt er distrib%tion, and <C red%ces rent to t e excess o8er t e pro!it0 3n t is capitalist basis, again, t e rent gro@s, being a portion o! pro!it B i.e., o! t e s%rpl%s-8al%e 8ie@ed as t e prod%ct o! t e total capitalC, b%t not t at speci!ic portion o! t e prod%ct, @ ic t e capitalist pockets0 :i8en t e necessary means o! prod%ction, i.e. , a s%!!icient acc%m%lation o! capital, t e creation o! s%rpl%s-8al%e is only limited by t e labo%ring pop%lation i! t e rate o! s%rpl%s-8al%e, i.e. , t e intensity o! exploitation, is gi8en# and no ot er limit b%t t e intensity o! exploitation i! t e labo%ring pop%lation is gi8en0 ?nd t e capitalist process o! prod%ction consists essentially o! t e prod%ction o! s%rpl%s-8al%e, represented in t e s%rpl%s-prod%ct or t at aliD%ot portion o! t e prod%ced commodities materialising %npaid labo%r0 &t m%st ne8er be !orgotten t at t e prod%ction o! t is s%rpl%s-8al%e I and t e recon8ersion o! a portion o! it into capital, or t e acc%m%lation, !orms an integrate part o! t is prod%ction o! s%rpl%s-8al%e I is t e immediate p%rpose and compelling moti8e o! capitalist prod%ction0 &t @ill ne8er do, t ere!ore, to represent capitalist prod%ction as somet ing @ ic it is not, namely as prod%ction @ ose immediate p%rpose is enHoyment or t e man%!act%re o! t e means o! enHoyment !or t e capitalist0 5 is @o%ld be o8erlooking its speci!ic c aracter, @ ic is re8ealed in all its inner essence0 5 e creation o! t is s%rpl%s-8al%e makes %p t e direct process o! prod%ction, @ ic , as @e a8e said, as no ot er limits b%t t ose mentioned abo8e0 ?s soon as all t e s%rpl%s-labo%r it @as possible to sD%eeEe o%t as been embodied in commodities, s%rpl%s-8al%e as been prod%ced0 A%t t is prod%ction o! s%rpl%s-8al%e completes b%t t e !irst act o! t e capitalist process o! prod%ction I t e direct prod%ction process0 ;apital as absorbed so and so m%c %npaid labo%r0 Wit t e de8elopment o! t e process, @ ic expresses itsel! in a drop in t e rate o! pro!it, t e mass o! s%rpl%s-8al%e t %s prod%ced s@ells to immense dimensions0 -o@ comes t e second act o! t e process0 5 e entire mass o! commodities, i.e. , t e total prod%ct, incl%ding t e portion @ ic replaces t e constant and 8ariable capital, and t at representing s%rpl%s-8al%e, m%st be sold0 &! t is is not done, or done only in part, or only at prices belo@ t e prices o! prod%ction, t e labo%rer as been indeed exploited, b%t is exploitation is not realised as s%c !or t e capitalist, and t is can be bo%nd %p @it a total or partial !ail%re to realise t e s%rpl%s-8al%e pressed o%t o! im, indeed e8en @it t e partial or total loss o! t e capital0 5 e conditions o! direct exploitation, and t ose o! realising it, are not identical0 5 ey di8erge not only in place and time, b%t also logically0

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5 e !irst are only limited by t e prod%cti8e po@er o! society, t e latter by t e proportional relation o! t e 8ario%s branc es o! prod%ction and t e cons%mer po@er o! society0 A%t t is lastnamed is not determined eit er by t e absol%te prod%cti8e po@er, or by t e absol%te cons%mer po@er, b%t by t e cons%mer po@er based on antagonistic conditions o! distrib%tion, @ ic red%ce t e cons%mption o! t e b%lk o! society to a minim%m 8arying @it in more or less narro@ limits0 &t is !%rt ermore restricted by t e tendency to acc%m%late, t e dri8e to expand capital and prod%ce s%rpl%s-8al%e on an extended scale0 5 is is la@ !or capitalist prod%ction, imposed by incessant re8ol%tions in t e met ods o! prod%ction t emsel8es, by t e depreciation o! existing capital al@ays bo%nd %p @it t em, by t e general competiti8e str%ggle and t e need to impro8e prod%ction and expand its scale merely as a means o! sel!-preser8ation and %nder penalty o! r%in0 5 e market m%st, t ere!ore, be contin%ally extended, so t at its interrelations and t e conditions reg%lating t em ass%me more and more t e !orm o! a nat%ral la@ @orking independently o! t e prod%cer, and become e8er more %ncontrollable0 5 is internal contradiction seeks to resol8e itsel! t ro%g expansion o! t e o%tlying !ield o! prod%ction0 A%t t e more prod%cti8eness de8elops, t e more it !inds itsel! at 8ariance @it t e narro@ basis on @ ic t e conditions o! cons%mption rest0 &t is no contradiction at all on t is sel!-contradictory basis t at t ere s o%ld be an excess o! capital sim%ltaneo%sly @it a gro@ing s%rpl%s o! pop%lation0 For @ ile a combination o! t ese t@o @o%ld, indeed, increase t e mass o! prod%ced s%rpl%s-8al%e, it @o%ld at t e same time intensi!y t e contradiction bet@een t e conditions %nder @ ic t is s%rpl%s-8al%e is prod%ced and t ose %nder @ ic it is realised0 &! a certain rate o! pro!it is gi8en, t e mass o! pro!it @ill al@ays depend on t e magnit%de o! t e ad8anced capital0 5 e acc%m%lation, o@e8er, is t en determined by t at portion o! t is mass @ ic is recon8erted into capital0 ?s !or t is portion, being eD%al to t e pro!it min%s t e re8en%e cons%med by t e capitalists, it @ill depend not merely on t e 8al%e o! t is mass, b%t also on t e c eapness o! t e commodities @ ic t e capitalist can b%y @it it, commodities @ ic pass partly into is cons%mption, is re8en%e, and partly into is constant capital0 BWages are ere ass%med to be gi8en0C 5 e mass o! capital set in motion by t e labo%rer, @ ose 8al%e e preser8es by is labo%r and reprod%ces in is prod%ct, is D%ite di!!erent !rom t e 8al%e @ ic e adds to it0 &! t e mass o! t e capital R 1,=== and t e added labo%r R 1==, t e reprod%ced capital R 1,1==0 &! t e mass R 1== and t e added labo%r R <=, t e reprod%ced capital R 1<=0 &n t e !irst case t e rate o! pro!it R 1=T, in t e second R <=T0 ?nd yet more can be acc%m%lated o%t o! 1== t an o%t o! <=0 ?nd t %s t e ri8er o! capital rolls on Baside !rom its depreciation t ro%g increase o! t e prod%cti8enessC, or its acc%m%lation does, not in proportion to t e rate o! pro!it, b%t in proportion to t e impet%s it already possesses0 $o !ar as it is based on a ig rate o! s%rpl%s-8al%e, a ig rate o! pro!it is possible @ en t e @orking-day is 8ery long, alt o%g labo%r is not ig ly prod%cti8e0 &t is possible, beca%se t e @ants o! t e labo%rers are 8ery small, ence a8erage @ages 8ery lo@, alt o%g t e labo%r itsel! is %nprod%cti8e0 5 e lo@ @ages @ill correspond to t e labo%rers" lack o! energy0 ;apital t en acc%m%lates slo@ly, in spite o! t e ig rate o! pro!it0 ,op%lation is stagnant and t e @orking-time @ ic t e prod%ct costs, is great, @ ile t e @ages paid to t e labo%rer etare small0 5 e rate o! pro!it does not sink beca%se t e labo%rer is exploited any less, b%t beca%se generally less labo%r is employed in proportion to t e employed capital0 &!, as s o@n, a !alling rate o! pro!it is bo%nd %p @it an increase in t e mass o! pro!it, a larger portion o! t e ann%al prod%ct o! labo%r is appropriated by t e capitalist %nder t e category o! capital Bas a replacement !or cons%med capitalC and a relati8ely smaller portion %nder t e category o! pro!it0 6ence t e !antastic idea o! priest ; almers, /5 0 ; almers, :n &olitical 0conomy in Conne ion with the Moral State and Moral &rospects of Society, $econd edition, :lasgo@, 183<, p0 <<. J 0d1 t at t e less o! t e ann%al prod%ct is expended by capitalists as capital, t e greater t e pro!its t ey pocket0 &n @ ic case t e state c %rc comes to t eir

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assistance, to care !or t e cons%mption o! t e greater part o! t e s%rpl%s-prod%ct, rat er t an a8ing it %sed as capital0 5 e preac er con!o%nds ca%se @it e!!ect0 F%rt ermore, t e mass o! pro!it increases in spite o! its slo@er rate @it t e gro@t o! t e in8ested capital0 6o@e8er, t is reD%ires a sim%ltaneo%s concentration o! capital, since t e conditions o! prod%ction t en demand employment o! capital on a larger scale0 &t also reD%ires its centralisation, i.e. , t e s@allo@ing %p o! t e small capitalists by t e big and t eir depri8ation o! capital0 &t is again b%t an instance o! separating I raised to t e second po@er I t e conditions o! prod%ction !rom t e prod%cers to @ ose n%mber t ese small capitalists still belong, since t eir o@n labo%r contin%es to play a role in t eir case0 5 e labo%r o! a capitalist stands altoget er in in8erse proportion to t e siEe o! is capital, i.e. , to t e degree in @ ic e is a capitalist0 &t is t is same se8erance o! t e conditions o! prod%ction, on t e one and, !rom t e prod%cers, on t e ot er, t at !orms t e conception o! capital0 &t begins @it primiti8e acc%m%lation BA%c &, Kap0 JJ&4 /Englis edition: ,art LDDD. J 0d.1C, appears as a permanent process in t e acc%m%lation and concentration o! capital, and expresses itsel! !inally as centralisation o! existing capitals in a !e@ ands and a depri8ation o! many o! t eir capital Bto @ ic expropriation is no@ c angedC0 5 is process @o%ld soon bring abo%t t e collapse o! capitalist prod%ction i! it @ere not !or co%nteracting tendencies, @ ic a8e a contin%o%s decentralising e!!ect alongside t e centripetal one0

II. Conflict &et$een !pansion "f Production And Production "f Surplus,Value
5 e de8elopment o! t e social prod%cti8eness o! labo%r is mani!ested in t@o @ays: !irst, in t e magnit%de o! t e already prod%ced prod%cti8e !orces, t e 8al%e and mass o! t e conditions o! prod%ction %nder @ ic ne@ prod%ction is carried on, and in t e absol%te magnit%de o! t e already acc%m%lated prod%cti8e capital# secondly, in t e relati8e smallness o! t e portion o! total capital laid o%t in @ages, i.e. , in t e relati8ely small D%antity o! li8ing labo%r reD%ired !or t e reprod%ction and sel!-expansion o! a gi8en capital, !or mass prod%ction0 5 is also implies concentration o! capital0 &n relation to employed labo%r-po@er t e de8elopment o! t e prod%cti8ity again re8eals itsel! in t@o @ays: First, in t e increase o! s%rpl%s-labo%r, i.e. , t e red%ction o! t e necessary labo%r-time reD%ired !or t e reprod%ction o! labo%r-po@er0 $econdly, in t e decrease o! t e D%antity o! labo%r-po@er Bt e n%mber o! labo%rersC generally employed to set in motion a gi8en capital0 5 e t@o mo8ements not only go and in and, b%t m%t%ally in!l%ence one anot er and are p enomena in @ ic t e same la@ expresses itsel!0 .et t ey a!!ect t e rate o! pro!it in opposite @ays0 5 e total mass o! pro!it is eD%al to t e total mass o! s%rpl%s-8al%e, t e rate o! pro!it R sN; R s%rpl%s-8al%eNad8anced total capital0 5 e s%rpl%s-8al%e, o@e8er, as a total, is determined !irst by its rate, and second by t e mass o! labo%r sim%ltaneo%sly employed at t is rate, or, @ at amo%nts to t e same, by t e magnit%de o! t e 8ariable capital0 3ne o! t ese !actors, t e rate o! s%rpl%s8al%e, rises, and t e ot er, t e n%mber o! labo%rers, !alls Brelati8ely or absol%telyC0 &nasm%c as t e de8elopment o! t e prod%cti8e !orces red%ces t e paid portion o! employed labo%r, it raises t e s%rpl%s-8al%e, beca%se it raises its rate# b%t inasm%c as it red%ces t e total mass o! labo%r employed by a gi8en capital, it red%ces t e !actor o! t e n%mber by @ ic t e rate o! s%rpl%s8al%e is m%ltiplied to obtain its mass0 5@o labo%rers, eac @orking 1< o%rs daily, cannot prod%ce t e same mass o! s%rpl%s-8al%e as <2 @ o @ork only < o%rs, e8en i! t ey co%ld li8e on air and ence did not a8e to @ork !or t emsel8es at all0 &n t is respect, t en, t e compensation o! t e red%ced n%mber o! labo%rers by intensi!ying t e degree o! exploitation as certain ins%rmo%ntable limits0 &t may, !or t is reason, @ell c eck t e !all in t e rate o! pro!it, b%t cannot pre8ent it altoget er0 Wit t e de8elopment o! t e capitalist mode o! prod%ction, t ere!ore, t e rate o! pro!it !alls, @ ile its mass increases @it t e gro@ing mass o! t e capital employed0 :i8en t e rate, t e

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absol%te increase in t e mass o! capital depends on its existing magnit%de0 A%t, on t e ot er and, i! t is magnit%de is gi8en, t e proportion o! its gro@t , i.e. , t e rate o! its increment, depends on t e rate o! pro!it0 5 e increase in t e prod%cti8eness B@ ic , moreo8er, @e repeat, al@ays goes and in and @it a depreciation o! t e a8ailable capitalC can directly only increase t e 8al%e o! t e existing capital i! by raising t e rate o! pro!it it increases t at portion o! t e 8al%e o! t e ann%al prod%ct @ ic is recon8erted into capital0 ?s concerns t e prod%cti8ity o! labo%r, t is can only occ%r Bsince t is prod%cti8ity as not ing direct to do @it t e value o! t e existing capitalC by raising t e relati8e s%rpl%s-8al%e, or red%cing t e 8al%e o! t e constant capital, so t at t e commodities @ ic enter eit er t e reprod%ction o! labo%r-po@er, or t e elements o! constant capital, are c eapened0 Aot imply a depreciation o! t e existing capital, and bot go and in and @it a red%ction o! t e 8ariable capital in relation to t e constant0 Aot ca%se a !all in t e rate o! pro!it, and bot slo@ it do@n0 F%rt ermore, inasm%c as an increased rate o! pro!it ca%ses a greater demand !or labo%r, it tends to increase t e @orking pop%lation and t %s t e material, @ ose exploitation makes real capital o%t o! capital0 &ndirectly, o@e8er, t e de8elopment o! t e prod%cti8ity o! labo%r contrib%tes to t e increase o! t e 8al%e o! t e existing capital by increasing t e mass and 8ariety o! %se-8al%es in @ ic t e same exc ange-8al%e is represented and @ ic !orm t e material s%bstance, i.e. , t e material elements o! capital, t e material obHects making %p t e constant capital directly, and t e 8ariable capital at least indirectly0 More prod%cts @ ic may be con8erted into capital, @ ate8er t eir exc ange-8al%e, are created @it t e same capital and t e same labo%r0 5 ese prod%cts may ser8e to absorb additional labo%r, ence also additional s%rpl%s-labo%r, and t ere!ore create additional capital0 5 e amo%nt o! labo%r @ ic a capital can command does not depend on its 8al%e, b%t on t e mass o! ra@ and a%xiliary materials, mac inery and elements o! !ixed capital and necessities o! li!e, all o! @ ic it comprises, @ ate8er t eir 8al%e may be0 ?s t e mass o! t e labo%r employed, and t %s o! s%rpl%s-labo%r increases, t ere is also a gro@t in t e 8al%e o! t e reprod%ced capital and in t e s%rpl%s-8al%e ne@ly added to it0 5 ese t@o elements embraced by t e process o! acc%m%lation, o@e8er, are not to be regarded merely as existing side by side in repose, as )icardo does0 5 ey contain a contradiction @ ic mani!ests itsel! in contradictory tendencies and p enomena0 5 ese antagonistic agencies co%nteract eac ot er sim%ltaneo%sly0 ?longside t e stim%lants o! an act%al increase o! t e labo%ring pop%lation, @ ic spring !rom t e increase o! t e portion o! t e total social prod%ct ser8ing as capital, t ere are agencies @ ic create a merely relati8e o8er-pop%lation0 ?longside t e !all in t e rate o! pro!it mass o! capitals gro@s, and and in and @it t is t ere occ%rs a depreciation o! existing capitals @ ic c ecks t e !all and gi8es an accelerating motion to t e acc%m%lation o! capital-8al%es0 ?longside t e de8elopment o! prod%cti8ity t ere de8elops a ig er composition o! capital, i.e., t e relati8e decrease o! t e ratio o! 8ariable to constant capital0 5 ese di!!erent in!l%ences may at one time operate predominantly side by side in space, and at anot er s%cceed eac ot er in time0 From time to time t e con!lict o! antagonistic agencies !inds 8ent in crises0 5 e crises are al@ays b%t momentary and !orcible sol%tions o! t e existing contradictions0 5 ey are 8iolent er%ptions @ ic !or a time restore t e dist%rbed eD%ilibri%m0 5 e contradiction, to p%t it in a 8ery general @ay, consists in t at t e capitalist mode o! prod%ction in8ol8es a tendency to@ards absol%te de8elopment o! t e prod%cti8e !orces, regardless o! t e 8al%e and s%rpl%s-8al%e it contains, and regardless o! t e social conditions %nder @ ic capitalist prod%ction takes place# @ ile, on t e ot er and, its aim is to preser8e t e 8al%e o! t e existing capital and promote its sel!-expansion to t e ig est limit B i.e., to promote an e8er more rapid gro@t o! t is 8al%eC0 5 e speci!ic !eat%re abo%t it is t at it %ses t e existing 8al%e o! capital as a means o! increasing t is 8al%e to t e %tmost0 5 e met ods by @ ic it accomplis es

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t is incl%de t e !all o! t e rate o! pro!it, depreciation o! existing capital, and de8elopment o! t e prod%cti8e !orces o! labo%r at t e expense o! already created prod%cti8e !orces0 5 e periodical depreciation o! existing capital I one o! t e means immanent in capitalist prod%ction to c eck t e !all o! t e rate o! pro!it and asten acc%m%lation o! capital-8al%e t ro%g !ormation o! ne@ capital I dist%rbs t e gi8en conditions, @it in @ ic t e process o! circ%lation and reprod%ction o! capital takes place, and is t ere!ore accompanied by s%dden stoppages and crises in t e prod%ction process0 5 e decrease o! 8ariable in relation to constant capital, @ ic goes and in and @it t e de8elopment o! t e prod%cti8e !orces, stim%lates t e gro@t o! t e labo%ring pop%lation, @ ile contin%ally creating an arti!icial o8er-pop%lation0 5 e acc%m%lation o! capital in terms o! 8al%e is slo@ed do@n by t e !alling rate o! pro!it, to asten still more t e acc%m%lation o! %se-8al%es, @ ile t is, in its t%rn, adds ne@ moment%m to acc%m%lation in terms o! 8al%e0 ;apitalist prod%ction seeks contin%ally to o8ercome t ese immanent barriers, b%t o8ercomes t em only by means @ ic again place t ese barriers in its @ay and on a more !ormidable scale0 5 e real barrier o! capitalist prod%ction is capital itself0 &t is t at capital and its sel!-expansion appear as t e starting and t e closing point, t e moti8e and t e p%rpose o! prod%ction# t at prod%ction is only prod%ction !or capital and not 8ice 8ersa, t e means o! prod%ction are not mere means !or a constant expansion o! t e li8ing process o! t e society o! prod%cers0 5 e limits @it in @ ic t e preser8ation and sel!-expansion o! t e 8al%e o! capital resting on t e expropriation and pa%perisation o! t e great mass o! prod%cers can alone mo8e I t ese limits come contin%ally into con!lict @it t e met ods o! prod%ction employed by capital !or its p%rposes, @ ic dri8e to@ards %nlimited extension o! prod%ction, to@ards prod%ction as an end in itsel!, to@ards %nconditional de8elopment o! t e social prod%cti8ity o! labo%r0 5 e means I %nconditional de8elopment o! t e prod%cti8e !orces o! society I comes contin%ally into con!lict @it t e limited p%rpose, t e sel!-expansion o! t e existing capital0 5 e capitalist mode o! prod%ction is, !or t is reason, a istorical means o! de8eloping t e material !orces o! prod%ction and creating an appropriate @orld-market and is, at t e same time, a contin%al con!lict bet@een t is its istorical task and its o@n corresponding relations o! social prod%ction0

III. !cess Capital And !cess Population

? drop in t e rate o! pro!it is attended by a rise in t e minim%m capital reD%ired by an indi8id%al capitalist !or t e prod%cti8e employment o! labo%r# reD%ired bot !or its exploitation generally, and !or making t e cons%med labo%r-time s%!!ice as t e labo%r-time necessary !or t e prod%ction o! t e commodities, so t at it does not exceed t e a8erage social labo%r-time reD%ired !or t e prod%ction o! t e commodities0 ;oncentration increases sim%ltaneo%sly, beca%se beyond certain limits a large capital @it a small rate o! pro!it acc%m%lates !aster t an a small capital @it a large rate o! pro!it0 ?t a certain ig point t is increasing concentration in its t%rn ca%ses a ne@ !all in t e rate o! pro!it0 5 e mass o! small dispersed capitals is t ereby dri8en along t e ad8ent%ro%s road o! spec%lation, credit !ra%ds, stock s@indles, and crises0 5 e so-called plet ora o! capital al@ays applies essentially to a plet ora o! t e capital !or @ ic t e !all in t e rate o! pro!it is not compensated t ro%g t e mass o! pro!it I t is is al@ays tr%e o! ne@ly de8eloping !res o!!s oots o! capital I or to a plet ora @ ic places capitals incapable o! action on t eir o@n at t e disposal o! t e managers o! large enterprises in t e !orm o! credit0 5 is plet ora o! capital arises !rom t e same ca%ses as t ose @ ic call !ort relati8e o8er-pop%lation, and is, t ere!ore, a p enomenon s%pplementing t e latter, alt o%g t ey stand at opposite poles I %nemployed capital at one pole, and %nemployed @orker pop%lation at t e ot er0 38er-prod%ction o! capital, not o! indi8id%al commodities I alt o%g o8er-prod%ction o! capital al@ays incl%des o8er-prod%ction o! commodities I is t ere!ore simply o8er-acc%m%lation o! capital0 5o appreciate @ at t is o8er-acc%m%lation is Bits closer analysis !ollo@s laterC, one need

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only ass%me it to be absol%te0 W en @o%ld o8er-prod%ction o! capital be absol%teQ 38erprod%ction @ ic @o%ld a!!ect not H%st one or anot er, or a !e@ important sp eres o! prod%ction, b%t @o%ld be absol%te in its !%ll scope, ence @o%ld extend to all !ields o! prod%ctionQ 5 ere @o%ld be absol%te o8er-prod%ction o! capital as soon as additional capital !or p%rposes o! capitalist prod%ction R =0 5 e p%rpose o! capitalist prod%ction, o@e8er, is sel!-expansion o! capital, i.e., appropriation o! s%rpl%s-labo%r, prod%ction o! s%rpl%s-8al%e, o! pro!it0 ?s soon as capital @o%ld, t ere!ore, a8e gro@n in s%c a ratio to t e labo%ring pop%lation t at neit er t e absol%te @orking-time s%pplied by t is pop%lation, nor t e relati8e s%rpl%s @orking-time, co%ld be expanded any !%rt er Bt is last @o%ld not be !easible at any rate in t e case @ en t e demand !or labo%r @ere so strong t at t ere @ere a tendency !or @ages to riseC# at a point, t ere!ore, @ en t e increased capital prod%ced H%st as m%c , or e8en less, s%rpl%s-8al%e t an it did be!ore its increase, t ere @o%ld be absol%te o8er-prod%ction o! capital# i.e., t e increased capital ; U c; @o%ld prod%ce no more, or e8en less, pro!it t an capital ; be!ore its expansion by c;0 &n bot cases t ere @o%ld be a steep and s%dden !all in t e general rate o! pro!it, b%t t is time d%e to a c ange in t e composition o! capital not ca%sed by t e de8elopment o! t e prod%cti8e !orces, b%t rat er by a rise in t e money-8al%e o! t e 8ariable capital Bbeca%se o! increased @agesC and t e corresponding red%ction in t e proportion o! s%rpl%s-labo%r to necessary labo%r0 &n reality, it @o%ld appear t at a portion o! t e capital @o%ld lie completely or partially idle Bbeca%se it @o%ld a8e to cro@d o%t some o! t e acti8e capital be!ore it co%ld expand its o@n 8al%eC, and t e ot er portion @o%ld prod%ce 8al%es at a lo@er rate o! pro!it, o@ing to t e press%re o! %nemployed or b%t partly employed capital0 &t @o%ld be immaterial in t is respect i! a part o! t e additional capital @ere to take t e place o! t e old capital, and t e latter @ere to take its position in t e additional capital0 We s o%ld still al@ays a8e t e old s%m o! capital on one side, and t e s%m o! additional capital on t e ot er0 5 e !all in t e rate o! pro!it @o%ld t en be accompanied by an absol%te decrease in t e mass o! pro!it, since t e mass o! employed labo%rpo@er co%ld not be increased and t e rate o! s%rpl%s-8al%e raised %nder t e conditions @e ad ass%med, so t at t e mass o! s%rpl%s-8al%e co%ld not be increased eit er0 ?nd t e red%ced mass o! pro!it @o%ld a8e to be calc%lated on an increased total capital0 A%t e8en i! it is ass%med t at t e employed capital contin%es to sel!-expand at t e old rate o! pro!it, and t e mass o! pro!it ence remains t e same, t is mass @o%ld still e calc%lated on an increased total capital, t is like@ise implying a !all in t e rate o! pro!it0 &! a total capital o! 1,=== yielded a pro!it o! 1==, and a!ter being increased to 1,+== still yielded 1==, t en, in t e second case, 1,=== @o%ld yield only 66W0 $el!-expansion o! t e old capital, in t e absol%te sense, @o%ld a8e been red%ced0 5 e capital R 1,=== @o%ld yield no more %nder t e ne@ circ%mstances t an !ormerly a capital R 666W0 &t is e8ident, o@e8er, t at t is act%al depreciation o! t e old capital co%ld not occ%r @it o%t a str%ggle, and t at t e additional capital c; co%ld not ass%me t e !%nctions o! capital @it o%t a str%ggle0 5 e rate o! pro!it @o%ld not !all %nder t e e!!ect o! competition d%e to o8er-prod%ction o! capital0 &t @o%ld rat er be t e re8erse# it @o%ld be t e competiti8e str%ggle @ ic @o%ld begin beca%se t e !allen rate o! pro!it and o8er-prod%ction o! capital originate !rom t e same conditions0 5 e part o! c; in t e ands o! old !%nctioning capitalists @o%ld be allo@ed to remain more or less idle to pre8ent a depreciation o! t eir o@n original capital and not to narro@ its place in t e !ield o! prod%ction0 3r t ey @o%ld employ it, e8en at a momentary loss, to s i!t t e need o! keeping additional capital idle on ne@comers and on t eir competitors in general0 5 at portion o! c; @ ic is in ne@ ands @o%ld seek to ass%me a place !or itsel! at t e expense o! t e old capital, and @o%ld accomplis t is in part by !orcing a portion o! t e old capital to lie idle0 &t @o%ld compel t e old capital to gi8e %p its old place and @it dra@ to Hoin completely or partially %nemployed additional capital0 ? portion o! t e old capital as to lie %n%sed %nder all circ%mstances# it as to gi8e %p its c aracteristic D%ality as capital, so !ar as acting as s%c and prod%cing 8al%e is concerned0 5 e

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competiti8e str%ggle @o%ld decide @ at part o! it @o%ld be partic%larly a!!ected0 $o long as t ings go @ell, competition e!!ects an operating !raternity o! t e capitalist class, as @e a8e seen in t e case o! t e eD%alisation o! t e general rate o! pro!it, so t at eac s ares in t e common loot in proportion to t e siEe o! is respecti8e in8estment0 A%t as soon as it no longer is a D%estion o! s aring pro!its, b%t o! s aring losses, e8eryone tries to red%ce is o@n s are to a minim%m and to s o8e it o!! %pon anot er0 5 e class, as s%c , m%st ine8itably lose0 6o@ m%c t e indi8id%al capitalist m%st bear o! t e loss, i.e., to @ at extent e m%st s are in it at all, is decided by strengt and c%nning, and competition t en becomes a !ig t among ostile brot ers0 5 e antagonism bet@een eac indi8id%al capitalist"s interests and t ose o! t e capitalist class as a @ ole, t en comes to t e s%r!ace, H%st as pre8io%sly t e identity o! t ese interests operated in practice t ro%g competition0 6o@ is t is con!lict settled and t e conditions restored @ ic correspond to t e Kso%ndL operation o! capitalist prod%ctionQ 5 e mode o! settlement is already indicated in t e 8ery emergence o! t e con!lict @ ose settlement is %nder disc%ssion0 &t implies t e @it dra@al and e8en t e partial destr%ction o! capital amo%nting to t e !%ll 8al%e o! additional capital c;, or at least a part o! it0 ?lt o%g , as t e description o! t is con!lict s o@s, t e loss is by no means eD%ally distrib%ted among indi8id%al capitals, its distrib%tion being rat er decided t ro%g a competiti8e str%ggle in @ ic t e loss is distrib%ted in 8ery di!!erent proportions and !orms, depending on special ad8antages or pre8io%sly capt%red positions, so t at one capital is le!t %n%sed, anot er is destroyed, and a t ird s%!!ers b%t a relati8e loss, or is H%st temporarily depreciated, etc0 A%t t e eD%ilibri%m @o%ld be restored %nder all circ%mstances t ro%g t e @it dra@al or e8en t e destr%ction o! more or less capital0 5 is @o%ld extend partly to t e material s%bstance o! capital, i.e., a part o! t e means o! prod%ction, o! !ixed and circ%lating capital, @o%ld not operate, not act as capital# some o! t e operating establis ments @o%ld t en be bro%g t to a standstill0 ?lt o%g , in t is respect, time attacks and @orsens all means o! prod%ction Bexcept landC, t e stoppage @o%ld in reality ca%se !ar greater damage to t e means o! prod%ction0 6o@e8er, t e main e!!ect in t is case @o%ld be t at t ese means o! prod%ction @o%ld cease to !%nction as s%c , t at t eir !%nction as means o! prod%ction @o%ld be dist%rbed !or a s orter or longer period0 5 e main damage, and t at o! t e most ac%te nat%re, @o%ld occ%r in respect to capital, and in so !ar as t e latter possesses t e c aracteristic o! 8al%e it @o%ld occ%r in respect to t e values o! capitals0 5 at portion o! t e 8al%e o! a capital @ ic exists only in t e !orm o! claims on prospecti8e s ares o! s%rpl%s-8al%e, i.e., pro!it, in !act in t e !orm o! promissory notes on prod%ction in 8ario%s !orms, is immediately depreciated by t e red%ction o! t e receipts on @ ic it is calc%lated0 ? part o! t e gold and sil8er lies %n%sed, i.e., does not !%nction as capital0 ,art o! t e commodities on t e market can complete t eir process o! circ%lation and reprod%ction only t ro%g an immense contraction o! t eir prices, ence t ro%g a depreciation o! t e capital @ ic t ey represent0 5 e elements o! !ixed capital are depreciated to a greater or lesser degree in H%st t e same @ay0 &t m%st be added t at de!inite, pres%pposed, price relations go8ern t e process o! reprod%ction, so t at t e latter is alted and t ro@n into con!%sion by a general drop in prices0 5 is con!%sion and stagnation paralyses t e !%nction o! money as a medi%m o! payment, @ ose de8elopment is geared to t e de8elopment o! capital and is based on t ose pres%pposed price relations0 5 e c ain o! payment obligations d%e at speci!ic dates is broken in a %ndred places0 5 e con!%sion is a%gmented by t e attendant collapse o! t e credit system, @ ic de8elops sim%ltaneo%sly @it capital, and leads to 8iolent and ac%te crises, to s%dden and !orcible depreciations, to t e act%al stagnation and disr%ption o! t e process o! reprod%ction, and t %s to a real !alling o!! in reprod%ction0 A%t t ere @o%ld a8e been still ot er agencies at @ork at t e same time0 5 e stagnation o! prod%ction @o%ld a8e laid o!! a part o! t e @orking-class and @o%ld t ereby a8e placed t e employed part in a sit%ation, @ ere it @o%ld a8e to s%bmit to a red%ction o! @ages e8en belo@ t e a8erage0 5 is as t e 8ery same e!!ect on capital as an increase o! t e relati8e or absol%te

1>2

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s%rpl%s-8al%e at a8erage @ages @o%ld a8e ad0 ,rosperity @o%ld a8e led to more marriages among labo%rers and red%ced t e decimation o! o!!spring0 W ile implying a real increase in pop%lation, t is does not signi!y an increase in t e act%al @orking pop%lation0 A%t it a!!ects t e relations o! t e labo%rer to capital in t e same @ay as an increase o! t e n%mber o! act%ally @orking labo%rers @o%ld a8e a!!ected t em0 3n t e ot er and, t e !all in prices and t e competiti8e str%ggle @o%ld a8e dri8en e8ery capitalist to lo@er t e indi8id%al 8al%e o! is total prod%ct belo@ its general 8al%e by means o! ne@ mac ines, ne@ and impro8ed @orking met ods, ne@ combinations, i.e., to increase t e prod%cti8ity o! a gi8en D%antity o! labo%r, to lo@er t e proportion o! 8ariable to constant capital, and t ereby to release some labo%rers# in s ort, to create an arti!icial o8er-pop%lation0 (ltimately, t e depreciation o! t e elements o! constant capital @o%ld itsel! tend to raise t e rate o! pro!it0 5 e mass o! employed constant capital @o%ld a8e increased in relation to 8ariable, b%t its 8al%e co%ld a8e !allen0 5 e ens%ing stagnation o! prod%ction @o%ld a8e prepared I @it in capitalistic limits I a s%bseD%ent expansion o! prod%ction0 ?nd t %s t e cycle @o%ld r%n its co%rse ane@0 ,art o! t e capital, depreciated by its !%nctional stagnation, @o%ld reco8er its old 8al%e0 For t e rest, t e same 8icio%s circle @o%ld be described once more %nder expanded conditions o! prod%ction, @it an expanded market and increased prod%cti8e !orces0 6o@e8er, e8en %nder t e extreme conditions ass%med by %s t is absol%te o8er-prod%ction o! capital is not absol%te o8er-prod%ction, not absol%te o8er-prod%ction o! means o! prod%ction0 &t is o8er-prod%ction o! means o! prod%ction only in so !ar as t e latter ser8e as capital, and conseD%ently incl%de a sel!-expansion o! 8al%e, m%st prod%ce an additional 8al%e in proportion to t e increased mass0 .et it @o%ld still be o8er-prod%ction, beca%se capital @o%ld be %nable to exploit labo%r to t e degree reD%ired by a Kso%ndL, KnormalL de8elopment o! t e process o! capitalist prod%ction, to a degree @ ic @o%ld at least increase t e mass o! pro!it along @it t e gro@ing mass o! t e employed capital# to a degree @ ic @o%ld, t ere!ore, pre8ent t e rate o! pro!it !rom !alling as m%c as t e capital gro@s, or e8en more rapidly0 38er-prod%ction o! capital is ne8er anyt ing more t an o8er-prod%ction o! means o! prod%ction I o! means o! labo%r and necessities o! li!e I @ ic may ser8e as capital, i.e., may ser8e to exploit labo%r at a gi8en degree o! exploitation# a !all in t e intensity o! exploitation belo@ a certain point, o@e8er, calls !ort dist%rbances, and stoppages in t e capitalist prod%ction process, crises, and destr%ction o! capital0 &t is no contradiction t at t is o8er-prod%ction o! capital is accompanied by more or less considerable relati8e o8er-pop%lation0 5 e circ%mstances @ ic increased t e prod%cti8eness o! labo%r, a%gmented t e mass o! prod%ced commodities, expanded markets, accelerated acc%m%lation o! capital bot in terms o! its mass and its 8al%e, and lo@ered t e rate o! pro!it I t ese same circ%mstances a8e also created, and contin%o%sly create, a relati8e o8erpop%lation, an o8er-pop%lation o! labo%rers not employed by t e s%rpl%s-capital o@ing to t e lo@ degree o! exploitation at @ ic alone t ey co%ld be employed, or at least o@ing to t e lo@ rate o! pro!it @ ic t ey @o%ld yield at t e gi8en degree o! exploitation0 &! capital is sent abroad, t is is not done beca%se it absol%tely co%ld not be applied at ome, b%t beca%se it can be employed at a ig er rate o! pro!it in a !oreign co%ntry0 A%t s%c capital is absol%te excess capital !or t e employed labo%ring pop%lation and !or t e ome co%ntry in general0 &t exists as s%c alongside t e relati8e o8er-pop%lation, and t is is an ill%stration o! o@ bot o! t em exist side by side, and m%t%ally in!l%ence one anot er0 3n t e ot er and, a !all in t e rate o! pro!it connected @it acc%m%lation necessarily calls !ort a competiti8e str%ggle0 ;ompensation o! a !all in t e rate o! pro!it by a rise in t e mass o! pro!it applies only to t e total social capital and to t e big, !irmly placed capitalists0 5 e ne@ additional capital operating independently does not enHoy any s%c compensating conditions0 &t m%st still

1>+

; apter J4

@in t em, and so it is t at a !all in t e rate o! pro!it calls !ort a competiti8e str%ggle among capitalists, not 8ice 8ersa0 5o be s%re, t e competiti8e str%ggle is accompanied by a temporary rise in @ages and a res%ltant !%rt er temporary !all o! t e rate o! pro!it0 5 e same occ%rs @ en t ere is an o8er-prod%ction o! commodities, @ en markets are o8erstocked0 $ince t e aim o! capital is not to minister to certain @ants, b%t to prod%ce pro!it, and since it accomplis es t is p%rpose by met ods @ ic adapt t e mass o! prod%ction to t e scale o! prod%ction, not 8ice 8ersa, a ri!t m%st contin%ally ens%e bet@een t e limited dimensions o! cons%mption %nder capitalism and a prod%ction @ ic !ore8er tends to exceed t is immanent barrier0 F%rt ermore, capital consists o! commodities, and t ere!ore o8er-prod%ction o! capital implies o8er-prod%ction o! commodities0 6ence t e pec%liar p enomenon o! economists @ o deny o8er-prod%ction o! commodities, admitting o8er-prod%ction o! capital0 5o say t at t ere is no general o8erprod%ction, b%t rat er a disproportion @it in t e 8ario%s branc es o! prod%ction, is no more t an to say t at %nder capitalist prod%ction t e proportionality o! t e indi8id%al branc es o! prod%ction springs as a contin%al process !rom disproportionality, beca%se t e co esion o! t e aggregate prod%ction imposes itsel! as a blind la@ %pon t e agents o! prod%ction, and not as a la@ @ ic , being %nderstood and ence controlled by t eir common mind, brings t e prod%cti8e process %nder t eir Hoint control0 &t amo%nts !%rt ermore to demanding t at co%ntries in @ ic capitalist prod%ction is not de8eloped, s o%ld cons%me and prod%ce at a rate @ ic s%its t e co%ntries @it capitalist prod%ction0 &! it is said t at o8er-prod%ction is only relati8e, t is is D%ite correct# b%t t e entire capitalist mode o! prod%ction is only a relati8e one, @ ose barriers are not absol%te0 5 ey are absol%te only !or t is mode, i.e., on its basis0 6o@ co%ld t ere ot er@ise be a s ortage o! demand !or t e 8ery commodities @ ic t e mass o! t e people lack, and o@ @o%ld it be possible !or t is demand to be so%g t abroad, in !oreign markets, to pay t e labo%rers at ome t e a8erage amo%nt o! necessities o! li!eQ 5 is is possible only beca%se in t is speci!ic capitalist interrelation t e s%rpl%s-prod%ct ass%mes a !orm in @ ic its o@ner cannot o!!er it !or cons%mption, %nless it !irst recon8erts itsel! into capital !or im0 &! it is !inally said t at t e capitalists a8e only to exc ange and cons%me t eir commodities among t emsel8es, t en t e entire nat%re o! t e capitalist mode o! prod%ction is lost sig t o!# and also !orgotten is t e !act t at it is a matter o! expanding t e 8al%e o! t e capital, not cons%ming it0 &n s ort, all t ese obHections to t e ob8io%s p enomena o! o8er-prod%ction Bp enomena @ ic pay no eed to t ese obHectionsC amo%nt to t e contention t at t e barriers o! capitalist prod%ction are not barriers o! production generally, and t ere!ore not barriers o! t is speci!ic, capitalist mode o! prod%ction0 5 e contradiction o! t e capitalist mode o! prod%ction, o@e8er, lies precisely in its tendency to@ards an absol%te de8elopment o! t e prod%cti8e !orces, @ ic contin%ally come into con!lict @it t e speci!ic conditions o! prod%ction in @ ic capital mo8es, and alone can mo8e0 5 ere are not too many necessities o! li!e prod%ced, in proportion to t e existing pop%lation0 M%ite t e re8erse0 5oo little is prod%ced to decently and %manely satis!y t e @ants o! t e great mass0 5 ere are not too many means o! prod%ction prod%ced to employ t e able-bodied portion o! t e pop%lation0 M%ite t e re8erse0 &n t e !irst place, too large a portion o! t e prod%ced pop%lation is not really capable o! @orking, and is t ro%g !orce o! circ%mstances made dependent on exploiting t e labo%r o! ot ers, or on labo%r @ ic can pass %nder t is name only %nder a miserable mode o! prod%ction0 &n t e second place, not eno%g means o! prod%ction are prod%ced to permit t e employment o! t e entire able-bodied pop%lation %nder t e most prod%cti8e conditions, so t at t eir absol%te @orking period co%ld be s ortened by t e mass and e!!ecti8eness o! t e constant capital employed d%ring @orking- o%rs0 3n t e ot er and, too many means o! labo%r and necessities o! li!e are prod%ced at times to permit o! t eir ser8ing as means !or t e exploitation o! labo%rers at a certain rate o! pro!it0 5oo many commodities are prod%ced to permit o! a realisation and con8ersion into ne@ capital o! t e 8al%e and s%rpl%s-8al%e contained in t em %nder t e conditions o! distrib%tion and cons%mption

1>6

; apter J4

pec%liar to capitalist prod%ction, i.e., too many to permit o! t e cons%mmation o! t is process @it o%t constantly rec%rring explosions0 -ot too m%c @ealt is prod%ced0 A%t at times too m%c @ealt is prod%ced in its capitalistic, sel!-contradictory !orms0 5 e limitations o! t e capitalist mode o! prod%ction come to t e s%r!ace: 1C &n t at t e de8elopment o! t e prod%cti8ity o! labo%r creates o%t o! t e !alling rate o! pro!it a la@ @ ic at a certain point comes into antagonistic con!lict @it t is de8elopment and m%st be o8ercome constantly t ro%g crises0 <C &n t at t e expansion or contraction o! prod%ction are determined by t e appropriation o! %npaid labo%r and t e proportion o! t is %npaid labo%r to materialised labo%r in general, or, to speak t e lang%age o! t e capitalists, by pro!it and t e proportion o! t is pro!it to t e employed capital, t %s by a de!inite rate o! pro!it, rat er t an t e relation o! prod%ction to social reD%irements, i.e., to t e reD%irements o!" socially de8eloped %man beings0 &t is !or t is reason t at t e capitalist mode o! prod%ction meets @it barriers at a certain expanded stage o! prod%ction @ ic , i! 8ie@ed !rom t e ot er premise, @o%ld re8ersely a8e been altoget er inadeD%ate0 &t comes to a standstill at a point !ixed by t e prod%ction and realisation o! pro!it, and not t e satis!action o! reD%irements0 &! t e rate o! pro!it !alls, t ere !ollo@s, on t e one and, an exertion o! capital in order t at t e indi8id%al capitalists, t ro%g impro8ed met ods, etc0, may depress t e 8al%e o! t eir indi8id%al commodity belo@ t e social a8erage 8al%e and t ereby realise an extra pro!it at t e pre8ailing market-price0 3n t e ot er and, t ere appears s@indling and a general promotion o! s@indling by reco%rse to !renEied 8ent%res @it ne@ met ods o! prod%ction, ne@ in8estments o! capital, ne@ ad8ent%res, all !or t e sake o! sec%ring a s red o! extra pro!it @ ic is independent o! t e general a8erage and rises abo8e it0 5 e rate o! pro!it, i.e., t e relati8e increment o! capital, is abo8e all important to all ne@ o!!s oots o! capital seeking to !ind an independent place !or t emsel8es0 ?nd as soon as !ormation o! capital @ere to !all into t e ands o! a !e@ establis ed big capitals, !or @ ic t e mass o! pro!it compensates !or t e !alling rate o! pro!it, t e 8ital !lame o! prod%ction @o%ld be altoget er exting%is ed0 &t @o%ld die o%t0 5 e rate o! pro!it is t e moti8e po@er o! capitalist prod%ction0 5 ings are prod%ced only so long as t ey can be prod%ced @it a pro!it0 6ence t e concern o! t e Englis economists o8er t e decline o! t e rate o! pro!it0 5 e !act t at t e bare possibility o! t is appening s o%ld @orry )icardo, s o@s is pro!o%nd %nderstanding o! t e conditions o! capitalist prod%ction0 &t is t at @ ic is eld against im, it is is %nconcern abo%t K %man beings,L and is a8ing an eye solely !or t e de8elopment o! t e prod%cti8e !orces, @ ate8er t e cost in %man beings and capital- values I it is precisely t at @ ic is t e important t ing abo%t im0 7e8elopment o! t e prod%cti8e !orces o! social labo%r is t e istorical task and H%sti!ication o! capital0 5 is is H%st t e @ay in @ ic it %nconscio%sly creates t e material reD%irements o! a ig er mode o! prod%ction0 W at @orries )icardo is t e !act t at t e rate o! pro!it, t e stim%lating principle o! capitalist prod%ction, t e !%ndamental premise and dri8ing !orce o! acc%m%lation, s o%ld be endangered by t e de8elopment o! prod%ction itsel!0 ?nd ere t e D%antitati8e proportion means e8eryt ing0 5 ere is, indeed, somet ing deeper be ind it, o! @ ic e is only 8ag%ely a@are0 &t comes to t e s%r!ace ere in a p%rely economic @ay I i.e., !rom t e bo%rgeois point o! 8ie@, @it in t e limitations o! capitalist %nderstanding, !rom t e standpoint o! capitalist prod%ction itsel! I t at it as its barrier, t at it is relati8e, t at it is not an absol%te, b%t only a istorical mode o! prod%ction corresponding to a de!inite limited epoc in t e de8elopment o! t e material reD%irements o! prod%ction0

1>>

; apter J4

IV. Supplementar# )emar2s

$ince t e de8elopment o! t e prod%cti8ity o! labo%r proceeds 8ery disproportionately in t e 8ario%s lines o! ind%stry, and not only disproportionately in degree b%t !reD%ently also in opposite directions, it !ollo@s t at t e mass o! a8erage pro!it BR s%rpl%s-8al%eC m%st be s%bstantially belo@ t e le8el one @o%ld nat%rally expect a!ter t e de8elopment o! t e prod%cti8eness in t e most ad8anced branc es o! ind%stry0 5 e !act t at t e de8elopment o! t e prod%cti8ity in di!!erent lines o! ind%stry proceeds at s%bstantially di!!erent rates and !reD%ently e8en in opposite directions, is not d%e merely to t e anarc y o! competition and t e pec%liarity o! t e bo%rgeois mode o! prod%ction0 ,rod%cti8ity o! labo%r is also bo%nd %p @it nat%ral conditions, @ ic !reD%ently become less prod%cti8e as prod%cti8ity gro@s I inasm%c as t e latter depends on social conditions0 6ence t e opposite mo8ements in t ese di!!erent sp eres I progress ere, and retrogression t ere0 ;onsider t e mere in!l%ence o! t e seasons, !or instance, on @ ic t e b%lk o! ra@ materials depends !or its mass, t e ex a%stion o! !orest lands, coal and iron mines, etc0 W ile t e circ%lating part o! constant capital, s%c as ra@ materials, etc0, contin%ally increases its mass in proportion to t e prod%cti8ity o! labo%r, t is is not t e case @it !ixed capital, s%c as b%ildings, mac inery, and lig ting and eating !acilities, etc0 ?lt o%g in absol%te terms a mac ine becomes dearer @it t e gro@t o! its bodily mass, it becomes relati8ely c eaper0 &! !i8e labo%rers prod%ce ten times as m%c o! a commodity as be!ore, t is does not increase t e o%tlay !or !ixed capital ten-!old# alt o%g t e 8al%e o! t is part o! constant capital increases @it t e de8elopment o! t e prod%cti8eness, it does not by any means increase in t e same proportion0 We a8e !reD%ently pointed o%t t e di!!erence in t e ratio o! constant to 8ariable capital as expressed in t e !all o! t e rate o! pro!it, and t e di!!erence in t e same ratio as expressed in relation to t e indi8id%al commodity and its price @it t e de8elopment o! t e prod%cti8ity o! labo%r0 /5 e 8al%e o! a commodity is determined by t e total labo%r-time o! past and li8ing labo%r incorporated in it0 5 e increase in labo%r prod%cti8ity consists precisely in t at t e s are o! li8ing labo%r is red%ced @ ile t at o! past labo%r is increased, b%t in s%c a @ay t at t e total D%antity o! labo%r incorporated in t at commodity declines# in s%c a @ay, t ere!ore, t at li8ing labo%r decreases more t an past labo%r increases0 5 e past labo%r contained in t e 8al%e o! a commodity I t e constant part o! capital I consists partly o! t e @ear and tear o! !ixed, partly o! circ%lating, constant capital entirely cons%med by t at commodity, s%c as ra@ and a%xiliary materials0 5 e portion o! 8al%e deri8ing !rom ra@ and a%xiliary materials m%st decrease @it t e increased prod%cti8ity o! labo%r, beca%se @it regard to t ese materials t e prod%cti8ity expresses itsel! precisely by red%cing t eir 8al%e0 3n t e ot er and, it is most c aracteristic o! rising labo%r prod%cti8ity t at t e !ixed part o! constant capital is strongly a%gmented, and @it it t at portion o! its 8al%e @ ic is trans!erred by @ear and tear to t e commodities0 For a ne@ met od o! prod%ction to represent a real increase in prod%cti8ity, it m%st trans!er a smaller additional portion o! t e 8al%e o! !ixed capital to eac %nit o! t e commodity in @ear and tear t an t e portion o! 8al%e ded%cted !rom it t ro%g t e sa8ing in li8ing labo%r# in s ort, it m%st red%ce t e 8al%e o! t e commodity0 &t m%st ob8io%sly do so e8en i!, as it occ%rs in some cases, an additional 8al%e goes into t e 8al%e o! t e commodity !or more or dearer ra@ or a%xiliary materials o8er and abo8e t e additional portion !or @ear and tear o! t e !ixed capital0 ?ll additions to t e 8al%e m%st be more t an o!!set by t e red%ction in 8al%e res%lting !rom t e decrease in li8ing labo%r0 5 is red%ction o! t e total D%antity o! labo%r going into a commodity seems, accordingly, to be t e essential criterion o! increased prod%cti8ity o! labo%r, no matter %nder @ at social conditions prod%ction is carried on0 ,rod%cti8ity o! labo%r, indeed, @o%ld al@ays be meas%red by t is standard in a society, in @ ic prod%cers reg%late t eir prod%ction according to a preconcei8ed plan, or e8en %nder simple commodity-prod%ction0 A%t o@ does t e matter stand %nder capitalist prod%ctionQ

1>8

; apter J4

$%ppose, a certain line o! capitalist ind%stry prod%ces a normal %nit o! its commodity %nder t e !ollo@ing conditions: 5 e @ear and tear o! !ixed capital amo%nts to Z s illing per piece# ra@ and a%xiliary materials go into it to t e amo%nt o! 1>Z s illings per piece# @ages, < s illings# and s%rpl%s-8al%e, < s illings at a rate o! s%rpl%s-8al%e o! 1==T0 5otal 8al%e R << s illings0 We ass%me !or t e sake o! simplicity t at t e capital in t is line o! prod%ction as t e a8erage composition o! social capital, so t at t e price o! prod%ction o! t e commodity is identical @it its 8al%e, and t e pro!it o! t e capitalist @it t e created s%rpl%s-8al%e0 5 en t e cost-price o! t e commodity R Z U 1>Z U < R <=s0, t e a8erage rate o! pro!it <N<= R 1=T, and t e price o! prod%ction per piece o! t e commodity, like its 8al%e R <<s0 $%ppose a mac ine is in8ented @ ic red%ces by al! t e li8ing labo%r reD%ired per piece o! t e commodity, b%t trebles t at portion o! its 8al%e acco%nted !or by t e @ear and tear o! t e !ixed capital0 &n t at case, t e calc%lation is: Wear and tear R 1Z s0, ra@ and a%xiliary materials, as be!ore, 1>Zs0, @ages, 1s0, s%rpl%s-8al%e 1s0, total <1s0 5 e commodity t en !alls 1s0 in 8al%e# t e ne@ mac ine as certainly increased t e prod%cti8ity o! labo%r0 A%t t e capitalist sees t e matter as !ollo@s: is cost-price is no@ 1Zs0 !or @ear, 1>Zs0 !or ra@ and a%xiliary materials, 1s0 !or @ages, total <=s0, as be!ore0 $ince t e rate o! pro!it is not immediately altered by t e ne@ mac ine, e @ill recei8e 1=T o8er is cost-price, t at is, <s0 5 e price o! prod%ction, t en, remains %naltered R <<s0, b%t is 1s0 abo8e t e 8al%e0 For a society prod%cing %nder capitalist conditions t e commodity as not c eapened0 5 e ne@ mac ine is no impro8ement !or it0 5 e capitalist is, t ere!ore, not interested in introd%cing it0 ?nd since its introd%ction @o%ld make is present, not as yet @orn-o%t, mac inery simply @ort less, @o%ld t%rn it into scrap-iron, ence @o%ld ca%se a positi8e loss, e takes good care not to commit t is, @ at is !or im a %topian, mistake0 5 e la@ o! increased prod%cti8ity o! labo%r is not, t ere!ore, absol%tely 8alid !or capital0 $o !ar as capital is concerned, prod%cti8eness does not increase t ro%g a sa8ing in li8ing labo%r in general, b%t only t ro%g a sa8ing in t e paid portion o! li8ing labo%r, as compared to labo%r expended in t e past, as @e a8e already indicated in passing in Aook & BKap0 J& &&, <, +0 2=*N3*8C0 /Englis edition: ; 0 J4, <. J 0d.1 6ere t e capitalist mode o! prod%ction is beset @it anot er contradiction0 &ts istorical mission is %nconstrained de8elopment in geometrical progression o! t e prod%cti8ity o! %man labo%r0 &t goes back on its mission @ ene8er, as ere, it c ecks t e de8elopment o! prod%cti8ity0 &t t %s demonstrates again t at it is becoming senile and t at it is more and more o%tli8ed01 1 (nder competition, t e increasing minim%m o! capital reD%ired @it t e increase in prod%cti8ity !or t e s%ccess!%l operation o! an independent ind%strial establis ment, ass%mes t e !ollo@ing aspect: ?s soon as t e ne@, more expensi8e eD%ipment as become %ni8ersally establis ed, smaller capitals are ence!ort excl%ded !rom t is ind%stry0 $maller capitals can carry on independently in t e 8ario%s sp eres o! ind%stry only in t e in!ancy o! mec anical in8entions0 4ery large %ndertakings, s%c as rail@ays, on t e ot er and, @ ic a8e an %n%s%ally ig proportion o! constant capital, do not yield t e a8erage rate o! pro!it, b%t only a portion o! it, only an interest0 3t er@ise t e general rate o! pro!it @o%ld a8e !allen still lo@er0 A%t t is o!!ers direct employment to large concentrations o! capital in t e !orm o! stocks0 :ro@t o! capital, ence acc%m%lation o! capital, does not imply a !all in t e rate o! pro!it, %nless it is accompanied by t e a!orementioned c anges in t e proportion o! t e organic constit%ents o! capital0 -o@ it so appens t at in spite o! t e constant daily re8ol%tions in t e mode o! prod%ction, no@ t is and no@ t at larger or smaller portion o! t e total capital contin%es to acc%m%late !or certain periods on t e basis o! a gi8en a8erage proportion o! t ose constit%ents, so t at t ere is no organic c ange @it its gro@t , and conseD%ently no ca%se !or a !all in t e rate o! pro!it0 5 is constant expansion o! capital, ence also an expansion o! prod%ction, on t e basis o! t e old met od o! prod%ction @ ic goes D%ietly on @ ile ne@ met ods are already being

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introd%ced at its side, is anot er reason, @ y t e rate o! pro!it does not decline as m%c as t e total capital o! society gro@s0 5 e increase in t e absol%te n%mber o! labo%rers does not occ%r in all branc es o! prod%ction, and not %ni!ormly in all, in spite o! t e relati8e decrease o! 8ariable capital laid o%t in @ages0 &n agric%lt%re, t e decrease o! t e element o! li8ing labo%r may be absol%te0 ?t any rate, it is b%t a reD%irement o! t e capitalist mode o! prod%ction t at t e n%mber o! @age@orkers s o%ld increase absol%tely, in spite o! its relati8e decrease0 'abo%r-po@er becomes red%ndant !or it as soon as it is no longer necessary to employ it !or 1< to 1+ o%rs daily0 ? de8elopment o! prod%cti8e !orces @ ic @o%ld diminis t e absol%te n%mber o! labo%rers, i.e., enable t e entire nation to accomplis its total prod%ction in a s orter time span, @o%ld ca%se a re8ol%tion, beca%se it @o%ld p%t t e b%lk o! t e pop%lation o%t o! t e r%nning0 5 is is anot er mani!estation o! t e speci!ic barrier o! capitalist prod%ction, s o@ing also t at capitalist prod%ction is by no means an absol%te !orm !or t e de8elopment o! t e prod%cti8e !orces and !or t e creation o! @ealt , b%t rat er t at at a certain point it comes into collision @it t is de8elopment0 5 is collision appears partly in periodical crises, @ ic arise !rom t e circ%mstance t at no@ t is and no@ t at portion o! t e labo%ring pop%lation becomes red%ndant %nder its old mode o! employment0 5 e limit o! capitalist prod%ction is t e excess time o! t e labo%rers0 5 e absol%te spare time gained by society does not concern it0 5 e de8elopment o! prod%cti8ity concerns it only in so !ar as it increases t e s%rpl%s labo%r-time o! t e @orking-class, not beca%se it decreases t e labo%r-time !or material prod%ction in general0 &t mo8es t %s in a contradiction0 We a8e seen t at t e gro@ing acc%m%lation o! capital implies its gro@ing concentration0 5 %s gro@s t e po@er o! capital, t e alienation o! t e conditions o! social prod%ction personi!ied in t e capitalist !rom t e real prod%cers0 ;apital comes more and more to t e !ore as a social po@er, @ ose agent is t e capitalist0 5 is social po@er no longer stands in any possible relation to t at @ ic t e labo%r o! a single indi8id%al can create0 &t becomes an alienated, independent, social po@er, @ ic stands opposed to society as an obHect, and as an obHect t at is t e capitalist"s so%rce o! po@er0 5 e contradiction bet@een t e general social po@er into @ ic capital de8elops, on t e one and, and t e pri8ate po@er o! t e indi8id%al capitalists o8er t ese social conditions o! prod%ction, on t e ot er, becomes e8er more irreconcilable, and yet contains t e sol%tion o! t e problem, beca%se it implies at t e same time t e trans!ormation o! t e conditions o! prod%ction into general, common, social, conditions0 5 is trans!ormation stems !rom t e de8elopment o! t e prod%cti8e !orces %nder capitalist prod%ction, and !rom t e @ays and means by @ ic t is de8elopment takes place0 -o capitalist e8er 8ol%ntarily introd%ces a ne@ met od o! prod%ction, no matter o@ m%c more prod%cti8e it may be, and o@ m%c it may increase t e rate o! s%rpl%s-8al%e, so long as it red%ces t e rate o! pro!it0 .et e8ery s%c ne@ met od o! prod%ction c eapens t e commodities0 6ence, t e capitalist sells t em originally abo8e t eir prices o! prod%ction, or, per aps, abo8e t eir 8al%e0 6e pockets t e di!!erence bet@een t eir costs o! prod%ction and t e market-prices o! t e same commodities prod%ced at ig er costs o! prod%ction0 6e can do t is, beca%se t e a8erage labo%r-time reD%ired socially !or t e prod%ction o! t ese latter commodities is ig er t an t e labo%r-time reD%ired !or t e ne@ met ods o! prod%ction0 6is met od o! prod%ction stands abo8e t e social a8erage0 A%t competition makes it general and s%bHect to t e general la@0 5 ere !ollo@s a !all in t e rate o! pro!it I per aps !irst in t is sp ere o! prod%ction, and e8ent%ally it ac ie8es a balance @it t e rest I @ ic is, t ere!ore, @ olly independent o! t e @ill o! t e capitalist0 &t is still to be added to t is point, t at t is same la@ also go8erns t ose sp eres o! prod%ction, @ ose prod%ct passes neit er directly nor indirectly into t e cons%mption o! t e labo%rers, or into t e conditions %nder @ ic t eir necessities are prod%ced# it applies, t ere!ore, also to t ose sp eres o! prod%ction, in @ ic t ere is no c eapening o! commodities to increase t e relati8e

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s%rpl%s-8al%e or c eapen labo%r-po@er0 B?t any rate, a c eapening o! constant capital in all t ese lines may increase t e rate o! pro!it, @it t e exploitation o! labo%r remaining t e same0C ?s soon as t e ne@ prod%ction met od begins to spread, and t ereby to !%rnis tangible proo! t at t ese commodities can act%ally be prod%ced more c eaply, t e capitalists @orking @it t e old met ods o! prod%ction m%st sell t eir prod%ct belo@ its !%ll price o! prod%ction, beca%se t e 8al%e o! t is commodity as !allen, and beca%se t e labo%r-time reD%ired by t em to prod%ce it is greater t an t e social a8erage0 &n one @ord I and t is appears as an e!!ect o! competition I t ese capitalists m%st also introd%ce t e ne@ met od o! prod%ction, in @ ic t e proportion o! 8ariable to constant capital as been red%ced0 ?ll t e circ%mstances @ ic lead to t e %se o! mac inery c eapening t e price o! a commodity prod%ced by it, come do@n in t e last analysis to a red%ction o! t e D%antity o! labo%r absorbed by a single piece o! t e commodity# and secondly, to a red%ction in t e @ear-and-tear portion o! t e mac inery, @ ose 8al%e goes into a single piece o! t e commodity0 5 e less rapid t e @ear o! mac inery, t e more t e commodities o8er @ ic it is distrib%ted, and t e more li8ing labo%r it replaces be!ore its term o! reprod%ction arri8es0 &n bot cases t e D%antity and 8al%e o! t e !ixed constant capital increase in relation to t e 8ariable0 K?ll ot er t ings being eD%al, t e po@er o! a nation to sa8e !rom its pro!its 8aries @it t e rate o! pro!its: is great @ en t ey are ig , less, @ en lo@# b%t as t e rate o! pro!its declines, all ot er t ings do not remain eD%al0000 ? lo@ rate o! pro!its is ordinarily accompanied by a rapid rate o! acc%m%lation, relati8ely to t e n%mbers o! t e people, as in England 000 a ig rate o! pro!it by a slo@er rate o! acc%m%lation, relati8ely to t e n%mbers o! t e people0 Examples: ,oland, )%ssia, &ndia, etc0L B)ic ard Pones, +n Dntroductory ,ecture on &olitical 0conomy, 'ondon, 1833, p0 += !!0C Pones emp asises correctly t at in spite o! t e !alling rate o! pro!it t e ind%cements and !ac%lties to acc%m%late are a%gmented# !irst, on acco%nt o! t e gro@ing relati8e o8erpop%lation# second, beca%se t e gro@ing prod%cti8ity o! labo%r is accompanied by an increase in t e mass o! %se8al%es represented by t e same exc ange-8al%e, ence in t e material elements o! capital# t ird, beca%se t e branc es o! prod%ction become more 8aried# !o%rt , d%e to t e de8elopment o! t e credit system, t e stock companies, etc0, and t e res%ltant case o! con8erting money into capital @it o%t becoming an ind%strial capitalist# !i!t , beca%se t e @ants and t e greed !or @ealt increase# and, sixt , beca%se t e mass o! in8estments in !ixed capital gro@s, etc0 5 ree cardinal !acts o! capitalist prod%ction: 1C ;oncentration o! means o! prod%ction in !e@ ands, @ ereby t ey cease to appear as t e property o! t e immediate labo%rers and t%rn into social prod%ction capacities0 E8en i! initially t ey are t e pri8ate property o! capitalists0 5 ese are t e tr%stees o! bo%rgeois society, b%t t ey pocket all t e proceeds o! t is tr%stees ip0 <C 3rganisation o! labo%r itsel! into social labo%r: t ro%g co-operation, di8ision o! labo%r, and t e %niting o! labo%r @it t e nat%ral sciences0

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&n t ese t@o senses, t e capitalist mode o! prod%ction abolis es pri8ate property and pri8ate labo%r, e8en t o%g in contradictory !orms0 3C ;reation o! t e @orld-market0 5 e st%pendo%s prod%cti8ity de8eloping %nder t e capitalist mode o! prod%ction relati8e to pop%lation, and t e increase, i! not in t e same proportion, o! capital-8al%es Bnot H%st o! t eir material s%bstanceC, @ ic gro@ m%c more rapidly t an t e pop%lation, contradict t e basis, @ ic constantly narro@s in relation to t e expanding @ealt , and !or @ ic all t is immense prod%cti8eness @orks0 5 ey also contradict t e conditions %nder @ ic t is s@elling capital a%gments its 8al%e0 6ence t e crises0

Part I!. Conversion of Co))o"it' Capital an" *one' Capital into Co))ercial Capital an" *one' +ealing Capital (*erchant,s Capital)
Chapter 1". Co ercial Capital

Merc ant"s, or trading, capital breaks %p into t@o !orms or s%b-di8isions, namely, commercial capital and money-dealing capital, @ ic @e s all no@ de!ine more closely, in so !ar as t is is necessary !or o%r analysis o! capital in its basic str%ct%re0 5 is is all t e more necessary, beca%se modern political economy, e8en in t e persons o! its best exponents, t ro@s trading capital and ind%strial capital indiscriminately toget er and, in e!!ect, @ olly o8erlooks t e c aracteristic pec%liarities o! t e !ormer0 5 e mo8ements o! commodity-capital a8e been analysed in Aook &&0 5o take t e total capital o! society, one part o! it I al@ays made %p o! di!!erent elements and e8en c anging in magnit%de I al@ays exists in t e !orm o! commodities on t e market, to be con8erted into money0 ?not er part exists on t e market in t e !orm o! money, to be con8erted into commodities0 &t is al@ays in t e process o! t is transition, o! t is !ormal metamorp osis0 &nasm%c as t is !%nction o! capital in t e process o! circ%lation is at all set apart as a special !%nction o! a special capital, as a !%nction establis ed by 8irt%e o! t e di8ision o! labo%r to a special gro%p o! capitalists, commodity-capital becomes commercial capital0 We a8e explained BAook &&, ; apter 4&, K5 e ;osts o! ;irc%lation,LC to @ at extent t e transport ind%stry, storage and distrib%tion o! commodities in a distrib%table !orm, may be regarded as prod%ction processes contin%ing @it in t e process o! circ%lation0 5 ese episodes incidental to t e circ%lation o! commodity-capital are sometimes con!%sed @it t e distinct !%nctions o! merc ant"s or commercial capital0 $ometimes t ey are, indeed, practically bo%nd %p @it t ese distinct, speci!ic !%nctions, alt o%g @it t e de8elopment o! t e social di8ision o! labo%r t e !%nction o! merc ant"s capital e8ol8es in a p%re !orm, i.e., di8orced !rom t ose real !%nctions, and independent o! t em0 5 ose !%nctions are t ere!ore irrele8ant to o%r p%rpose, @ ic is to de!ine t e speci!ic di!!erence o! t is special !orm o! capital0 &n so !ar as capital solely employed in t e circ%lation process, special commercial capital, partly combines t ose !%nctions @it its speci!ic ones, it does not appear in its p%re !orm0 We obtain its p%re !orm a!ter stripping it o! all t ese incidental !%nctions0 We a8e seen t at t e existence o! capital as commodity-capital and t e metamorp osis it %ndergoes @it in t e sp ere o! circ%lation in t e market as commodity-capital I a metamorp osis @ ic resol8es itsel! into b%ying and selling, con8erting commodity-capital into money-capital and money-capital into commodity-capital I t at t is !orms a p ase in t e reprod%ction process o! ind%strial capital, ence in its process o! prod%ction as a @ ole0 We a8e also seen, o@e8er, t at it is disting%is ed in its !%nction as a capital o! circ%lation !rom its !%nction as prod%cti8e capital0 5 ese are t@o di!!erent and separate !orms o! existence o! t e same capital0 3ne portion o! t e

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total social capital is contin%ally on t e market in t e !orm o! capital o! circ%lation, passing t ro%g t is process o! transm%tation, alt o%g !or eac indi8id%al capital its existence as commodity-capital, and its metamorp osis as s%c , merely represent e8er-8anis ing and e8er rene@ed nodal points I i.e., stages o! transition in t e contin%ity o! its prod%ction process, and alt o%g t e elements o! commodity-capital in t e market 8ary contin%o%sly !or t is reason, being constantly @it dra@n !rom t e commodity-market and eD%ally periodically ret%rned to it as ne@ prod%cts o! t e process o! prod%ction0 ;ommercial capital is not ing b%t a transm%ted !orm o! a part o! t is capital o! circ%lation constantly to be !o%nd in t e market, e8er in t e process o! its metamorp osis, and al@ays encompassed by t e sp ere o! circ%lation0 We say a part, beca%se a part o! t e selling and b%ying o! commodities al@ays takes place directly bet@een ind%strial capitalists0 We lea8e t is part entirely o%t o! consideration in t is analysis, beca%se it contrib%tes not ing to de!ining t e conception, or to %nderstanding t e speci!ic nat%re o! merc ant"s capital, and beca%se it as !%rt ermore been ex a%sti8ely treated !or o%r p%rpose in Aook &&0 5 e dealer in commodities, as a capitalist generally, appears on t e market primarily as t e representati8e o! a certain s%m o! money, @ ic be ad8ances as a capitalist, i.e., @ ic e @ants to t%rn !rom x Bits original 8al%eC into x U x Bt e original s%m pl%s pro!itC0 A%t it is e8ident to im I not being H%st a capitalist in general, b%t rat er a special dealer in commodities I t at is capital m%st !irst enter t e market in t e !orm o! money-capital, !or e does not prod%ce commodities0 6e merely trades in t em, expedites t eir mo8ement, and to operate @it t em e m%st !irst b%y t em, and, t ere!ore, m%st be in possession o! money-capital0 $%ppose t at a dealer in commodities o@ns V3,=== @ ic e in8ests as a trading capital0 Wit t ese V3,=== e b%ys, say, 3=,=== yards o! linen !rom some linen man%!act%rer at <s0 per yard0 6e t en sells t e 3=,=== yards0 &! t e ann%al a8erage rate o! pro!it R 1=T and e makes an ann%al pro!it o! 1=T a!ter ded%cting all incidental expenses, t en by t e end o! t e year e as con8erted is V3,=== into V3,3==0 6o@ e makes t is pro!it is a D%estion @ ic @e s all disc%ss later0 ?t present, @e intend to consider solely t e !orm o! t e mo8ements o! is capital0 Wit is V3,=== e keeps b%ying linen and selling it# e constantly repeats t is operation o! b%ying in order to sell, M I ; I M", t e simple !orm o! capital as it obtains entirely in t e process o! circ%lation, %ninterr%pted by t e prod%ction process, @ ic lies o%tside its o@n mo8ement and !%nction0 W at is no@ t e relation o! t is commercial capital to commodity-capital as a mere !orm o! existence o! ind%strial capitalQ $o !ar as t e linen man%!act%rer is concerned, e as realised t e 8al%e o! is linen @it t e merc ant"s money and t ereby completed t e !irst p ase in t e metamorp osis o! is commodity-capital I its con8ersion into money0 3t er conditions being eD%al, e can no@ proceed to recon8ert t is money into yarn, coal, @ages, etc0, and into means o! existence, etc0, !or t e cons%mption o! is re8en%e0 6ence, lea8ing aside t e re8en%e expendit%re, e can go on @it is process o! reprod%ction0 A%t @ ile t e sale o! t e linen, its metamorp osis into money, as taken place !or im, as prod%cer, it as not yet taken place !or t e linen itsel!0 &t is still on t e market as commoditycapital a@aiting to %ndergo its !irst metamorp osis I to be sold0 -ot ing as appened to t is linen besides a c ange in t e person o! its o@ner0 ?s concerns its p%rpose, as concerns its place in t e process, it is still commodity-capital, a saleable commodity, @it t e only di!!erence t at it is no@ in t e merc ant"s ands instead o! t e man%!act%rer"s0 5 e !%nction o! selling it, o! e!!ecting t e !irst p ase o! its metamorp osis, as passed !rom t e man%!act%rer to t e merc ant, as become t e special b%siness o! t e merc ant, @ ereas pre8io%sly it @as a !%nction @ ic t e prod%cer ad to per!orm imsel! a!ter a8ing completed t e !%nction o! its prod%ction0 'et %s ass%me t at t e merc ant !ails to sell t e 3=,=== yards o! linen d%ring t e inter8al reD%ired by t e linen man%!act%rer to bring anot er 3=,=== yards to market at a 8al%e o! V3,===0 5 e merc ant cannot b%y t em again, beca%se e still as in stock t e %nsold 3=,=== yards @ ic

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a8e not as yet been recon8erted into money-capital0 ? stoppage ens%es, i.e., an interr%ption o! reprod%ction0 5 e linen prod%cer mig t, o! co%rse, a8e additional money-capital at is disposal, @ ic e co%ld con8ert into prod%cti8e capital, regardless o! t e sale o! t e 3=,=== yards, in order to contin%e t e prod%ction process0 A%t t is @o%ld not alter t e sit%ation0 $o !ar as t e capital tied %p in t e 3=,=== yards o! linen is concerned, its process o! reprod%ction is, and remains, interr%pted0 &t is, indeed, easily seen ere t at t e merc ant"s operations are really not ing b%t operations t at m%st be per!ormed at all e8ents to con8ert t e prod%cer"s commodity-capital into money0 5 ey are operations @ ic e!!ect t e !%nctions o! commodity-capital in t e circ%lation and reprod%ction processes0 &! it de8ol8ed %pon t e prod%cer"s clerk to attend excl%si8ely to t e sale, and also t e p%rc ase, instead o! an independent merc ant, t is connection @o%ld not be obsc%red !or a single moment0 ;ommercial capital is, t ere!ore, not ing b%t t e prod%cer"s commodity I capital @ ic as to %ndergo t e process o! con8ersion into money I to per!orm its !%nction o! commodity-capital on t e market I t e only di!!erence being t at instead o! representing an incidental !%nction o! t e prod%cer, it is no@ t e excl%si8e operation o! a special kind o! capitalist, t e merc ant, and is set apart as t e b%siness o! a special in8estment o! capital0 5 is becomes e8ident, !%rt ermore, in t e speci!ic !orm o! circ%lation o! commercial capital 5 e merc ant b%ys a commodity and t en sells it: M I ; I M"0 &n t e simple circ%lation o! commodities, or e8en in t e circ%lation o! commodities as it appears in t e circ%lation process o! ind%strial capital, ;" I M I ;, circ%lation is e!!ected by eac piece o! money c anging ands t@ice0 5 e linen man%!act%rer sells is commodity-linen, con8erting it into money# t e b%yer"s money passes into is ands0 Wit t is same money e b%ys yarn, coal, labo%r, etc0 I expends t e money !or recon8erting t e 8al%e o! linen into t e commodities @ ic make %p its prod%ction elements0 5 e commodity e b%ys is not t e same commodity, not t e same kind o! commodity @ ic e sells0 6e as sold prod%cts and bo%g t means o! prod%ction0 A%t it is di!!erent @it respect to t e mo8ements o! merc ant"s capital0 Wit is V3,=== t e linen merc ant b%ys 3=,=== yards o! linen# e sells t e same 3=,=== yards o! linen in order to retrie8e is money-capital BV3,=== and t e pro!itC !rom circ%lation0 &t is not t e same pieces o! money, b%t rat er t e same commodity @ ic ere c anges places t@ice# t e commodity passes !rom t e seller into t e ands o! t e b%yer, and !rom t e ands o! t e b%yer, @ o no@ becomes seller, into t ose o! anot er b%yer0 &t is sold t@ice, and may be sold repeatedly t ro%g t e medi%m o! a series o! merc ants0 ?nd it is precisely t ro%g t is repeated sale, t ro%g t is t@o-!old c ange o! place o! t e same commodity, t at t e money ad8anced !or its p%rc ase by t e !irst b%yer is retrie8ed, its re!l%x to im e!!ected0 &n one case, ;" I M I ; e!!ects t e t@o-!old c ange o! place o! t e same money, t e sale o! a commodity in one !orm and t e p%rc ase o! a commodity in anot er0 &n t e ot er case, M I ; I M" e!!ects t e t@o-!old c ange o! place o! t e same commodity, t e @it dra@al o! ad8anced money !rom circ%lation0 &t is e8ident t at t e commodity as not been !inally sold @ en it passes !rom t e prod%cer into t e ands o! t e merc ant, in t at t e latter merely carries on t e operation o! selling I or e!!ects t e !%nction o! commodity-capital0 A%t at t e same time it is e8ident t at @ at is ; I M, a mere !%nction o! is capital in its transient !orm o! commoditycapital !or t e prod%cti8e capitalist, is M I ; I M", a speci!ic increase in t e 8al%e o! is ad8anced money-capital, !or t e merc ant0 3ne p ase o! t e metamorp osis o! commodities appears ere in respect to t e merc ant in t e !orm o! M I ; I M", ence as e8ol%tion o! a distinct kind o! capital0 5 e merc ant !inally sells is commodity, t at is, t e linen, to t e cons%mer, be it a prod%cti8e cons%mer B!or instance, a bleac erC, or an indi8id%al @ o acD%ires t e linen !or is pri8ate %se0 5 e merc ant t ereby reco8ers is ad8anced capital B@it a pro!itC, and can repeat is operation ane@0 6ad t e money ser8ed merely as a means o! payment in p%rc asing t e linen, so t at t e merc ant @o%ld a8e ad to pay only a!ter six @eeks, and ad e s%cceeded in selling be!ore t is term @as o%t, e co%ld a8e paid t e linen man%!act%rer @it o%t ad8ancing any money-capital o! is o@n0 6ad e not sold it, e @o%ld a8e ad to ad8ance is V3,=== on t e date o! expiration,

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instead o! on deli8ery o! t e linen0 ?nd i! a drop in t e market-prices ad compelled im to sell belo@ t e p%rc ase price, e @o%ld a8e ad to make good t e s ortage o%t o! is o@n capital0 W at is it, t en, t at lends to commercial capital t e c aracter o! an independently operating capital, @ ereas in t e ands o! t e prod%cer @ o does is o@n selling it is ob8io%sly merely a special !orm o! is capital in a speci!ic p ase o! t e reprod%ction process d%ring its soHo%rn in t e sp ere o! circ%lationQ 'irst: 5 e !act t at commodity-capital is !inally con8erted into money, t at it per!orms its initial metamorp osis, i.e., its appropriate !%nction on t e market D%a commodity-capital @ ile in t e ands o! an agent ot er t an t e prod%cer, and t at t is !%nction o! commodity-capital is e!!ected by t e merc ant in is operations, is b%ying and selling, so t at t ese operations ass%me t e appearance o! a separate %ndertaking distinct !rom t e ot er !%nctions o! ind%strial capital I and ence o! an independent %ndertaking0 &t is a distinct !orm o! t e social di8ision o! labo%r, so t at part o! t e !%nction ordinarily per!ormed as a special p ase o! t e reprod%ction process o! capital, in t is case I circ%lation, appears as t e excl%si8e !%nction o! speci!ic circ%lation agent distinct !rom t e prod%cer0 A%t t is alone @o%ld by no means gi8e t is partic%lar b%siness t e aspect o! a !%nction o! a speci!ic capital distinct !rom, and independent o!, ind%strial capital engaged in t e process o! reprod%ction# indeed, it does not so appear in cases @ ere trade is carried on by tra8elling salesmen or ot er direct agents o! t e ind%strial capitalist0 5 ere!ore, t ere m%st be a second element in8ol8ed0 Second: 5 is arises !rom t e !act t at in is capacity as an independent circ%lation agent, t e merc ant ad8ances money-capital B is o@n or borro@edC0 5 e transaction @ ic !or ind%strial capital in t e reprod%ction process amo%nts merely to ; I M, i.e., con8erting commodity-capital into money-capital, or mere sale, ass%mes !or t e merc ant t e !orm o! M I ; I M", or p%rc ase and sale o! t e same commodity, and t %s o! a re!l%x o! money-capital @ ic lea8es im in t e p%rc ase, and ret%rns to im in t e sale0 &t is al@ays ; I M, t e con8ersion o! commodity-capital into money-capital, @ ic !or t e merc ant ass%mes t e !orm o! M I ; I M, inasm%c as e ad8ances capital to p%rc ase commodities !rom t eir prod%cers# it is al@ays t e !irst metamorp osis o! commodity-capital, alt o%g !or a prod%cer, or !or ind%strial capital in process o! reprod%ction, t e same transaction may amo%nt to M I ;, to a recon8ersion o! money into commodities Bmeans o! prod%ctionC, to t e second p ase o! t e metamorp osis0 For t e linen prod%cer, t e !irst metamorp osis @as ; I M, t e con8ersion o! is commodity-capital into money-capital0 For t e merc ant t e same act appears as M I ;, as a con8ersion o! is money-capital into commodity-capital0 -o@, i! e sells t is linen to a bleac er, it @ill mean M I ;, i.e., t e con8ersion o! money capital into prod%cti8e capital, t is being t e second metamorp osis o! is commodity-capital !or t e bleac er, @ ile !or t e merc ant it means ; I M, t e sale o! t e linen e ad bo%g t0 A%t in !act it is only at t is point t at t e commodity-capital prod%ced by t e linen man%!act%rer as been !inally sold0 &n ot er @ords, t is M I ; I M o! t e merc ant represents no more t an a middleman"s !%nction !or ; I M bet@een t@o man%!act%rers0 3r let %s ass%me t at t e linen man%!act%rer b%ys yarn !rom a yarn dealer @it a portion o! t e 8al%e o! t e sold linen0 5 is is M I ; !or im0 A%t !or t e merc ant selling t e yarn it is ; I M, t e resale o! t e yarn0 ?s concerning t e yarn in its capacity o! commodity-capital, it is no more t an its !inal sale, @ ereby it passes !rom t e sp ere o! circ%lation into t at o! cons%mption# it is ; I M, t e cons%mmation o! its !irst metamorp osis0 W et er t e merc ant b%ys, or sells to t e ind%strial capitalist, is M I ; I M, t e circ%it o! merc ant"s capital, al@ays expresses @ at is H%st ; I M, or simply t e completion o! its !irst metamorp osis, @it regard to t e commodity-capital, a transient !orm o! ind%strial capital in process o! reprod%ction0 5 e M I ; o! merc ant"s capital is ; I M only !or t e ind%strial capitalist, not !or t e commodity-capital prod%ced by im0 &t is b%t t e trans!er o! commoditycapital !rom t e ind%strial capitalist to t e circ%lation agent0 &t is not %ntil t e merc ant"s capital closes ; I M t at !%nctioning commodity-capital per!orms its !inal ; I M0 M I ; I M amo%nts

186

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solely to t@o ; I M"s o! t e same commodity-capital, t@o s%ccessi8e sales o! it, @ ic merely e!!ect its last and !inal sale0 5 %s, commodity-capital ass%mes in commercial capital t e !orm o! an independent type o! capital beca%se t e merc ant ad8ances money-capital, @ ic is realised and !%nctions as capital only by ser8ing excl%si8ely to mediate t e metamorp osis o! commodity-capital, its !%nction as commodity-capital, i.e., its con8ersion into money, and it accomplis es t is by t e contin%al p%rc ase and sale o! commodities0 5 is is its excl%si8e operation0 5 is acti8ity o! e!!ecting t e circ%lation process o! ind%strial capital is t e excl%si8e !%nction o! t e money-capital @it @ ic t e merc ant operates0 Ay means o! t is !%nction e con8erts is money into money-capital, mo%lds is M into M I ; I M, and by t e same process con8erts commodity-capital into commercial capital0 $o long and so !ar as commercial capital exists in t e !orm o! commodity-capital, it is ob8io%sly not ing else I !rom t e standpoint o! t e reprod%ction process o! t e total social capital I b%t a portion o! ind%strial capital in t e market in process o! metamorp osis, @ ic exists and !%nctions as commodity-capital0 &t is t ere!ore only t e money-capital ad8anced by t e merc ant @ ic is excl%si8ely destined !or p%rc ase and sale and !or t is reason ne8er ass%mes any ot er !orm b%t t at o! commodity-capital and money-capital, ne8er t at o! prod%cti8e capital, and is al@ays con!ined to t e sp ere o! circ%lation o! capital I it is only t is money-capital @ ic is no@ to be regarded @it re!erence to t e entire reprod%ction process o! capital0 ?s soon as t e prod%cer, t e linen man%!act%rer, as sold is 3=,=== yards to t e merc ant !or V3,===, e %ses t e money so obtained to b%y t e necessary means o! prod%ction, so t at is capital ret%rns to t e prod%ction process0 6is process o! prod%ction contin%es @it o%t interr%ption0 $o !ar as e is concerned, t e con8ersion o! is commodity into money is accomplis ed0 A%t !or t e linen itsel!, as @e a8e seen, its metamorp osis as not yet taken place0 &t as not yet been !inally recon8erted into money, as not yet passed as a %se-8al%e into eit er prod%cti8e or indi8id%al cons%mption0 &t is no@ t e linen merc ant @ o represents on t e market t e same commodity-capital originally represented by t e linen man%!act%rer0 For t e latter t e process o! trans!ormation as been c%rtailed, only to be contin%ed in t e merc ant"s ands0 6ad t e linen prod%cer been obliged to @ait %ntil is linen ad really ceased being a commodity, %ntil it as passed into t e ands o! its %ltimate b%yer, its prod%cti8e or indi8id%al cons%mer, is process o! reprod%ction @o%ld a8e been interr%pted0 3r, to a8oid interr%pting it, e @o%ld a8e ad to c%rtail is operations, to con8ert a smaller portion o! is linen into yarn, coal, labo%r, etc0, in s ort, into t e elements o! prod%cti8e capital, and to retain a larger portion o! it as a money reser8e, so t at @it one portion o! is capital on t e market in t e s ape o! commodities, anot er @o%ld contin%e t e process o! prod%ction# one portion @o%ld be on t e market in t e !orm o! commodities, @ ile t e ot er ret%rned in t e !orm o! money0 5 is di8ision o! is capital is not abolis ed by t e merc ant"s inter8ention0 A%t @it o%t it t e portion o! money reser8e in t e capital o! circ%lation @o%ld al@ays a8e to be greater in relation to t e part employed in t e !orm o! prod%cti8e capital, and t e scale o! reprod%ction @o%ld a8e to be restricted accordingly0 &nstead, o@e8er, t e man%!act%rer is enabled to constantly employ a larger portion o! is capital in t e act%al process o! prod%ction, and a smaller portion as money reser8e0 3n t e ot er and, o@e8er, anot er portion o! t e social capital, in t e !orm o! merc ant"s capital, is kept contin%ally @it in t e sp ere o! circ%lation0 &t is employed all t e time !or t e sole p%rpose o! b%ying and selling0 6ence t ere seems to a8e been no more t an a replacement o! persons olding t is capital in t eir ands0 &!, instead o! b%ying V3,=== @ort o! linen @it t e p%rpose o! selling it again, t e merc ant ad applied t ese V3,=== prod%cti8ely, t e prod%cti8e capital o! society @o%ld a8e increased0 5r%e, t e linen man%!act%rer @o%ld t en a8e been obliged to old back a larger portion o! is capital as money reser8e, and like@ise t e merc ant, no@ trans!ormed into an ind%strial capitalist0 3n

18>

; apter J4&

t e ot er and, i! t e merc ant remains merc ant, t e man%!act%rer sa8es time in selling, @ ic e can de8ote to s%per8ising t e prod%ction process, @ ile t e merc ant m%st apply all is time to selling0 &! merc ant"s capital does not o8erstep its necessary proportions, it is to be in!erred, 1C t at as a res%lt o! t e di8ision o! labo%r t e capital de8oted excl%si8ely to b%ying and selling Band t is incl%des not only t e money reD%ired to b%y commodities, b%t also t e money @ ic m%st be in8ested in labo%r to maintain t e merc ant"s establis ment, and in is constant capitalt e store o%ses, transport, etc0C is smaller t an it @o%ld be i! t e ind%strial capitalist @ere constrained to carry on t e entire commercial part o! is b%siness on is o@n# <C t at beca%se t e merc ant de8otes all is time excl%si8ely to t is b%siness, t e prod%cer is able to con8ert is commodities more rapidly into money, and, moreo8er, t e commodity-capital itsel! passes more rapidly t ro%g its metamorp osis t an it @o%ld in t e ands o! t e prod%cer# 3C t at in 8ie@ing t e aggregate merc ant"s capital in its relation to ind%strial capital, one t%rno8er o! merc ant"s capital may represent not only t e t%rno8ers o! many capitals in one sp ere o! prod%ction, b%t t e t%rno8ers o! a n%mber o! capitals in di!!erent sp eres o! prod%ction0 5 e !ormer is t e case @ en, !or instance, t e linen merc ant, a!ter b%ying t e prod%ct o! some linen man%!act%rer @it is V3,===, sells it be!ore t e same man%!act%rer brings anot er lot o! t e same D%antity to market, and b%ys, and again sells, t e prod%ct o! anot er, or se8eral ot er, linen man%!act%rers, t %s e!!ecting t e t%rno8ers o! di!!erent capitals in t e same sp ere o! prod%ction0 5 e latter is t e case i!, !or example, t e merc ant a!ter selling is linen b%ys silk, t %s e!!ecting t e t%rno8er o! a capital in a di!!erent sp ere o! prod%ction0 &n general, it may be noted t at t e t%rno8er o! ind%strial capital is limited not by t e time o! circ%lation alone, b%t also by t e time o! prod%ction0 5 e t%rno8er o! merc ant"s capital dealing in one kind o! commodity is not merely limited by t e t%rno8er o! a single ind%strial capital, b%t by t at o! all ind%strial capitals in t e same branc o! prod%ction0 ?!ter t e merc ant as bo%g t and sold t e linen o! one prod%cer e can b%y and sell t at o! anot er, be!ore t e !irst brings anot er lot to t e market0 5 e same merc ant"s capital may, t ere!ore, s%ccessi8ely promote t e di!!erent t%rno8ers o! capitals in8ested in a certain branc o! prod%ction, @it t e e!!ect t at its t%rno8er is not identical @it t e t%rno8ers o! a sole ind%strial capital, and does not t ere!ore replace H%st t e single money reser8e @ ic t at one ind%strial capitalist @o%ld a8e ad to old in petto0 5 e t%rno8er o! merc ant"s capital in one sp ere o! prod%ction is nat%rally restricted by t e total prod%ction o! t at sp ere0 A%t it is not restricted by t e scale o! prod%ction, or t e period o! t%rno8er, o! any one capital o! t e same sp ere, so !ar as its period o! t%rno8er is D%ali!ied by its time o! prod%ction0 $%ppose, ? s%pplies a commodity reD%iring t ree mont s !or its prod%ction0 ?!ter t e merc ant as bo%g t and sold it, say, in one mont , e can b%y and sell t e same prod%ct o! some ot er man%!act%rer0 3r a!ter e as sold, say, t e corn o! one !armer, e can b%y and sell t at o! anot er @it t e same money, etc0 5 e t%rno8er o! is capital is restricted by t e mass o! corn e is able to b%y and sell s%ccessi8ely @it in a certain period, !or instance, in one year, @ ile t e t%rno8er o! t e !armer"s capital is, regardless o! t e time o! t%rno8er, restricted by t e time o! prod%ction, @ ic lasts one year0 6o@e8er, t e t%rno8er o! t e same merc ant"s capital may eD%ally @ell e!!ect t e t%rno8ers o! capitals in di!!erent branc es o! prod%ction0 &n so !ar as t e same merc ant"s capital ser8es in di!!erent t%rno8ers to trans!orm di!!erent commodity-capitals s%ccessi8ely into money, b%ying and selling t em one a!ter anot er, it per!orms t e same !%nction in its capacity o! money-capital @it regard to commodity-capital, @ ic money in general per!orms by means o! t e n%mber o! its t%rno8ers in a gi8en period @it regard to commodities0 5 e t%rno8er o! merc ant"s capital is not identical @it t e t%rno8er, or a single reprod%ction, o! an ind%strial capital o! eD%al siEe# it is rat er eD%al to t e s%m o! t e t%rno8ers o! a n%mber o!

188

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s%c capitals, @ et er in t e same or in di!!erent sp eres o! prod%ction0 5 e more D%ickly merc ant"s capital is t%rned o8er, t e smaller t e portion o! total money-capital ser8ing as merc ant"s capital# and con8ersely, t e more slo@ly it is t%rned o8er, t e larger t is portion0 5 e less de8eloped prod%ction, t e larger t e s%m o! merc ant"s capital in its relation to t e s%m o! t e commodities t ro@n into circ%lation# b%t t e smaller in absol%te terms, or in comparison @it more de8eloped conditions, and 8ice 8ersa0 &n s%c %nde8eloped conditions, t ere!ore, t e greater part o! t e act%al money-capital is in t e ands o! merc ants, @ ose !ort%ne constit%tes money @ealt 8is-O-8is t e ot ers0 5 e 8elocity o! circ%lation o! t e money-capital ad8anced by t e merc ant depends 1C on t e speed @it @ ic t e process o! prod%ction is rene@ed and t e di!!erent processes o! prod%ction are linked toget er# and <C on t e 8elocity o! cons%mption0 5o accomplis t e t%rno8er @e a8e examined abo8e, merc ant"s capital does not !irst a8e to b%y commodities !or its !%ll amo%nt o! 8al%e, and t en to sell t em0 &nstead, t e merc ant per!orms bot mo8ements sim%ltaneo%sly0 6is capital t en breaks %p into t@o parts0 3ne o! t em consists o! commodity-capital, and t e ot er o! money-capital0 6e b%ys and con8erts is money into commodities at one place0 Else@ ere, e sells and con8erts anot er part o! is commoditycapital into money0 3n one side, is capital ret%rns to im in t e !orm o! money-capital, @ ile on t e ot er e gets commodity-capital0 5 e larger t e portion in one !orm, t e smaller t e portion in t e ot er0 5 is alternates and balances itsel!0 &! t e %se o! money as a medi%m o! circ%lation combines @it its %se as a means o! payment and t e attendant de8elopment o! t e credit system, t en t e money-capital part o! merc ant"s capital is red%ced still more in relation to t e 8ol%me o! t e transactions t is merc ant"s capital e!!ects0 &! & b%y V3,=== @ort o! @ine on t ree mont s" credit and sell all t e @ine !or cas be!ore t is term expires, & do not need to ad8ance a single penny !or t ese transactions0 &n t is case it is also D%ite ob8io%s t at t e money-capital, @ ic ere acts as merc ant"s capital, is not ing more t an ind%strial capital in its money-capital !orm, in its process o! re!l%x in t e !orm o! money0 B5 e !act t at t e man%!act%rer @ o sold V3,=== @ort o! @ine on t ree mont s" credit may disco%nt is promissory note at t e banker"s does not alter t e matter at all and as not ing to do @it t e merc ant"s capital0C &! market-prices s o%ld !all in t e meantime by, say, 1N1=, t e merc ant, !ar !rom making a pro!it, @o%ld reco8er only V<,>== instead o! V3,===0 6e @o%ld a8e to p%t %p V3== o%t o! is o@n pocket0 5 ese V3== @o%ld ser8e merely as a reser8e to balance t e di!!erence in price0 A%t t e same applies to t e man%!act%rer0 &! e imsel! ad sold at !alling prices, e @o%ld like@ise a8e lost V3==, and @o%ld not be able to res%me prod%ction on t e same scale @it o%t reser8e capital0 5 e linen merc ant b%ys V3,=== @ort o! linen !rom t e man%!act%rer0 5 e latter pays, say, V<,=== o! t e V3,=== !or yarn0 6e b%ys t is yarn !rom a yarn dealer0 5 e money @ ic t e man%!act%rer pays to t e yarn dealer is not t e linen dealer"s money, !or t e latter as recei8ed commodities to t is amo%nt0 &t is t e money-!orm o! t e man%!act%rer"s o@n capital0 -o@ in t e ands o! t e yarn dealer t ese V<,=== appear as ret%rned money-capital0 A%t to @ at extent are t ey t at as distinct !rom t e V<,=== representing t e discarded money-!orm o! t e linen and t e ass%med money-!orm o! t e yarnQ &! t e yarn dealer bo%g t on credit and sold !or cas be!ore t e expiration o! is term o! payment, t en t ese V<,=== do not contain one penny o! merc ant"s capital as distinct !rom t e money-!orm @ ic t e ind%strial capital itsel! ass%mes in t e co%rse o! its circ%it0 &n so !ar as commercial capital is not, t ere!ore, H%st a !orm o! ind%strial capital in t e merc ant"s ands as commodity- or money-capital, it is not ing b%t t at portion o! money-capital @ ic belongs directly to t e merc ant and circ%lates in t e p%rc ase and sale o! commodities0 3n a red%ced scale t is portion represents t at part o! capital ad8anced !or prod%ction @ ic s o%ld al@ays a8e to be in t e ands o! t e ind%strialist as money reser8e and means o! p%rc ase, and @ ic s o%ld al@ays a8e to circ%late as is money-capital0 5 is portion, on a red%ced scale, is no@ in t e ands o! merc ant capitalists and per!orms its !%nctions as s%c in t e process o! circ%lation0 &t is t at portion o! t e total capital @ ic , aside !rom @ at is expended

18*

; apter J4&

as re8en%e, m%st contin%ally circ%late on t e market as a means o! p%rc ase in order to maintain t e contin%ity o! t e process o! reprod%ction0 5 e more rapid t e process o! reprod%ction, and t e more de8eloped t e !%nction o! money as a means o! payment, i.e., t e more de8eloped t e credit system,1 t e smaller t at portion is in relation to t e total capital0 Merc ant"s capital is simply capital !%nctioning in t e sp ere o! circ%lation0 5 e process o! circ%lation is a p ase o! t e total process o! reprod%ction0 A%t no 8al%e is prod%ced in t e process o! circ%lation, and, t ere!ore, no s%rpl%s-8al%e0 3nly c anges o! !orm o! t e same mass o! 8al%e take place0 &n !act, not ing occ%rs t ere o%tside t e metamorp osis o! commodities, and t is as not ing to do as s%c eit er @it t e creation or c ange o! 8al%es0 &! a s%rpl%s-8al%e is realised in t e sale o! prod%ced commodities, t en t is is only beca%se it already existed in t em0 &n t e second act, t e re-exc ange o! money-capital against commodities Belements o! prod%ctionC, t e b%yer t ere!ore does not realise any s%rpl%s-8al%e eit er0 6e merely initiates t e prod%ction o! s%rpl%s-8al%e t ro%g exc anging is money !or means o! prod%ction and labo%r-po@er0 A%t so !ar as t ese metamorp oses reD%ire circ%lation time I time d%ring @ ic capital does not prod%ce at all, least o! all s%rpl%s-8al%e I it restricts t e creation o! 8al%es, and t e s%rpl%s-8al%e expresses itsel! t ro%g t e rate o! pro!it in in8erse ratio to t e d%ration o! t e circ%lation period0 Merc ant"s capital, t ere!ore, does not create eit er 8al%e or s%rpl%s-8al%e, at least not directly0 &n so !ar as it contrib%tes to s ortening t e time o! circ%lation, it may elp indirectly to increase t e s%rpl%s8al%e prod%ced by t e ind%strial capitalists0 &n so !ar as it elps to expand t e market and e!!ects t e di8ision o! labo%r bet@een capitals, ence enabling capital to operate on a larger scale, its !%nction promotes t e prod%cti8ity o! ind%strial capital, and its acc%m%lation0 &n so !ar as it s ortens circ%lation time, it raises t e ratio o! s%rpl%s-8al%e to ad8anced capital, ence t e rate o! pro!it0 ?nd to t e extent t at it con!ines a smaller portion o! capital to t e sp ere o! circ%lation in t e !orm o! money-capital, it increases t at portion o! capital @ ic is engaged directly in prod%ction0

Chapter 1$. Co

ercial Profit

We a8e seen in Aook && t at t e p%re !%nctions o! capital in t e sp ere o! ;irc%lation I t e operations @ ic t e ind%strial capitalist m%st per!orm, !irst, to realise t e 8al%e o! is commodities, and second, to recon8ert t is 8al%e into elements o! prod%ction, operations e!!ecting t e metamorp osis o! commodity-capital, ;" I M I ;, ence t e acts o! selling and b%ying-prod%ce neit er 8al%e nor s%rpl%s-8al%e0 &t @as rat er seen t at t e time reD%ired !or t is p%rpose, obHecti8ely in regard to commodities and s%bHecti8ely in regard to t e capitalist, sets t e limit to t e prod%ction o! 8al%e and s%rpl%s-8al%e0 W at is tr%e o! t e metamorp osis o! commodity-capital in general, is, o! co%rse, not in t e least altered by t e !act t at a part o! it may ass%me t e s ape o! commercial capital, or t at t e operations, e!!ecting t e metamorp osis o! commodity-capital, appear as t e special concern o! a special gro%p o! capitalists, or as t e excl%si8e !%nction o! a portion o! t e money-capital0 &! selling and b%ying commodities I and t at is @ at t e metamorp osis o! commodity-capital ;" I M I ; amo%nts to I by ind%strial capitalists t emsel8es are not operations @ ic create 8al%e or s%rpl%s-8al%e, t ey @ill certainly not create eit er o! t ese @ en carried o%t by persons ot er t an t e ind%strial capitalists0 F%rt ermore, i! t at portion o! t e total social capital, @ ic m%st contin%ally be on and as money-capital, in order t at t e process o! reprod%ction is not interr%pted by t e process o! circ%lation and proceeds contin%o%sly I i! t is money-capital creates neit er 8al%e nor s%rpl%s-8al%e, it cannot acD%ire t e properties o! creating t em by being contin%ally t ro@n into circ%lation by some section o! capitalists ot er t an t e ind%strial capitalists, to per!orm t e same !%nction0 We a8e already indicated to @ at extent merc ant"s capital may be indirectly prod%cti8e, and @e s all later disc%ss t is point at greater lengt 0 ;ommercial capital, t ere!ore I stripped o! all eterogeneo%s !%nctions, s%c as storing, expressing, transporting, distrib%ting, retailing, @ ic may be connected @it it, and con!ined to its tr%e !%nction o! b%ying in order to sell I creates neit er 8al%e nor s%rpl%s-8al%e, b%t acts as middleman in t eir realisation and t ereby sim%ltaneo%sly in t e act%al exc ange o! commodities, i.e., in t eir trans!er !rom and to and, in t e social metabolism0 -e8ert eless, since t e circ%lation p ase o! ind%strial capital is H%st as m%c a p ase o! t e reprod%ction process as prod%ction is, t e capital operating independently in t e process o! circ%lation m%st yield t e a8erage ann%al pro!it H%st as @ell as capital operating in t e 8ario%s branc es o! prod%ction0 $ o%ld merc ant"s capital yield a ig er percentage o! a8erage pro!it t an ind%strial capital, t en a portion o! t e latter @o%ld trans!orm itsel! into merc ant"s capital0 $ o%ld it yield a lo@er a8erage pro!it, t en t e con8erse @o%ld res%lt0 ? portion o! t e merc ant"s capital @o%ld t en be trans!ormed into ind%strial capital0 -o species o! capital c anges its p%rpose, or !%nction, @it greater ease t an merc ant"s capital0 $ince merc ant"s capital does not itsel! prod%ce s%rpl%s-8al%e, it is e8ident t at t e s%rpl%s-8al%e @ ic it pockets in t e !orm o! a8erage pro!it m%st be a portion o! t e s%rpl%s-8al%e prod%ced by t e total prod%cti8e capital0 A%t no@ t e D%estion arises: 6o@ does merc ant"s capital attract its s are o! t e s%rpl%s-8al%e or pro!it prod%ced by t e prod%cti8e capitalQ &t is H%st an ill%sion t at commercial pro!it is a mere addition to, or a nominal rise o!, t e prices o! commodities in excess o! t eir 8al%e0 &t is plain t at t e merc ant can dra@ is pro!it only o%t o! t e price o! t e commodities e sells, and plainer still t at t e pro!it e makes in selling is commodities m%st be eD%al to t e di!!erence bet@een is p%rc ase price and is selling price, i.e., eD%al to t e excess o! t e latter o8er t e !ormer0

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&t is possible t at additional costs Bcosts o! circ%lationC may enter into t e commodities a!ter t eir p%rc ase and be!ore t eir sale, and it is also possible t at t is may not appen0 &! s%c costs s o%ld occ%r, it is plain t at t e excess o! t e selling price o8er t e p%rc ase price @o%ld not be all pro!it0 5o simpli!y t e analysis, @e s all ass%me at t is point t at no s%c costs occ%r0 For t e ind%strial capitalist t e di!!erence bet@een t e selling price and t e p%rc ase price o! is commodities is eD%al to t e di!!erence bet@een t eir price o! prod%ction and t eir cost-price, or, !rom t e standpoint o! t e total social capital, eD%al to t e di!!erence bet@een t e 8al%e o! t e commodities and t eir cost-price !or t e capitalists, @ ic again comes do@n to t e di!!erence bet@een t e total D%antity o! labo%r and t e D%antity o! paid labo%r incorporated in t em0 Ae!ore t e commodities bo%g t by t e ind%strial capitalist are t ro@n back on t e market as saleable commodities, t ey pass t ro%g t e process o! prod%ction, in @ ic alone t e portion o! t eir price to be realised as pro!it is created0 A%t it is di!!erent @it t e merc ant0 5 e commodities are in is ands only so long as t ey are in t e process o! circ%lation0 6e merely contin%es t eir sale, t e realisation o! t eir price @ ic @as beg%n by t e prod%cti8e capitalist, and t ere!ore does not ca%se t em to pass t ro%g any intermediate process in @ ic t ey co%ld again absorb s%rpl%s8al%e0 W ile t e ind%strial capitalist merely realises t e pre8io%sly prod%ced s%rpl%s-8al%e, or pro!it, in t e process o! circ%lation, t e merc ant as not only to realise is pro!it d%ring and t ro%g circ%lation, b%t m%st !irst make it0 5 ere appears to be no ot er @ay o! doing t is o%tside o! selling t e commodities bo%g t by im !rom t e ind%strial capitalist at t eir prices o! prod%ction, or, !rom t e standpoint o! t e total commodity-capital, at t eir 8al%es in excess o! t eir prices o! prod%ction, making a nominal extra c arge to t eir prices, ence, selling t em, !rom t e standpoint o! t e total commodity-capital, abo8e t eir 8al%e, and pocketing t is excess o! t eir nominal 8al%e o8er t eir real 8al%e# in s ort, selling t em !or more t an t ey are @ort 0 5 is met od o! adding an extra c arge is easy to grasp0 For instance, one yard o! linen costs <s0 &! & @ant to make a 1=T pro!it in reselling it, & m%st add 1N1= to t e price, ence sell t e yard at <s0 < <N+ d0 5 e di!!erence bet@een its act%al price o! prod%ction and its selling price is t en R < <N+d0, and t is represents a pro!it o! 1=T on <s0 5 is amo%nts to my selling t e yard to t e b%yer at a price @ ic is in reality t e price o! 1 1N1= yard0 3r, @ at amo%nts to t e same, it is as t o%g & sold to t e b%yer only 1=N11 o! a yard !or <s0 and kept 1N11 o! a yard !or mysel!0 &n !act & can b%y back 1N11 o! a yard !or < <N+d0 at t e price o! <s0 < <N+d0 per yard0 5 is @o%ld, t ere!ore, be H%st a ro%ndabo%t @ay o! s aring in t e s%rpl%s-8al%e and s%rpl%s-prod%ct by a nominal rise in t e price o! commodities0 5 is is realisation o! commercial pro!it by raising t e price o! commodities, as it appears at !irst glance0 ?nd, indeed, t is @ ole notion t at pro!it originates !rom a nominal rise in t e price o! commodities, or !rom t eir sale abo8e t eir 8al%e, springs !rom t e obser8ations o! commercial capital0 A%t it is D%ickly apparent on closer inspection t at t is is mere ill%sion0 ?ss%ming capitalist prod%ction to be predominant, commercial pro!it cannot be realised in t is manner0 B&t is ere al@ays a D%estion o! a8erages, not o! isolated cases0C W y do @e ass%me t at t e merc ant can realise a pro!it o! no more t an, say, 1=T on is commodities by selling t em 1=T abo8e t eir price o! prod%ctionQ Aeca%se @e ass%me t at t e prod%cer o! t ese commodities, t e ind%strial capitalist B@ o appears as K the producerL be!ore t e o%tside @orld, being t e personi!ication o! ind%strial capitalC, ad sold t em to t e dealer at t eir prices o! prod%ction0 &! t e p%rc ase price o! commodities paid by t e dealer is eD%al to t eir price o! prod%ction, or, in t e last instance, eD%al to t eir 8al%e, so t at t e price o! prod%ction or, in t e last instance, t e 8al%e, represent t e merc ant"s cost-price, t en, indeed, t e excess o! is selling price o8er is p%rc ase price I and t is di!!erence alone is t e so%rce o! is pro!it I m%st be an excess o! t eir commercial price o8er t eir price o! prod%ction, so t at in t e !inal analysis t e merc ant sells all commodities abo8e t eir 8al%es0 A%t @ y @as it ass%med t at t e ind%strial capitalist sells is commodities to t e merc ant at t eir prices o! prod%ctionQ 3r rat er, @ at @as taken !or granted in t at ass%mptionQ

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&t @as t at merc ant"s capital did not go into !orming t e general rate o! pro!it B@e are dealing @it it as yet only in its capacity o! commercial capitalC0 We proceeded necessarily !rom t is premise in disc%ssing t e general rate o! pro!it, !irst, beca%se merc ant"s capital as s%c did not exist !or %s at t e time, and, second, beca%se a8erage pro!it, and ence t e general rate o! pro!it, ad !irst to be de8eloped as a le8elling o! pro!its or s%rpl%s-8al%es act%ally prod%ced by t e ind%strial capitals in t e di!!erent sp eres o! prod%ction0 A%t in t e case o! merc ant"s capital @e are dealing @it a capital @ ic s ares in t e pro!it @it o%t participating in its prod%ction0 6ence, it is no@ necessary to s%pplement o%r earlier exposition0 $%ppose, t e total ind%strial capital ad8anced in t e co%rse o! t e year R ><= c U 18=8 R *== Bsay million VC, and t at s" R 1==T0 5 e prod%ct t ere!ore R ><= c U 18=8 U 18=s0 'et %s call t is prod%ct or t e prod%ced commodity-capital, ;, @ ose 8al%e, or price o! prod%ction Bsince bot are identical !or t e totality o! commoditiesC R 1,=8=, and t e rate o! pro!it !or t e total social capital o! *== R <=T0 5 ese <=T are, according to o%r earlier analyses, t e a8erage rate o! pro!it, since t e s%rpl%s-8al%e is not calc%lated ere on t is or t at capital o! any partic%lar composition, b%t on t e total ind%strial capital o! a8erage composition0 5 %s, ; R 1,=8=, and t e rate o! pro!it R <=T0 'et %s no@ ass%me, o@e8er, t at aside !rom t ese V*== o! ind%strial capital, t ere are still V1== o! merc ant"s capital, @ ic s ares in t e pro!it pro rata to its magnit%de H%st as t e !ormer0 ?ccording to o%r ass%mption, it is 1N1= o! t e total capital o! 1,===0 5 ere!ore, it participates to t e extent o! 1N1= in t e total s%rpl%s-8al%e o! 18=, and t %s sec%res a pro!it o! 18T0 ?ct%ally, t en, t e pro!it to be distrib%ted among t e ot er 1N1= o! t e total capital is only R 16<, or on t e capital o! *== like@ise R 18T0 6ence, t e price at @ ic ; is sold by t e o@ners o! t e ind%strial capital o! *== to t e merc ants R ><=c U 18=8 U 16<s R 1,=6<0 &! t e dealer t en adds t e a8erage pro!it o! 18T to is capital o! 1==, e sells t e commodities at 1,=6< U 18 R 1,=8=, i.e., at t eir price o! prod%ction, or, !rom t e standpoint o! t e total commodity-capital, at t eir 8al%e, alt o%g e makes is pro!it only d%ring and t ro%g t e circ%lation process, and only !rom an excess o! is selling price o8er is p%rc ase price0 .et e does not sell t e commodities abo8e t eir 8al%e, or abo8e t eir price o! prod%ction, precisely beca%se e as bo%g t t em !rom t e ind%strial capitalist belo@ t eir 8al%e, or belo@ t eir price o! prod%ction0 5 %s, merc ant"s capital enters t e !ormation o! t e general rate o! pro!it as a determinant pro rata to its part in t e total capital0 6ence, i! @e say in t e gi8en case t at t e a8erage rate o! pro!it R 18T, it @o%ld R <=T, i! it @ere not t at 1N1= o! t e total capital @as merc ant"s capital and t e general rate o! pro!it t ereby lo@ered by 1N1=0 5 is leads to a closer and more compre ensi8e de!inition o! t e price o! prod%ction0 Ay price o! prod%ction @e mean, H%st as be!ore, t e price o! a commodity R its costs Bt e 8al%e o! t e constant U 8ariable capital contained in itC U t e a8erage pro!it0 A%t t is a8erage pro!it is no@ determined di!!erently0 &t is determined by t e total pro!it prod%ced by t e total prod%cti8e capital# b%t not as calc%lated on t e total prod%cti8e capital alone, so t at i! t is R *==, as ass%med abo8e, and t e pro!it R 18=, t en t e a8erage rate o! pro!it R 18=N*== R <=T0 A%t, rat er, as calc%lated on t e total prod%cti8e U merc ant"s capital, so t at @it *== prod%cti8e and 1== merc ant"s capital, t e a8erage rate o! pro!it R 18=N1,=== R 18T0 5 e price o! prod%ction is, t ere!ore R k Bt e costsC U 18, instead o! k U <=0 5 e s are o! t e total pro!it !alling to merc ant"s capital is t %s incl%ded in t e a8erage rate o! pro!it0 5 e act%al 8al%e, or price o! prod%ction, o! t e total commodity-capital is t ere!ore R k U p U m B@ ere m is commercial pro!itC0 5 e price o! prod%ction, or t e price at @ ic t e ind%strial capitalist as s%c sells is commodities, is t %s smaller t an t e act%al price o! prod%ction o! t e commodity# or in terms o! all commodities taken toget er, t e prices at @ ic t e class o! ind%strial capitalists sell t eir commodities are lo@er t an t eir 8al%e0 6ence, in t e abo8e case, *== BcostsC U 18T on *==, or *== U 16<R 1,=6<0 &t !ollo@s, t en, t at in selling a commodity at 118 !or @ ic e paid 1== t e merc ant does, indeed, add 18T to t e price0 A%t since t is commodity, !or @ ic e paid 1==, is really @ort 118, e does not sell it abo8e its 8al%e0 We s all ence!ort %se t e term price o! prod%ction in t is, its more precise, sense0 &t is e8ident, t ere!ore, t at t e pro!it o! t e

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ind%strial capitalist eD%als t e excess o! t e price o! prod%ction o! t e commodity o8er its costprice, and t at commercial pro!it, as distinct !rom t is ind%strial pro!it, eD%als t e excess o! t e selling price o8er t e price o! prod%ction o! t e commodity @ ic , !or t e merc ant, is its p%rc ase price# b%t t at t e act%al price o! t e commodity R its price o! prod%ction U t e commercial pro!it0 P%st as ind%strial capital realises only s%c pro!its as already exist in t e 8al%e o! commodities as s%rpl%s-8al%e, so merc ant"s capital realises pro!its only beca%se t e entire s%rpl%s-8al%e, or pro!it, as not as yet been !%lly realised in t e price c arged !or t e commodities by t e ind%strial capitalist0 1 5 e merc ant"s selling price t %s exceeds t e p%rc ase price not beca%se t e !ormer exceeds t e total 8al%e, b%t beca%se t e latter is belo@ t is 8al%e0 Merc ant"s capital, t ere!ore, participates in le8elling s%rpl%s-8al%e to a8erage pro!it, alt o%g it does not take part in its prod%ction0 5 %s, t e general rate o! pro!it contains a ded%ction !rom s%rpl%s-8al%e d%e to merc ant"s capital, ence a ded%ction !rom t e pro!it o! ind%strial capital0 &t !ollo@s !rom t e !oregoing: 1C 5 e larger t e merc ant"s capital in proportion to t e ind%strial capital, t e smaller t e rate o! ind%strial pro!it, and 8ice 8ersa0 <C &t @as demonstrated in t e !irst part t at t e rate o! pro!it is al@ays lo@er t an t e rate o! t e act%al s%rpl%s-8al%e, i.e., it al@ays %nderstates t e intensity o! exploitation, as in t e abo8e case, ><=c U 18=8 U 18=s, t e rate o! s%rpl%s-8al%e o! 1==T and a rate o! pro!it o! only <=T0 ?nd t e di!!erence becomes still greater, inasm%c as t e a8erage rate o! pro!it appears smaller again, dropping !rom <=T to 18T, i! t e s are !alling to merc ant"s capital is also taken into acco%nt0 5 e a8erage rate o! pro!it o! t e direct capitalist exploiter, t ere!ore, expresses a rate o! pro!it smaller t an it act%ally is0 ?ss%ming all ot er circ%mstances remaining t e same, t e relati8e 8ol%me o! merc ant"s capital B@it t e exception o! t e small dealer @ o represents a ybrid !ormC is in in8erse proportion to t e 8elocity o! its t%rno8er, ence in in8erse proportion to t e energy o! t e process o! reprod%ction in general0 &n t e co%rse o! scienti!ic analysis, t e !ormation o! a general rate o! pro!it appears to res%lt !rom ind%strial capitals and t eir competition, and is only later corrected, s%pplemented, and modi!ied by t e inter8ention o! merc ant"s capital0 &n t e co%rse o! its istorical de8elopment, o@e8er, t e process is really re8ersed0 &t is t e commercial capital @ ic !irst determines t e prices o! commodities more or less in accordance @it t eir 8al%es, and it is t e sp ere o! circ%lation, t e sp ere t at promotes t e process o! reprod%ction, in @ ic a general rate o! pro!it initially takes s ape0 &t is originally t e commercial pro!it @ ic determines t e ind%strial pro!it0 -ot %ntil t e capitalist mode o! prod%ction as asserted itsel! and t e prod%cer imsel! as become merc ant, is commercial pro!it red%ced to t at aliD%ot part o! t e total s%rpl%s-8al%e !alling to t e s are o! merc ant"s capital as an aliD%ot part o! t e total capital engaged in t e social process o! reprod%ction0 &t @as seen in t e s%pplementary eD%alisation o! pro!it t ro%g t e inter8ention o! merc ant"s capital t at no additional element entered t e 8al%e o! commodities @it t e merc ant"s ad8anced money-capital, and t at t e extra c arge to t e price, @ ereby t e merc ant makes is pro!it, @as merely eD%al to t at portion o! t e 8al%e o! t e commodities, @ ic prod%cti8e capital ad not calc%lated in t e price o! prod%ction, i.e., ad le!t o%t0 5 e case o! t is money-capital is similar to t at o! t e ind%strial capitalist"s !ixed capital, since it is not cons%med and its 8al%e, t ere!ore, does not make %p an element o! t e 8al%e o! commodity0 &t is in t e p%rc ase price o! commodity-capital t at t e merc ant replaces its price o! prod%ction R M, in money0 6is o@n selling price, as pre8io%sly s o@n, is R M U M, @ ere M stands !or t e addition to t e price o! commodities determined by t e general rate o! pro!it0 3nce e sells t e commodities, is original money-capital, @ ic e ad8anced !or t eir p%rc ase, ret%rns to im toget er @it t is M0 We see once more t at is money-capital is not ing b%t t e ind%strial capitalist"s commodity-capital trans!ormed into money-capital, @ ic a!!ects t e magnit%de o! t e 8al%e o! t is commodity-

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capital no more t an @o%ld a direct sale o! t e latter to t e %ltimate cons%mer, instead o! to t e merc ant0 &t, act%ally, merely anticipates t e payment o! t e cons%mer0 6o@e8er, t is is correct only on t e condition it erto ass%med, t at t e merc ant as no o8er ead expenses, or t at aside !rom t e money-capital @ ic e m%st ad8ance to b%y commodities !rom t e prod%cer e need not ad8ance any ot er capital, circ%lating or !ixed, in t e process o! commodity metamorp osis0, t e process o! b%ying and selling0 A%t t is is not so in reality, as @e a8e seen in t e analysis o! t e costs o! circ%lation BAook &&, ; ap0 4&C0 5 ese costs o! circ%lation are partly expenses @ ic t e merc ant as to reclaim !rom ot er agents o! circ%lation, and partly expenses arising directly !rom is speci!ic b%siness0 -o matter @ at t e nat%re o! t ese costs o! circ%lation I @ et er t ey arise !rom t e p%rely commercial nat%re o! t e merc ant"s establis ment as s%c and ence belong to t e merc ant"s speci!ic costs o! circ%lation, or represent items @ ic are c arges !or s%bseD%ent processes o! prod%ction added in t e process o! circ%lation, s%c as expressage, transport, storage, etc0 I t ey al@ays reD%ire o! t e merc ant, aside !rom is money-capital, ad8anced to t e p%rc ase o! commodities, some additional capital !or t e p%rc ase and payment o! s%c means o! circ%lation0 ?s m%c o! t is element o! cost as consists o! circ%lating capital passes @ olly as an additional element into t e selling price o! t e commodities# and as m%c o! it as consists o! !ixed capital only to t e extent o! its @ear and tear0 A%t only as an element @ ic !orms a nominal 8al%e, e8en i! as t e p%rely commercial costs o! circ%lation, it does not add any real 8al%e to t e commodities0 A%t @ et er !ixed or circ%lating, t is entire additional capital participates in !orming t e general rate o! pro!it0 5 e p%rely commercial costs o! circ%lation B ence, excl%ding costs o! expressage, s ipping, storage, etc0C resol8e t emsel8es into costs reD%ired to realise t e 8al%e o! commodities, to trans!orm it !rom commodities into money, or !rom money into commodities, to e!!ect t eir exc ange0 We lea8e entirely o%t o! consideration all possible processes o! prod%ction @ ic may contin%e in t e process o! circ%lation, and !rom @ ic t e merc ant"s b%siness can be altoget er separated# as, in !act, t e act%al transport ind%stry and expressage may be, and are, ind%strial branc es entirely distinct !rom commercial# and p%rc aseable and saleable commodities may be stored in docks or in ot er p%blic premises, @it t e res%ltant cost o! storage being c arged to t e merc ant by t ird persons inasm%c as e as to ad8ance it0 ?ll t is takes place in act%al @ olesale commerce, @ ere merc ant"s capital appears in its p%rest !orm, %nmixed @it ot er !%nctions0 5 e express company o@ner, t e rail@ay director, and t e s ipo@ner, are not Kmerc ants0L 5 e costs @ ic @e consider ere are t ose o! b%ying and selling0 We a8e already remarked earlier t at t ese resol8e t emsel8es into acco%nting, book-keeping, marketing, correspondence, etc0 5 e constant capital reD%ired !or t is p%rpose consists o! o!!ices, paper, postage, etc0 5 e ot er costs break %p into 8ariable capital ad8anced !or t e employment o! mercantile @age-@orkers0 BExpressage, transport costs, ad8ances !or c%stoms d%ties, etc0, may partly be considered as being ad8anced by t e merc ant in p%rc asing commodities and t %s enter t e p%rc ase price as !ar as e is concerned0C ?ll t ese costs are not inc%rred in prod%cing t e %se-8al%e o! commodities, b%t in realising t eir 8al%e0 5 ey are p%re costs o! circ%lation0 5 ey do not enter into t e immediate process o! prod%ction, b%t since t ey are part o! t e process o! circ%lation t ey are also part o! t e total process o! reprod%ction0 5 e only portion o! t ese costs o! interest to %s at t is point is t at ad8anced as 8ariable capital0 B5 e !ollo@ing D%estions s o%ld also be analysed: First, o@ does t e la@ t at only necessary labo%r enters t e 8al%e o! commodities operate in t e process o! circ%lationQ $econd, o@ does acc%m%lation obtain in merc ant"s capitalQ 5 ird, o@ does merc ant"s capital !%nction in t e act%al aggregate reprod%ction process o! societyQC 5 ese costs arise d%e to t e prod%ct a8ing t e economic !orm o! a commodity0

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&! t e labo%r-time @ ic t e ind%strial capitalists t emsel8es lose @ ile directly selling commodities to one anot er I ence, speaking obHecti8ely, t e circ%lation time o! t e commodities I does not add 8al%e to t ese commodities, it is e8ident t at t is labo%r-time does not c ange its nat%re in t e least by !alling to t e merc ant instead o! t e ind%strial capitalist0 5 e con8ersion o! commodities Bprod%ctsC into money, and o! money into commodities Bmeans o! prod%ctionC is a necessary !%nction o! ind%strial capital and, t ere!ore, a necessary operation o! t e capitalist I @ o is act%ally b%t personi!ied capital endo@ed @it a conscio%sness o! its o@n and a @ill0 A%t t ese !%nctions neit er create 8al%e, nor prod%ce s%rpl%s-8al%e0 Ay per!orming t ese operations and carrying on t e !%nctions o! capital in t e sp ere o! circ%lation a!ter t e prod%cti8e capitalist as ceased to be in8ol8ed t e merc ant merely takes t e place o! t e ind%strial capitalist0 5 e labo%r-time reD%ired in t ese operations is de8oted to certain necessary operations o! t e reprod%ction process o! capital, b%t yields no additional 8al%e0 &! t e merc ant did not per!orm t ese operations B ence, did not expend t e labo%r-time entailedC, e @o%ld not be applying is capital as a circ%lation agent o! ind%strial capital# e @o%ld not t en be contin%ing t e interr%pted !%nction o! t e ind%strial capitalist, and conseD%ently co%ld not participate as a capitalist pro rata to is ad8anced capital, in t e mass o! pro!it prod%ced by ind%strial capitalists0 &n order to s are in t e mass o! s%rpl%s-8al%e, to expand t e 8al%e o! is ad8ance as capital, t e commercial capitalist need not employ @age-@orkers0 &! is b%siness and capital are small, e may be t e only @orker in it0 6e is paid @it t at portion o! t e pro!it @ ic !alls to im t ro%g t e di!!erence bet@een t e p%rc ase price paid by im !or commodities and t eir act%al price o! prod%ction0 A%t, on t e ot er and, t e pro!it realised by t e merc ant on a small amo%nt o! ad8anced capital may be no larger, or may e8en be smaller, t an t e @ages o! one o! t e better-paid skilled @age@orkers0 &n !act, e br%s es s o%lders @it many direct commercial agents o! t e prod%cti8e capitalist, s%c as b%yers, sellers, tra8ellers, @ o enHoy t e same or a ig er income eit er in t e !orm o! @ages, or in t e !orm o! a s are in t e pro!it Bpercentages, bon%sesC made !rom eac sale0 &n t e !irst case, t e merc ant pockets t e mercantile pro!it as an independent capitalist# in t e ot er, t e salesman, t e ind%strial capitalist"s @age-labo%rer, recei8es a portion o! t e pro!it eit er in t e !orm o! @ages, or as a proportional s are in t e pro!it o! t e ind%strial capitalist, @ ose direct agent e is, @ ile is employer pockets bot t e ind%strial and t e commercial pro!it0 A%t in all t ese cases, alt o%g is income may appear to t e circ%lation agent as an ordinary @age, as payment !or @ork per!ormed, and alt o%g , @ ere it does not so appear, t e pro!it may be no larger t an t e @age o! a better-paid labo%rer, is income is deri8ed solely !rom t e mercantile pro!it0 5 is !ollo@s !rom is labo%r not being labo%r @ ic prod%ces 8al%e0 5 e lengt ening o! t e act o! circ%lation represents !or t e ind%strial capitalist 1C a personal loss o! time, since it pre8ents im !rom per!orming in person is !%nction as manager o! t e prod%cti8e process# <C a longer stay o! is prod%ct in money- or commodity-!orm, in t e circ%lation process, ence in a process @ ere it does not expand 8al%e and @ ere t e direct prod%ction process is interr%pted0 &! t is process is not to be interr%pted, prod%ction m%st eit er be c%rtailed, or more money-capital m%st be ad8anced to maintain t e process o! prod%ction on t e same scale0 5 is means t at eac time eit er a smaller pro!it is made on t e capital it erto in8ested, or t at additional money-capital m%st be ad8anced to make t e pre8io%s pro!it0 ?ll t is remains %nc anged @ en t e merc ant takes t e place o! t e ind%strial capitalist0 &nstead o! t e ind%strial capitalist de8oting more time to t e process o! circ%lation, it is t e merc ant @ o is so engaged# instead o! t e ind%strial capitalist it is t e merc ant @ o ad8ances additional capital !or circ%lation# or, @ at amo%nts to t e same t ing, instead o! a large portion o! t e ind%strial capital being contin%ally di8erted into t e process o! circ%lation, it is t e merc ant"s capital @ ic is @ olly tied %p in it# and instead o! making a smaller pro!it, t e ind%strial capitalist m%st yield a portion o! is pro!it @ olly to t e merc ant0 $o long as merc ant"s capital remains @it in t e bo%nds in @ ic it is necessary, t e only di!!erence is t at t is di8ision o! t e !%nctions o! capital

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red%ces t e time excl%si8ely %sed %p in t e process o! circ%lation, t at less additional capital is ad8anced !or t is p%rpose, and t at t e loss in total pro!it, represented by mercantile pro!it, is smaller t an it @o%ld ot er@ise a8e been0 &! in t e abo8e example, ><= c U 18=8 U 18=s, assisted by a merc ant"s capital o! 1==, prod%ces a pro!it o! 16<, or 18T, !or t e ind%strial capitalist, ence implying a ded%ction o! 18, t en, b%t !or t is independent merc ant"s capital, t e additional capital reD%ired @o%ld probably be <==, and @e s o%ld a8e a total ad8ance by t e ind%strial capitalist o! 1,1== instead o! *==, @ ic , based %pon a s%rpl%s-8al%e o! 18=, @o%ld yield a rate o! pro!it o! only 16 2N11T0 &! t e ind%strial capitalist @ o acts as is o@n merc ant ad8ances not only t e additional capital to b%y ne@ commodities be!ore is prod%ct in t e process o! circ%lation as been recon8erted into money, b%t also capital Bo!!ice expenses and @ages !or commercial employeesC to realise t e 8al%e o! is commodity-capital, or, in ot er @ords, !or t e process o! circ%lation, t en t ese s%pplements !orm additional capital, b%t do not create s%rpl%s-8al%e0 5 ey m%st be made good o%t o! t e 8al%e o! t e commodities, beca%se a portion o! t e 8al%e o! t ese commodities m%st be recon8erted into t ese circ%lation costs0 A%t no additional s%rpl%s-8al%e is created t ereby0 $o !ar as t is concerns t e total capital o! society, it means in !act t at a portion o! it m%st be set aside !or secondary operations @ ic are no part o! t e sel!-expansion process, and t at t is portion o! t e social capital m%st be contin%ally reprod%ced !or t is p%rpose0 5 is red%ces t e rate o! pro!it !or t e indi8id%al capitalist and !or t e entire class o! ind%strial capitalists, an e!!ect arising !rom e8ery ne@ in8estment o! additional capital @ ene8er s%c capital is reD%ired to set in motion t e same mass o! 8ariable capital0 &n so !ar as t ese additional costs connected @it t e b%siness o! circ%lation are trans!erred !rom t e ind%strial to t e commercial capitalist, t ere takes place a similar red%ction in t e rate o! pro!it, b%t to a lesser degree and in a di!!erent @ay0 &t no@ de8elops t at t e merc ant ad8ances more capital t an @o%ld be necessary i! t ese costs did not exist, and t at t e pro!it on t is additional capital increases t e amo%nt o! t e commercial pro!it, so t at more o! t e merc ant"s capital Hoins ind%strial capital in le8elling t e a8erage rate o! pro!it and t ereby t e a8erage pro!it !alls0 &! in o%r abo8e example an additional capital o! += is ad8anced besides t e merc ant"s capital o! 1== to co8er t e costs in D%estion, t en t e total s%rpl%s-8al%e o! 18= is distrib%ted @it respect to a prod%cti8e capital o! *== pl%s a merc ant"s capital o! 1+=, toget er R 1,=+=0 5 e a8erage rate o! pro!it, t ere!ore, sinks to 1> 1N>T 5 e ind%strial capitalist sells is commodities to t e merc ant at *== U 1+2 <N> R 1,=+2< 1N>, and t e merc ant sells t em at 1,13= B1,=8= U += !or costs @ ic e m%st reco8erC0 Moreo8er, it m%st be admitted t at t e di8ision bet@een merc ant"s and ind%strial capital is accompanied by a centralisation o! t e commercial expenses and, conseD%ently, by t eir red%ction0 5 e D%estion no@ arises: W at abo%t t e commercial @age-@orkers employed by t e commercial capitalist, ere t e merc antQ &n one respect, s%c a commercial employee is a @age-@orker like any ot er0 &n t e !irst place, is labo%r-po@er is bo%g t @it t e 8ariable capital o! t e merc ant, not @it money expended as re8en%e, and conseD%ently it is not bo%g t !or pri8ate ser8ice, b%t !or t e p%rpose o! expanding t e 8al%e o! t e capital ad8anced !or it0 &n t e second place, t e 8al%e o! is labo%r-po@er, and t %s is @ages, are determined as t ose o! ot er @age-@orkers, i.e., by t e cost o! prod%ction and reprod%ction o! is speci!ic labo%r-po@er, not by t e prod%ct o! is labo%r0 6o@e8er, @e m%st make t e same distinction bet@een im and t e @age-@orkers directly employed by ind%strial capital @ ic exists bet@een ind%strial capital and merc ant"s capital, and t %s bet@een t e ind%strial capitalist and t e merc ant0 $ince t e merc ant, as a mere agent o! circ%lation, prod%ces neit er 8al%e nor s%rpl%s-8al%e B!or t e additional 8al%e @ ic e adds to t e commodities t ro%g is expenses resol8es itsel! into an addition o! pre8io%sly existing 8al%es, alt o%g t e D%estion ere poses itsel!, o@ e preser8es t is 8al%e o! is constant capitalQC it !ollo@s t at t e mercantile @orkers employed by im in t ese same !%nctions cannot

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directly create s%rpl%s-8al%e !or im0 6ere, as in t e case o! prod%cti8e labo%rers, @e ass%me t at @ages are determined by t e 8al%e o! t e labo%r-po@er, and t at, ence, t e merc ant does not enric imsel! by depressing @ages, so t at e does not enter into is cost acco%nt an ad8ance !or labo%r @ ic e as paid only in part# in ot er @ords, t at e does not enric imsel! t ro%g c eating is clerks, etc0 5 e di!!ic%lty as concerns mercantile @age-@orkers is by no means to explain o@ t ey prod%ce direct pro!its !or t eir employer @it o%t creating any direct s%rpl%s-8al%e Bo! @ ic pro!it is b%t a transm%ted !ormC0 5 is D%estion as, indeed, already been sol8ed in t e general analysis o! commercial pro!its0 P%st as ind%strial capital makes pro!it by selling labo%r embodied and realised in commodities, !or @ ic it as not paid any eD%i8alent, so merc ant"s capital deri8es pro!it !rom not paying in !%ll to prod%cti8e capital !or all t e %npaid labo%r contained in t e commodities Bin commodities, in so !ar as capital in8ested in t eir prod%ction !%nctions as an aliD%ot part o! t e total ind%strial capitalC, and by demanding payment !or t is %npaid portion still contained in t e commodities @ en making a sale0 5 e relation o! merc ant"s capital to s%rpl%s-8al%e is di!!erent !rom t at o! ind%strial capital0 5 e latter prod%ces s%rpl%s-8al%e by directly appropriating t e %npaid labo%r o! ot ers0 5 e !ormer appropriates a portion o! t is s%rpl%s-8al%e by a8ing t is portion trans!erred !rom ind%strial capital to itsel!0 &t is only t ro%g its !%nction o! realising 8al%es t at merc ant"s capital acts as capital in t e process o! reprod%ction, and ence dra@s on t e s%rpl%s-8al%e prod%ced by t e total capital0 5 e mass o! t e indi8id%al merc ant"s pro!its depends on t e mass o! capital t at e can apply in t is process, and e can apply so m%c more o! it in b%ying and selling, t e more t e %npaid labo%r o! is clerks0 5 e 8ery !%nction, by 8irt%e o! @ ic t e merc ant"s money becomes capital, is largely done t ro%g is employees0 5 e %npaid labo%r o! t ese clerks, @ ile it does not create s%rpl%s8al%e, enables im to appropriate s%rpl%s-8al%e, @ ic , in e!!ect, amo%nts to t e same t ing @it respect to is capital0 &t is, t ere!ore, a so%rce o! pro!it !or im0 3t er@ise commerce co%ld ne8er be cond%cted on a large scale, capitalistically0 P%st as t e labo%rer"s %npaid labo%r directly creates s%rpl%s-8al%e !or prod%cti8e capital, so t e %npaid labo%r o! t e commercial @age-@orker sec%res a s are o! t is s%rpl%s-8al%e !or merc ant"s capital0 5 e di!!ic%lty lies ere: $ince t e merc ant"s labo%r-time and labo%r do not create 8al%e, alt o%g t ey sec%re !or im a s are o! already prod%ced s%rpl%s-8al%e, o@ does t e matter stand @it t e 8ariable capital @ ic e lays o%t in p%rc asing commercial labo%r-po@erQ &s t is 8ariable capital to be incl%ded in t e cost o%tlays o! t e ad8anced merc ant"s capitalQ &! not, t is appears to con!lict @it t e la@ o! eD%alisation o! t e rate o! pro!it# @ at capitalist @o%ld ad8ance 1+= i! e co%ld c arge only 1== to ad8anced capitalQ &! so, it seems to con!lict @it t e nat%re o! merc ant"s capital, since t is kind o! capital does not act as capital by setting in motion t e labo%r o! ot ers, as ind%strial capital does, b%t rat er by doing its o@n @ork, i.e., per!orming t e !%nctions o! b%ying and selling, t is being precisely t e means and t e reason @ y it recei8es a portion o! t e s%rpl%s-8al%e prod%ced by t e ind%strial capital0 BWe m%st t ere!ore analyse t e !ollo@ing points: t e merc ant"s 8ariable capital# t e la@ o! necessary labo%r in t e sp ere o! circ%lation# o@ t e merc ant"s labo%r maintains t e 8al%e o! is constant capital# t e part played by merc ant"s capital in t e process o! reprod%ction as a @ ole# and, !inally, t e d%plication in commodity-capital and money-capital, on t e one and, and in commercial capital and money-dealing capital on t e ot er0C &! e8ery merc ant ad only as m%c capital as e imsel! @ere able to t%rn o8er by is o@n labo%r, t ere @o%ld be in!inite !ragmentation o! merc ant"s capital0 5 is !ragmentation @o%ld increase in t e same proportion as prod%cti8e capital raised prod%ction and operated @it greater masses in t e !or@ard marc o! t e capitalist mode o! prod%ction0 6ence, an increasing disproportion o! t e t@o0 ;apital in t e sp ere o! circ%lation @o%ld become decentralised in t e

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same proportion as it became centralised in t e sp ere o! prod%ction0 5 e p%rely commercial b%siness o! t e ind%strial capitalist, and t %s is p%rely commercial expenses, @o%ld expand in!initely t ereby, !or e @o%ld a8e to deal @it , say, 1,=== merc ants, instead o! 1==0 5 %s, t e ad8antages o! independently operating merc ant"s capital @o%ld largely be lost0 ?nd not t e p%rely commercial expenses alone, b%t also t e ot er costs o! circ%lation, s%c as sorting, expressage, etc0, @o%ld gro@0 5 is, as !ar as t e ind%strial capital is concerned0 -o@ let %s consider merc ant"s capital0 Firstly, t e p%rely commercial operations0 &t does not take more time to deal @it large !ig%res t an @it small ones0 &t takes ten times as m%c time to make 1= p%rc ases at V1== eac as it does to make one p%rc ase at V1,===0 &t takes ten times as m%c correspondence, paper, and postage, to correspond @it 1= small merc ants as it does @it one large merc ant0 5 e clearly de!ined di8ision o! labo%r in a commercial o!!ice, in @ ic one keeps t e books, anot er looks a!ter money matters, a t ird as c arge o! correspondence, one b%ys, anot er sells, a t ird tra8els, etc0, sa8es immense D%antities o! labo%r-time, so t at t e n%mber o! @orkers employed in @ olesale commerce are in no @ay related to t e comparati8e siEe o! t e establis ment0 5 is is so, beca%se in commerce m%c more t an in ind%stry t e same !%nction reD%ires t e same labo%r-time, @ et er per!ormed on a large or a small scale0 5 is is t e reason @ y concentration appears earlier istorically in t e merc ant"s b%siness t an in t e ind%strial @orks op0 F%rt er, regarding o%tlays in constant capital0 3ne %ndred small o!!ices cost incomparably more t an one large o!!ice, 1== small @are o%ses more t an a large one, etc0 5 e costs o! transport, @ ic enter t e acco%nts o! a commercial establis ment at least as costs to be ad8anced, gro@ @it t e !ragmentation0 5 e ind%strial capitalist @o%ld a8e to lay o%t more in labo%r and in circ%lation costs in t e commercial part o! is b%siness0 5 e same merc ant"s capital, @ en di8ided among many small capitalists, @o%ld, o@ing to t is !ragmentation, reD%ire more labo%rers to per!orm its !%nctions, and more merc ant"s capital @o%ld, !%rt ermore, be needed to t%rn o8er t e same commoditycapital0 $%ppose A is t e entire merc ant"s capital directly applied in b%ying and selling commodities, and b t e corresponding 8ariable capital paid o%t in @ages to t e commercial employees0 5 en A U b is smaller t an t e total merc ant"s capital, A, @o%ld be i! e8ery merc ant ad to get along @it o%t assistants, ence @o%ld in8est not ing in b0 6o@e8er, @e a8e not yet o8ercome t e di!!ic%lty0 5 e selling price o! t e commodities m%st s%!!ice 1C to pay t e a8erage pro!it on A U b0 5 is is explained i! only by t e !act t at A U b is generally a red%ction o! t e original A, representing a smaller merc ant"s capital t an @o%ld be reD%ired @it o%t b0 A%t t is selling price m%st s%!!ice <C to co8er not only t e additional pro!it on b, b%t to replace also t e paid @ages, t e merc ant"s 8ariable capital R b0 5 is last consideration gi8es rise to t e di!!ic%lty0 7oes b represent a ne@ constit%ent o! t e price, or is it merely a part o! t e pro!it made by means o! A U b, @ ic appears as @ages only so !ar as t e mercantile @age-@orker is concerned, and as concerns t e merc ant simply replaces 8ariable capitalQ &n t e latter case, t e merc ant"s pro!it on is ad8anced capital A U b @o%ld H%st eD%al t e pro!it d%e to A by 8irt%e o! t e general rate, pl%s b, @ ic e pays o%t in t e !orm o! @ages, b%t @ ic does not itsel! yield a pro!it0 5 e cr%x o! t e matter is, indeed, to !ind t e limits Bmat ematically speakingC o! b0 'et %s !irst acc%rately de!ine t e problem0 'et A stand !or capital in8ested directly in b%ying and selling commodities, K !or t e constant capital Bact%al andling costsC cons%med in t is !%nction, and b !or t e 8ariable capital in8ested by t e merc ant0 )eco8ering A o!!ers no di!!ic%lties at all0 For t e merc ant it is simply t e realised p%rc ase price, and t e price o! prod%ction !or t e man%!act%rer0 &t is t e price paid by t e merc ant, and in reselling e reco8ers A as part o! is selling price# in addition to t is A, e makes a pro!it on A, as pre8io%sly explained0 For example, let t e commodity cost V1==0 $%ppose t e pro!it is 1=T0 &n

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t at case, t e commodity is sold at 11=0 5 e commodity pre8io%sly cost 1==, and t e merc ant"s capital o! 1== merely adds 1= to it0 -o@ i! @e look at K, it is at most as large as, b%t in !act smaller t an, t e portion o! constant capital @ ic t e prod%cer @o%ld %se %p in b%ying and selling, b%t t en it @o%ld !orm an addition to t e constant capital e reD%ires directly in prod%ction0 5 is portion, nonet eless, m%st be contin%ally reco8ered in t e price o! t e commodity, or, @ at amo%nts to t e same, a corresponding portion o! t e commodity m%st be contin%ally expended in t is !orm, or, !rom t e standpoint o! t e total capital o! society, m%st be contin%ally reprod%ced in t is !orm0 5 is portion o! t e ad8anced constant capital @o%ld a8e a limiting e!!ect on t e rate o! pro!it, H%st as t e entire mass o! it directly in8ested in prod%ction0 &n so !ar as t e ind%strial capitalist lea8es t e commercial part o! is b%siness to t e merc ant, e need not ad8ance t is part o! t e capital0 5 e merc ant ad8ances it in is stead0 &n a @ay, e does t is b%t nominally, since a merc ant neit er prod%ces, nor reprod%ces, t e constant capital cons%med by im Bt e act%al andling costsC0 &ts prod%ction appears a separate b%siness, or at least a part o! t e b%siness, o! some ind%strial capitalists @ o t %s play a role similar to t ose @ o s%pply constant capital to prod%cers o! necessities o! li!e0 First, t ere!ore, t e merc ant as t is constant capital reco8ered !or im and, secondly, recei8es is pro!it on it0 5 ro%g bot o! t ese, t ere!ore, t e ind%strial capitalist"s pro!it is red%ced0 A%t o@ing to economising and concentration @ ic are bo%nd %p @it di8ision o! labo%r, it s rinks less t an it @o%ld i! e imsel! ad to ad8ance t is capital0 5 e red%ction in t e rate o! pro!it is less, beca%se t e capital t %s ad8anced is less0 $o !ar, t en, t e selling price is made %p o! A U K U t e pro!it on A U K0 5 is portion o! it o!!ers no !%rt er di!!ic%lties0 A%t no@ b, t e 8ariable capital ad8anced by t e merc ant, enters into it0 5 e res%ltant selling price is A U K U b U t e pro!it on A U K U t e pro!it on b0 A merely reco8ers t e p%rc ase price and adds not ing to it b%t t e pro!it on A0 K adds t e pro!it on K, and K itsel!# b%t K U t e pro!it on K, t e part o! t e circ%lation costs ad8anced in t e !orm o! constant capital U t e corresponding a8erage pro!it, @o%ld be larger in t e ands o! t e ind%strial capitalist t an in t e merc ant"s0 5 e s rinking o! t e a8erage pro!it appears in t e !orm o! t e !%ll a8erage pro!it calc%lated a!ter ded%cting A U K !rom t e ad8anced ind%strial capital, @it t e ded%ction !rom t e a8erage pro!it on A U K paid to t e merc ant, so t at t is ded%ction appears as t e pro!it o! a speci!ic capital, merc ant"s capital0 A%t t e sit%ation is di!!erent @it respect to b U t e pro!it on b, or, in t e present case, @ ere t e rate o! pro!it is ass%med R 1=T, @it b U 1N1= b0 ?nd t e real di!!ic%lty lies ere0 W at t e merc ant b%ys @it b is, according to o%r ass%mption, not ing b%t commercial labo%r, ence labo%r reD%ired to per!orm t e !%nctions o! circ%lating capital, ; I M and M I ;0 A%t commercial labo%r is t e labo%r generally necessary !or a capital to operate as merc ant"s capital, to elp con8ert commodities into money and money into commodities0 &t is labo%r @ ic realises, b%t does not create, 8al%es0 ?nd only in so !ar as a capital per!orms t ese !%nctions I ence a capitalist per!orms t ese operations, or t is @ork @it is capital I does it ser8e as merc ant"s capital and participate in reg%lating t e general rate o! pro!it, i.e., dra@ its di8idends o%t o! t e total pro!it0 A%t Bb U t e pro!it on bC appears to incl%de, !irst, payment !or labo%r B!or it makes no di!!erence @ et er t e ind%strial capitalist pays t e merc ant !or is o@n labo%r, or t e labo%r o! t e clerks paid by t e merc antC, and, secondly, t e pro!it on t e payment !or t is labo%r, @ ic t e merc ant @o%ld a8e to per!orm in person0 First, merc ant"s capital gets its b re!%nded, and, secondly, e makes t e pro!it on it0 5 is arises !rom t e !act, t ere!ore, t at, !irst, it reD%ires payment !or t e @ork @ ereby it operates as merchant5s capital, and t at, secondly, it demands t e pro!it, beca%se it operates as capital, i.e., beca%se it per!orms @ork !or @ ic pro!it is paid to it as !%nctioning capital0 5 is is, t ere!ore, t e D%estion to be sol8ed0 'et %s ass%me t at A R 1==, b R 1=, and t e rate o! pro!it R 1=T0 We take it t at K R =, in order to lea8e o%t o! consideration t is element o! t e p%rc ase price, @ ic does not belong ere and as

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already been acco%nted !or0 6ence, t e selling price @o%ld R A U p U b U p BR A U Ap" U b U bp"# @ ere p stands !or t e rate o! pro!itC R 1== U 2= U 1= U 1R1<10 A%t i! b @ere not in8ested by t e merc ant in @ages I since b is paid only !or commercial labo%r, ence labo%r reD%ired, to realise t e 8al%e o! t e commodity I capital t ro@n on t e market by ind%strial capital I t e matter @o%ld stand as !ollo@s: to b%y or sell !or A R 1==, t e merc ant @o%ld de8ote is time, and @e @is to ass%me t at t is is t e only time at is disposal0 5 e commercial labo%r represented by b, or 1=, i! paid !or by pro!it instead o! @ages, @o%ld pres%ppose anot er merc ant"s capital R 1==, since at 1=T t is makes b R 1=0 5 is second A R 1== @o%ld not additionally go into t e price o! commodities, b%t t e 1=T @o%ld0 5 ere @o%ld, ence, be t@o operations at 1== R <==, t at @o%ld b%y commodities at <== U <= R <<=0 $ince merc ant"s capital is absol%tely not ing b%t an indi8id%alised !orm o! a portion o! ind%strial capital engaged in t e process o! circ%lation, all D%estions re!erring to it m%st be sol8ed by representing t e problem primarily in a !orm# in @ ic t e p enomena pec%liar to merc ant"s capital do not yet appear independently, b%t still in direct connection @it ind%strial capital, as a branc o! it0 ?s an o!!ice, distinct !rom a @orks op, mercantile capital operates contin%ally in t e circ%lation process0 &t is ere I in t e o!!ice o! t e ind%strial capitalist imsel! I t at @e m%st !irst analyse t e b no@ %nder consideration0 5 e o!!ice is !rom t e o%tset al@ays in!initesimally small compared to t e ind%strial @orks op0 ?s !or t e rest, it is clear t at as t e scale o! prod%ction is extended, commercial operations reD%ired constantly !or t e circ%lation o! ind%strial capital, in order to sell t e prod%ct existing as commodity-capital, to recon8ert t e money so recei8ed into means o! prod%ction, and to keep acco%nt o! t e @ ole process, m%ltiply accordingly0 ;alc%lation o! prices, book-keeping, managing !%nds, correspondence I all belong %nder t is ead0 5 e more de8eloped t e scale o! prod%ction, t e greater, e8en i! not proportionately greater, t e commercial operations o! t e ind%strial capital, and conseD%ently t e labo%r and ot er costs o! circ%lation in8ol8ed in realising 8al%e and s%rpl%s-8al%e0 5 is necessitates t e employment o! commercial @age-@orkers @ o make %p t e act%al o!!ice sta!!0 5 e o%tlay !or t ese, alt o%g made in t e !orm o! @ages, di!!ers !rom t e 8ariable capital laid o%t in p%rc asing prod%cti8e labo%r0 &t increases t e o%tlay o! t e ind%strial capitalist, t e mass o! t e capital to be ad8anced, @it o%t directly increasing s%rpl%s8al%e0 Aeca%se it is an o%tlay !or labo%r employed solely in realising 8al%e already created0 'ike e8ery ot er o%tlay o! t is kind, it red%ces t e rate o! pro!it be-ca%se t e ad8anced capital increases, b%t not t e s%rpl%s-8al%e0 &! s%rpl%s-8al%e s remains constant @ ile ad8anced capital ; increases to ; U ;, t en t e rate o! pro!it sN; is replaced by t e smaller rate o! pro!it sN; U ;0 5 e ind%strial capitalist endea8o%rs, t ere!ore, to c%t t ese expenses o! circ%lation do@n to a minim%m, H%st as is expenses !or constant capital0 6ence, ind%strial capital does not maintain t e same attit%de to its commercial @age-labo%rers as it does to its prod%cti8e @age-labo%rers0 5 e more prod%cti8e @age-labo%rers it employs %nder ot er@ise eD%al circ%mstances, t e greater t e o%tp%t, and t e greater t e s%rpl%s-8al%e, or pro!it0 ;on8ersely, o@e8er, t e larger t e scale o! prod%ction, t e greater t e D%antity o! 8al%e and s%rpl%s-8al%e to be realised, t e greater t e prod%ced commodity-capital, t e greater are t e absol%te, i! not relati8e, o!!ice costs, gi8ing rise to a kind o! di8ision o! labo%r0 5o @ at extent pro!it is t e precondition !or t ese o%tlays, is seen, among ot er t ings, !rom t e !act t at @it t e increase o! commercial salaries, a part o! t em is !reD%ently paid by a s are in t e pro!it0 &t is in t e nat%re o! t ings t at labo%r consisting merely o! intermediate operations connected partly @it calc%lating 8al%es, partly @it realising t em, and partly @it recon8erting t e realised money into means o! prod%ction, is a labo%r @ ose magnit%de t ere!ore depends on t e D%antity o! t e prod%ced 8al%es t at a8e to e realised, and does not act as t e ca%se, like directly prod%cti8e labo%r, b%t rat er as an e!!ect, o! t e respecti8e magnit%des and masses o! t ese 8al%es0 5 e same applies to t e ot er costs o! circ%lation0 5o do m%c meas%ring, @eig ing, packing, and transporting, m%c m%st be on and0 5 e amo%nt o!

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packing, transporting, etc0, depends on t e D%antity o! commodities @ ic are t e obHects o! t is acti8ity, not 8ice 8ersa0 5 e commercial @orker prod%ces no s%rpl%s-8al%e directly0 A%t t e price o! is labo%r is determined by t e 8al%e o! is labo%r-po@er, ence by its costs o! prod%ction, @ ile t e application o! t is labo%r-po@er, its exertion, expendit%re o! energy, and @ear and tear, is as in t e ease o! e8ery ot er @age-labo%rer by no means limited by its 8al%e0 6is @age, t ere!ore, is not necessarily proportionate to t e mass o! pro!it @ ic e elps t e capitalist to realise0 W at e costs t e capitalist and @ at e brings in !or im, are t@o di!!erent t ings0 6e creates no direct s%rpl%s-8al%e, b%t adds to t e capitalist"s income by elping im to red%ce t e cost o! realising s%rpl%s-8al%e, inasm%c as e per!orms partly %npaid labo%r0 5 e commercial @orker, in t e strict sense o! t e term, belongs to t e better-paid class o! @age-@orkers I to t ose @ ose labo%r is classed as skilled and stands abo8e a8erage labo%r0 .et t e @age tends to !all, e8en in relation to a8erage labo%r, @it t e ad8ance o! t e capitalist mode o! prod%ction0 5 is is d%e partly to t e di8ision o! labo%r in t e o!!ice, implying a one-sided de8elopment o! t e labo%r capacity, t e cost o! @ ic does not !all entirely on t e capitalist, since t e labo%rer"s skill de8elops by itsel! t ro%g t e exercise o! is !%nction, and all t e more rapidly as di8ision o! labo%r makes it more one-sided0 $econdly, beca%se t e necessary training, kno@ledge o! commercial practices, lang%ages, etc0, is more and more rapidly, easily, %ni8ersally and c eaply reprod%ced @it t e progress o! science and p%blic ed%cation t e more t e capitalist mode o! prod%ction directs teac ing met ods, etc0, to@ards practical p%rposes0 5 e %ni8ersality o! p%blic ed%cation enables capitalists to recr%it s%c labo%rers !rom classes t at !ormerly ad no access to s%c trades and @ere acc%stomed to a lo@er standard o! li8ing0 Moreo8er, t is increases s%pply, and ence competition0 Wit !e@ exceptions, t e labo%r-po@er o! t ese people is t ere!ore de8al%ated @it t e progress o! capitalist prod%ction0 5 eir @age !alls, @ ile t eir labo%r capacity increases0 5 e capitalist increases t e n%mber o! t ese labo%rers @ ene8er e as more 8al%e and pro!its to realise0 5 e increase o! t is labo%r is al@ays a res%lt, ne8er a ca%se o! more s%rpl%s-8al%e0 < 5 ere is d%plication, t ere!ore0 3n t e one and, t e !%nctions as commodity-capital and moneycapital B ence !%rt er designated as merc ant"s capitalC are general de!inite !orms ass%med by ind%strial capital0 3n t e ot er and, speci!ic capitals, and t ere!ore speci!ic gro%ps o! capitalists, are excl%si8ely de8oted to t ese !%nctions# and t ese !%nctions t %s de8elop into speci!ic sp eres o! sel!-expansion o! capital0 &n t e case o! mercantile capital, t e commercial !%nctions and circ%lation costs are !o%nd only in indi8id%alised !orm0 5 at side o! ind%strial capital @ ic is de8oted to circ%lation, contin%o%sly exists not only in t e s ape o! commodity-capital and money-capital, b%t also in t e o!!ice alongside t e @orks op0 A%t it becomes independent in t e case o! mercantile capital0 &n t e latter"s case, t e o!!ice is its only @orks op0 5 e portion o! capital employed in t e !orm o! circ%lation costs appears m%c larger in t e case o! t e big merc ant t an in t at o! t e ind%strialist, beca%se besides t eir o@n o!!ices connected @it e8ery ind%strial @orks op, t at part o! capital @ ic @o%ld a8e to be so applied by t e entire class o! ind%strial capitalists is concentrated in t e ands o! a !e@ merc ants, @ o in carrying o%t t e !%nctions o! circ%lation also pro8ide !or t e gro@ing expenses incidental to t eir contin%ation0 5o ind%strial capital t e costs o! circ%lation appear as %nprod%cti8e expenses, and so t ey are0 5o t e merc ant t ey appear as a so%rce o! is pro!it, proportional, gi8en t e general rate o! pro!it, to t eir siEe0 5 e o%tlay to be made !or t ese circ%lation costs is, t ere!ore, a prod%cti8e in8estment !or mercantile capital0 ?nd !or t is reason, t e commercial labo%r @ ic it b%ys is like@ise immediately prod%cti8e !or it0

Chapter 1&. The Turnover of 1erchant7s Capital. Prices.

5 e t%rno8er o! ind%strial capital is a combination o! its period o! prod%ction and time o! circ%lation, and t ere!ore embraces t e entire process o! prod%ction0 5 e t%rno8er o! merc ant"s capital, on t e ot er and, being in reality not ing b%t an alienated mo8ement o! commoditycapital, represents only t e !irst p ase in t e metamorp osis o! a commodity, ; I M, as t e re!l%ent mo8ement o! a speci!ic capital# M I ;, ; I M, is, !rom t e mercantile point o! 8ie@, t e t%rno8er o! merc ant"s capital0 5 e merc ant b%ys, con8erting is money into commodities, t en sells, con8erting t e latter back into money, and so !ort in constant repetition0 Wit in circ%lation, t e metamorp osis o! ind%strial capital al@ays presents itsel! in t e !orm o! ; 1 I M I ;<# t e money realised by t e sale o! t e prod%ced commodity ; 1 is %sed to p%rc ase ne@ means o! prod%ction, ;<0 5 is amo%nts to a practical exc ange o! ; 1 !or ;<, and t e same money t %s c anges ands t@ice0 &ts mo8ement mediates t e exc ange o! t@o di!!erent kinds o! commodities, ;1 and ;<0 A%t in t e case o! t e merc ant, it is, con8ersely, t e same commodity @ ic c anges ands t@ice in M I ; I M"0 &t merely promotes t e re!l%x o! is money0 &!, !or example, a certain merc ant"s capital is V1==, and !or t ese V1== t e merc ant b%ys commodities and sells t em !or V11=, t en is capital o! V1== as completed one t%rno8er, and t e n%mber o! s%c t%rno8ers per year depends on t e n%mber o! times t is mo8ement M I ; I M" is repeated0 We ere lea8e entirely o%t o! consideration t e costs @ ic may be concealed in t e di!!erence bet@een t e p%rc ase price and t e selling price, since t ese do not alter in any @ay t e !orm, @ ic @e are no@ analysing0 5 e n%mber o! t%rno8ers o! a gi8en merc ant"s capital, t ere!ore, is analogo%s in t is case to t e repeated cycles o! money as a mere medi%m o! circ%lation0 P%st as t e same t aler b%ys ten times its 8al%e in commodities in making ten cycles, so t e same money-capital o! t e merc ant, @ en t%rned o8er ten times, b%ys ten times its 8al%e in commodities, or realises a total commoditycapital o! ten times its 8al%e# a merc ant"s capital o! 1==, !or instance, a ten-!old 8al%e R 1,===0 A%t t ere is t is di!!erence: &n t e cycle o! money as a medi%m o! circ%lation it is t e same piece o! money t at passes t ro%g di!!erent ands, t %s repeatedly per!orming t e same !%nction and ence making %p !or t e mass o! t e circ%lating pieces o! money by its 8elocity0 A%t in t e merc ant"s case it is t e same money capital, t e same money-8al%e, regardless o! @ at pieces o! money it may be composed, @ ic repeatedly b%ys and sells commodity-capital to t e amo%nt o! its 8al%e and @ ic t ere!ore ret%rns to t e same ands, t e same point o! depart%re as M U M, i.e., 8al%e pl%s s%rpl%s-8al%e0 5 is c aracterises its t%rno8er as a capital t%rno8er0 &t al@ays @it dra@s more money !rom circ%lation t an it t ro@s in0 &t is sel!-e8ident, at any rate, t at an accelerated t%rno8er o! merc ant"s capital Bgi8en a de8eloped credit system, t e !%nction o! money as a means o! payment predominatesC implies a more rapid circ%lation o! t e same D%antity o! money0 ? repeated t%rno8er o! commercial capital, o@e8er, ne8er connotes more t an repeated b%ying and selling# @ ile a repeated t%rno8er o! ind%strial capital connotes t e periodicity and reno8ation o! t e entire reprod%ction process B@ ic incl%des t e process o! cons%mptionC0 For merc ant"s capital t is appears merely as an external condition0 &nd%strial capital m%st contin%ally bring commodities to t e market and @it dra@ t em !rom it, in order t at rapid t%rno8er o! merc ant"s capital may remain possible0 &! t e process o! reprod%ction is slo@, t en so is t e t%rno8er o!

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merc ant"s capital0 5r%e, merc ant"s capital promotes t e t%rno8er o! prod%cti8e capital, b%t only in so !ar as it s ortens its time o! circ%lation0 &t as no direct in!l%ence on t e time o! prod%ction, @ ic is also a barrier to t e period o! t%rno8er o! ind%strial capital0 5 is is t e !irst barrier !or t e t%rno8er o! merc ant"s capital0 $econdly, aside !rom t e barrier !ormed by reprod%cti8e cons%mption, t e t%rno8er o! merc ant"s capital is %ltimately limited by t e 8elocity and 8ol%me o! t e total indi8id%al cons%mption, since all t e commodity-capital @ ic is part o! t e cons%mption-!%nd depends on it0 6o@e8er Baside !rom t e t%rno8ers in t e @orld o! commerce, in @ ic one merc ant al@ays sells t e same commodity to anot er, and t is sort o! circ%lation may appear ig ly prospero%s in times o! spec%lationC, t e merc ant"s capital, in t e !irst place, c%rtails p ase ; I M !or prod%cti8e capital0 $econdly, %nder t e modern credit system it disposes o! a large portion o! t e total social money-capital, so t at it can repeat its p%rc ases e8en be!ore it as de!initely sold @ at as pre8io%sly been p%rc ased0 ?nd it is immaterial in t is case, @ et er o%r merc ant sells directly to t e %ltimate cons%mer, or t ere are a doEen ot er intermediate merc ants bet@een t em0 3@ing to t e immense elasticity o! t e reprod%ction process, @ ic may al@ays be p%s ed beyond any gi8en bo%nds, it does not enco%nter any obstacle in prod%ction itsel!, or at best a 8ery elastic one0 ?side !rom t e separation o! ; I M and M I ;, @ ic !ollo@s !rom t e nat%re o! t e commodities, a !ictitio%s demand is t en created0 &n spite o! its independent stat%s, t e mo8ement o! merc ant"s capital is ne8er more t an t e mo8ement o! ind%strial capital @it in t e sp ere o! circ%lation0 A%t by 8irt%e o! its independent stat%s it mo8es, @it in certain limits, independently o! t e bo%nds o! t e reprod%ction process and t ereby e8en dri8es t e latter beyond its bo%nds0 5 is internal dependence and external independence p%s merc ant"s capital to a point @ ere t e internal connection is 8iolently restored t ro%g a crisis0 6ence t e p enomenon t at crises do not come to t e s%r!ace, do not break o%t, in t e retail b%siness !irst, @ ic deals @it direct cons%mption, b%t in t e sp eres o! @ olesale trade, and o! banking, @ ic places t e money-capital o! society at t e disposal o! t e !ormer0 5 e man%!act%rer may act%ally sell to t e exporter, and t e exporter, in is t%rn, to is !oreign c%stomer# t e importer may sell is ra@ materials to t e man%!act%rer, and t e latter may sell is prod%cts to t e @ olesale merc ant, etc0 A%t at some partic%lar imperceptible point t e goods lie %nsold, or else, again, all prod%cers and middlemen may grad%ally become o8erstocked0 ;ons%mption is t en generally at its ig est, eit er beca%se one ind%strial capitalist sets a s%ccession o! ot ers in motion# or beca%se t e labo%rers employed by t em are !%lly employed and a8e more to spend t an %s%al0 5 e capitalists" expendit%res increase toget er @it t eir gro@ing income0 Aesides, as @e a8e seen BAook &&, ,art &&&C, contin%o%s circ%lation takes place bet@een constant capital and constant capital Be8en regardless o! accelerated acc%m%lationC0 &t is at !irst independent o! indi8id%al cons%mption beca%se it ne8er enters t e latter0 A%t t is cons%mption de!initely limits it ne8ert eless, since constant capital is ne8er prod%ced !or its o@n sake b%t solely beca%se more o! it is needed in sp eres o! prod%ction @ ose prod%cts go into indi8id%al cons%mption0 6o@e8er, t is may go on %ndist%rbed !or some time, stim%lated by prospecti8e demand, and in s%c branc es, t ere!ore, t e b%siness o! merc ants and ind%strialists goes briskly !ort 0 5 e crisis occ%rs @ en t e ret%rns o! merc ants @ o sell in distant markets Bor @ ose s%pplies a8e also acc%m%lated on t e ome marketC become so slo@ and meagre t at t e banks press !or payment, or promissory notes !or p%rc ased commodities become d%e be!ore t e latter a8e been resold0 5 en !orced sales take place, sales in order to meet payments0 5 en comes t e cras , @ ic brings t e ill%sory prosperity to an abr%pt end0 A%t t e s%per!iciality and meaninglessness o! t e t%rno8er o! merc ant"s capital are still greater, beca%se t e t%rno8er o! one and t e same merc ant"s capital may sim%ltaneo%sly or s%ccessi8ely promote t e t%rno8ers o! se8eral prod%cti8e capitals0 5 e t%rno8er o! merc ant"s capital does not H%st promote t e t%rno8ers o! se8eral ind%strial capitals, it can also expedite t e opposite p ases o! t e metamorp osis o! commodity-capital0 For

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instance, t e merc ant b%ys linen !rom t e man%!act%rer and sells it to t e bleac er0 &n t is case, t ere!ore t e t%rno8er o! t e same merc ant"s capital I in !act, t e same ; I M, a realisation o! t e linen I represents t@o opposite p ases !or t@o di!!erent ind%strial capitals0 &nasm%c as t e merc ant sells !or prod%cti8e cons%mption, is ; I M is al@ays M I ; !or one ind%strial capitalist, and is M I ; al@ays ; I M !or anot er ind%strial capitalist0 &! @e lea8e o%t K, t e circ%lation costs, as @e do in t is c apter, i!, in ot er @ords, @e lea8e aside t at portion o! capital @ ic t e merc ant ad8ances along @it t e money reD%ired to p%rc ase commodities, it !ollo@s t at @e also omit K, t e additional pro!it made on t is additional capital0 5 is is t %s t e strictly logical and mat ematically correct mode o! analysis i! @e @ant to see o@ pro!it and t%rno8er o! merc ant"s capital a!!ect prices0 &! t e price o! prod%ction o! 1 lb0 o! s%gar @ere V1, t e merc ant co%ld b%y 1== lbs0 o! s%gar @it V1==0 &! e b%ys and sells t is D%antity in t e co%rse o! t e year, and i! t e a8erage ann%al rate o! pro!it is 1+T, e @o%ld add V1+ to t e V1==, and 3s0 to V1, t e price o! prod%ction o! 1 lb0 o! s%gar0 5 at is, e @o%ld sell 1 lb0 o! s%gar at V103s0 A%t i! t e price o! prod%ction o! 1 lb0 o! s%gar s o%ld !all to 1s0, t e merc ant co%ld b%y <,=== lbs0 o! s%gar @it V1==, and sell t e s%gar at 1s0 1 2N+d0 per lb0 5 e ann%al pro!it on capital in8ested in t e s%gar b%siness @o%ld still be V1+ on eac V1==0 A%t t e merc ant as to sell 1== lbs0 in t e !irst case, and <,=== lbs0 in t e second0 5 e ig or lo@ le8el o! t e price o! prod%ction as not ing to do @it t e rate o! pro!it0 A%t it @o%ld greatly and decisi8ely a!!ect t at aliD%ot part o! t e selling price o! eac lb0 o! s%gar, @ ic resol8es itsel! in mercantile pro!it, i.e., t e addition to t e price @ ic t e merc ant makes on a certain D%antity o! commodities or prod%cts0 &! t e price o! prod%ction o! a commodity is small, so, too, t e amo%nt t e merc ant ad8ances in its p%rc ase price, i.e., !or a certain D%antity o! it0 6ence, @it a gi8en rate o! pro!it, t e amo%nt o! pro!it e makes on t is D%antity o! c eap commodities is small as @ell0 3r, @ at amo%nts to t e same, e can t en b%y @it a certain amo%nt o! capital, say, 1==, a larger D%antity o! t ese c eap commodities, and t e total pro!it o! 1+, @ ic e makes per 1==, breaks %p into small !ractions o8er eac indi8id%al piece or portion belonging to t is mass o! commodities0 &! t e opposite takes place, t en t e re8erse is tr%e0 5 is depends entirely on t e greater or smaller prod%cti8ity o! t e ind%strial capital in @ ose prod%cts e trades0 &! @e except t e cases in @ ic t e merc ant is a monopolist and sim%ltaneo%sly monopolises prod%ction, as did t e 7%tc East &ndia ;ompany in its day, not ing can be more ridic%lo%s t an t e c%rrent idea t at it depends on t e merc ant @ et er e sells many commodities at a small pro!it or !e@ commodities at a large pro!it on eac indi8id%al piece o! t e commodities0 5 e t@o limits o! is selling price are: on t e one and, t e price o! prod%ction o! t e commodities, o8er @ ic e as no control# on t e ot er and, t e a8erage rate o! pro!it, o8er @ ic e as H%st as little control0 5 e only t ing %p to im to decide is @ et er e @ants to deal in dear or in c eap commodities, and e8en ere t e siEe o! is a8ailable capital and ot er circ%mstances also a8e t eir e!!ect0 5 ere!ore, it depends @ olly on t e degree o! de8elopment o! t e capitalist mode o! prod%ction, not on t e merc ant"s good@ill, @ at co%rse e s all !ollo@0 ? p%rely commercial company like t e old 7%tc East &ndia ;ompany, @ ic ad a monopoly o! prod%ction, co%ld !ancy t at it co%ld contin%e a met od adapted at best to t e beginnings o! capitalist prod%ction, %nder entirely c anged conditions0 1 5 e !ollo@ing circ%mstances, among ot ers, elp to maintain t at pop%lar preH%dice, @ ic , like all !alse conceptions o! pro!it, etc0, arises !rom t e obser8ation o! p%re commerce and merc ants" preH%dice: 'irst: p enomena o! competition, @ ic , o@e8er, apply merely to t e distrib%tion o! mercantile pro!it among indi8id%al merc ants, t e s are olders o! t e total merc ant"s capital# i! one, !or example, sells c eaper, in order to dri8e is competitors o!! t e !ield0 Secondly: an economist o! t e calibre o! ,ro!essor )osc er may still imagine in 'eipEig t at it @as Kcommon sense and %manitarianL /)osc er, Die Grundlagen der $ationalK-onomie, 30

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?%!lage, 18+8, $0 1*<0 I 0d.1 gro%nds, @ ic prod%ced t e c ange in selling prices, and t at it @as not a res%lt o! a re8ol%tionised mode o! prod%ction0 4hirdly: i! prod%ction prices !all d%e to greater prod%cti8ity o! labo%r, and selling prices !all !or t e same reason, t e demand, and @it it t e market-prices, o!ten rise e8en !aster t an t e s%pply, so t at selling prices yield more t an t e a8erage pro!it0 'ourthly: a merc ant may red%ce is selling price B@ ic is ne8er more t an a red%ction o! t e %s%al pro!it t at e adds to t e priceC so as to t%rn o8er a larger capital more rapidly0 ?ll t ese are matters t at only concern competition bet@een t e merc ants t emsel8es0 We a8e already s o@n in Aook & /Englis edition: 4ol0 1, pp0 +1*-<=0 I 0d10 t at ig or lo@ commodity-prices do not determine eit er t e mass o! s%rpl%s-8al%e prod%ced by a gi8en capital, or t e rate o! s%rpl%s-8al%e# alt o%g t e price o! a commodity, and @it it t e s are o! s%rpl%s8al%e in t is price, are greater or smaller, depending on t e relati8e D%antity o! commodities prod%ced by a gi8en D%antity o! labo%r0 5 e prices o! e8ery speci!ied D%antity o! a commodity are, so !ar as t ey correspond to t e 8al%es, determined by t e total D%antity o! labo%r incorporated in t is commodity0 &! little labo%r is incorporated in m%c commodity, t e %nit price o! t e commodity is lo@ and t e s%rpl%s-8al%e in it is small0 6o@ t is labo%r incorporated in a commodity breaks %p into paid and %npaid labo%r and @ at portion o! its price, t ere!ore, represents s%rpl%s-8al%e, as not ing to do @it t is total D%antity o! labo%r, nor, conseD%ently, @it t e price o! t e commodity0 A%t t e rate o! s%rpl%s-8al%e does not depend on t e absol%te magnit%de o! t e s%rpl%s-8al%e contained in t e %nit price o! t e commodity0 &t depends on its relati8e magnit%de, its proportion to t e @ages contained in t e same commodity0 5 e rate o! s%rpl%s-8al%e may t ere!ore be large, @ ile t e absol%te magnit%de o! s%rpl%s-8al%e in eac %nit o! t e commodity is small0 5 is absol%te magnit%de o! s%rpl%s-8al%e in eac piece o! t e commodity depends primarily on t e prod%cti8ity o! labo%r, and only secondarily on its di8ision into paid and %npaid labo%r0 -o@, in t e case o! t e commercial selling price, t e price o! prod%ction is a gi8en external precondition0 5 e ig commercial commodity-prices in !ormer times @ere d%e 1C to t e ig prices o! prod%ction, i.e., t e %nprod%cti8eness o! labo%r# <C to t e absence o! a general rate o! pro!it, @it merc ant"s capital absorbing a m%c larger D%ota o! s%rpl%s-8al%e t an @o%ld a8e !allen to its s are i! capitals enHoyed greater general mobility0 5 e ending o! t is sit%ation, in bot its aspects, is t ere!ore t e res%lt o! t e de8elopment o! t e capitalist mode o! prod%ction0 5 e t%rno8ers o! merc ant"s capital 8ary in d%ration, t eir ann%al n%mber conseD%ently being greater or smaller, in di!!erent branc es o! commerce0 Wit in t e same branc t e t%rno8er is more or less rapid in t e di!!erent p ases o! t e economic cycle0 .et t ere is an a8erage n%mber o! t%rno8ers, determined by experience0 We a8e already seen t at t e t%rno8er o! merc ant"s capital di!!ers !rom t at o! ind%strial capital0 5 is is in t e nat%re o! t ings0 3ne single p ase in t e t%rno8er o! ind%strial capital appears as a complete t%rno8er o! an independently constit%ted merc ant"s capital, or yet o! its part0 &t also stands in a di!!erent relation to pro!it and price determination0 &n t e case o! ind%strial capital, its t%rno8er expresses, on t e one and, t e periodicity o! reprod%ction, and, t ere!ore, t e mass o! commodities t ro@n on t e market in a certain period depends on it0 3n t e ot er and, its time o! circ%lation creates a barrier, an extensible one, and exerts more or less o! a restraint on t e creation o! 8al%e and s%rpl%s-8al%e, beca%se it a!!ects t e 8ol%me o! t e prod%ction process0 5 e t%rno8er, t ere!ore, acts as a determining element on t e mass o! ann%ally prod%ced s%rpl%s-8al%e, and ence on t e !ormation o! t e general rate o! pro!it, b%t it acts as a limiting, rat er t an positi8e, element0 For merc ant"s capital, on t e contrary, t e a8erage rate o! pro!it is a gi8en magnit%de0 5 e merc ant"s capital does not directly participate in creating pro!it or s%rpl%s-8al%e, and Hoins in s aping t e general rate o! pro!it only in so !ar as it

<=6

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dra@s a di8idend proportionate to its s are in t e total capital, o%t o! t e mass o! pro!it prod%ced by ind%strial capital0 5 e greater t e n%mber o! t%rno8ers o! an ind%strial capital %nder conditions described in Aook &&, ,art &&, t e greater t e mass o! pro!it it creates0 5r%e, t ro%g t e !ormation o! a general rate o! pro!it, t e total pro!it is distrib%ted among t e di!!erent capitals not in proportion to t eir act%al part in its prod%ction, b%t in proportion to t e aliD%ot part t ey make %p o! t e total capital, i.e., in proportion to t eir magnit%de0 A%t t is does not alter t e essence o! t e matter0 5 e greater t e n%mber o! t%rno8ers o! t e total ind%strial capital, t e greater t e mass o! pro!its, t e mass o! ann%ally prod%ced s%rpl%s-8al%e, and, t ere!ore, ot er circ%mstances remaining %nc anged, t e rate o! pro!it0 &t is di!!erent @it merc ant"s capital0 5 e rate o! pro!it is a gi8en magnit%de @it respect to it, determined on t e one and by t e mass o! pro!it prod%ced by ind%strial capital, and on t e ot er by t e relati8e magnit%de o! t e total merc ant"s capital, by its D%antitati8e relation to t e s%m o! capital ad8anced in t e processes o! prod%ction and circ%lation0 5 e n%mber o! its t%rno8ers does, indeed, decisi8ely a!!ect its relation to t e total capital, or t e relati8e magnit%de o! merc ant"s capital reD%ired !or t e circ%lation, !or it is e8ident t at t e absol%te magnit%de o! t e reD%ired merc ant"s capital and t e 8elocity o! its t%rno8ers stand in in8erse proportion0 A%t, all ot er conditions remaining eD%al, t e relati8e magnit%de o! merc ant"s capital, or t e part it makes %p o! t e total capital, is determined by its absol%te magnit%de0 &! t e total capital is 1=,===, and t e merc ant"s capital 1N1= o! t at s%m, it is R 1,===# i! t e total capital is 1,===, t en 1N1= o! it R 1==0 5 e absol%te magnit%de o! merc ant"s capital 8aries, depending on t e magnit%de o! t e total capital, alt o%g its relati8e magnit%de remains t e same0 A%t ere @e ass%me t at its relati8e magnit%de, say, 1N1= o! t e total capital, is gi8en0 5 is relati8e magnit%de, o@e8er, is again determined by t e t%rno8er0 &! it is t%rned o8er rapidly, its absol%te magnit%de, !or example, @ill R V1,=== in t e !irst case, R 1== in t e second, and ence its relati8e magnit%de R 1N1=0 Wit a slo@er t%rno8er its absol%te magnit%de is, say, R <,=== in t e !irst case, and R <== in t e second0 &ts relati8e magnit%de @ill t en a8e increased !rom 1N1= to 1N+ o! t e total capital0 ;irc%mstances @ ic red%ce t e a8erage t%rno8er o! merc ant"s capital, like t e de8elopment o! means o! transportation, !or instance, red%ce pro tanto t e absol%te magnit%de o! merc ant"s capital, and t ereby increase t e general rate o! pro!it0 &! t e opposite takes place, t en t e re8erse is tr%e0 ? de8eloped capitalist mode o! prod%ction, compared @it earlier conditions, exerts a t@o-!old in!l%ence on merc ant"s capital0 3n t e one and, t e same D%antity o! commodities is t%rned o8er @it a smaller mass o! act%ally !%nctioning merc ant"s capital# o@ing to t e more rapid t%rno8er o! merc ant"s capital, and t e more rapid reprod%ction process, on @ ic t is depends, t e relation o! merc ant"s capital to ind%strial capital diminis es0 3n t e ot er and, @it t e de8elopment o! t e capitalist mode o! prod%ction all prod%ction becomes t e prod%ction o! commodities, @ ic places all prod%cts into t e ands o! agents o! circ%lation0 &t is to be added t at %nder t e pre8io%s mode o! prod%ction, @ ic prod%ced on a small scale, a 8ery large portion o! t e prod%cers sold t eir goods directly to t e cons%mers, or @orked on t eir personal orders, sa8e !or t e mass o! prod%cts cons%med directly, in kind, by t e prod%cer imsel!, and t e mass o! ser8ices per!ormed in kind0 W ile, t ere!ore, %nder !ormer modes o! prod%ction commercial capital @as greater in relation to t e commodity-capital @ ic it t%rned o8er, it @as: 1C absol%tely smaller, beca%se a disproportionately smaller part o! t e total prod%ct @as prod%ced as commodities, and passed as commodity-capital into circ%lation, !alling into t e ands o! merc ants0 &t @as smaller, beca%se t e commodity-capital @as smaller0 A%t at t e same time it @as proportionately larger, not only beca%se its t%rno8er @as slo@er and not only in relation to t e mass o! commodities t%rned o8er by it0 &t @as larger also beca%se t e price o! t is mass o! commodities, and ence t e merc ant"s capital to be ad8anced !or it, @ere greater t an %nder capitalist prod%ction on acco%nt o! a lo@er prod%cti8ity o! labo%r, so t at t e same 8al%e @as incorporated in a smaller mass o! commodities0

<=>

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<C &t is not only t at a larger mass o! commodities is prod%ced on t e basis o! capitalist prod%ction Btaking into acco%nt also t e red%ced 8al%e o! t is mass o! commoditiesC, b%t t e same mass o! prod%cts, !or instance, o! corn, also !orms a greater commodity mass, i.e., more and more o! it becomes an obHect o! commerce0 ?s a conseD%ence, t ere is an increase not only o! t e mass o! merc ant"s capital, b%t o! all capital applied in circ%lation, s%c as in marine s ipping, rail@ays, telegrap , etc0 3C 6o@e8er, and t is is an aspect @ ic belongs to t e disc%ssion o! Kcompetition among capitalsL: idle or only al!-!%nctioning merc ant"s capital gro@s @it t e progress o! t e capitalist mode o! prod%ction, @it t e ease o! entering retail trade, @it spec%lation, and t e red%ndance o! released capital0 A%t, ass%ming t e relati8e magnit%de o! merc ant"s capital to total capital to be gi8en, t e di!!erence o! t%rno8ers in t e 8ario%s branc es o! commerce does not a!!ect eit er t e magnit%de o! t e total pro!it !alling to t e s are o! merc ant"s capital, or t e general rate o! pro!it0 5 e merc ant"s pro!it is not determined by t e mass o! commodity-capital t%rned o8er by im, b%t by t e dimensions o! t e money-capital ad8anced by im to promote t is t%rno8er0 &! t e general ann%al rate o! pro!it is 1+T, and t e merc ant ad8ances V1==, @ ic e t%rns o8er once a year, e @ill sell is commodities at 11+0 &! is capital t%rns o8er !i8e times a year, e @ill sell a commodity-capital e bo%g t at 1== at 1=3 !i8e times a year, ence in a year a commodity-capital o! +== at +1+0 5 is gi8es t e same ann%al pro!it o! 1+ on is ad8anced capital o! 1==0 &! t is @ere not so, merc ant"s capital @o%ld yield a m%c ig er pro!it, proportionate to t e n%mber o! its t%rno8ers, t an ind%strial capital, @ ic @o%ld be in con!lict @it t e la@ o! t e general rate o! pro!it0 6ence, t e n%mber o! t%rno8ers o! merc ant"s capital in t e 8ario%s branc es o! commerce as a direct in!l%ence on t e mercantile prices o! commodities0 5 e amo%nt added to t e mercantile price, t e aliD%ot part o! mercantile pro!it o! a gi8en capital, @ ic !alls %pon t e price o! prod%ction o! a commodity, is in in8erse proportion to t e n%mber o! t%rno8ers, or t e 8elocity o! t%rno8er, o! merc ants" capitals in t e 8ario%s lines o! commerce0 &! a certain merc ant"s capital is t%rned o8er !i8e times a year, it @ill add to a commodity-capital o! eD%al 8al%e b%t 1N+ o! @ at anot er merc ant"s capital, @ ic t%rns o8er H%st once a year, adds to a commodity-capital o! eD%al 8al%e0 5 e modi!ication o! selling prices by t e a8erage period o! t%rno8er o! capitals in di!!erent branc es o! commerce amo%nts to t is: 5 e same mass o! pro!its, determined !or any gi8en magnit%de o! merc ant"s capital by t e general ann%al rate o! pro!it, ence determined independently o! t e speci!ic c aracter o! t e commercial operations o! t is capital, is di!!erently distrib%ted I proportionately to t e rate o! t%rno8er I o8er masses o! commodities o! eD%al 8al%e, so t at, !or instance, i! a merc ant"s capital is t%rned o8er !i8e times a year, 1+N+ R 3T i! once a year, 1+T, is added to t e price o! t e commodities0 5 e same percentage o! commercial pro!it in di!!erent branc es o! commerce, t ere!ore, increases t e selling prices o! commodities by D%ite di!!erent percentages o! t eir 8al%es, all depending on t eir periods o! t%rno8er0 3n t e ot er and, in t e case o! ind%strial capital, t e period o! t%rno8er does not in any @ay a!!ect t e magnit%de o! t e 8al%e o! indi8id%al commodities prod%ced, alt o%g it does a!!ect t e mass o! 8al%es and s%rpl%s-8al%es prod%ced in a gi8en time by a gi8en capital, beca%se it a!!ects t e mass o! exploited labo%r0 5 is is concealed, to be s%re, and seems to be ot er@ise as soon as one t%rns to prices o! prod%ction0 A%t t is is d%e solely to t e !act t at, according to pre8io%sly analysed la@s, t e prices o! prod%ction o! 8ario%s commodities de8iate !rom t eir 8al%es0 &! @e look %pon t e process o! prod%ction as a @ ole, and %pon t e mass o! commodities prod%ced by t e total ind%strial capital, @e s all at once !ind t e general la@ 8indicated0

<=8

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W ile, t ere!ore, a closer inspection o! t e in!l%ence o! t e period o! t%rno8er on t e !ormation o! 8al%es by ind%strial capital leads %s back to t e general la@ and to t e basis o! political economy, t at t e 8al%es o! commodities are determined by t e labo%r-time contained in t em, t e in!l%ence o! t e t%rno8ers o! merc ant"s capital on mercantile prices re8eals p enomena @ ic , @it o%t bene!it o! a 8ery !ar-reac ing analysis o! t e connecting links, seem to point to a p%rely arbitrary determination o! prices# namely, t at t ey are !ixed by a capital simply bent %pon pocketing a certain D%antity o! pro!it in a year0 7%e partic%larly to t is in!l%ence o! t%rno8ers, it appears t at @it in certain limits t e process o! circ%lation as s%c determines commodity-prices independently o! t e process o! prod%ction0 ?ll s%per!icial and !alse conceptions o! t e process o! reprod%ction as a @ ole are deri8ed !rom examinations o! merc ant"s capital and !rom t e conceptions @ ic its pec%liar mo8ements call !ort in t e minds o! circ%lation agents0 &!, as t e reader @ill a8e realised to is great dismay, t e analysis o! t e act%al intrinsic relations o! t e capitalist process o! prod%ction is a 8ery complicated matter and 8ery extensi8e# i! it is a @ork o! science to resol8e t e 8isible, merely external mo8ement into t e tr%e intrinsic mo8ement, it is sel!-e8ident t at conceptions @ ic arise abo%t t e la@s o! prod%ction in t e minds o! agents o! capitalist prod%ction and circ%lation @ill di8erge drastically !rom t ese real la@s and @ill merely be t e conscio%s expression o! t e 8isible mo8ements0 5 e conceptions o! t e merc ant, stockbroker, and banker, are necessarily D%ite distorted0 5 ose o! t e man%!act%rers are 8itiated by t e acts o! circ%lation to @ ic t eir capital is s%bHect, and by t e le8elling o! t e general rate o! pro!it0< ;ompetition like@ise ass%mes a completely distorted role in t eir minds0 &! t e limits o! 8al%e and s%rpl%s-8al%e are gi8en, it is easy to grasp o@ competition o! capitals trans!orms 8al%es into prices o! prod%ction and !%rt er into mercantile prices, and s%rpl%s-8al%e into a8erage pro!it0 A%t @it o%t t ese limits, it is absol%tely %nintelligible @ y competition s o%ld red%ce t e general rate o! pro!it to one le8el instead o! anot er, e.g., make it 1+T instead o! 1,+==T0 ;ompetition can at best only red%ce t e general rate o! pro!it to one le8el0 A%t it contains no element by @ ic it co%ld determine t is le8el itsel!0 From t e standpoint o! merc ant"s capital, t ere!ore, it is t e t%rno8er @ ic appears to determine prices0 3n t e ot er and, @ ile t e rate o! t%rno8er o! ind%strial capital, in so !ar as it enables a certain capital to exploit more or less labo%r, exerts a determining and limiting in!l%ence on t e mass o! pro!it, and t %s on t e general rate o! pro!it, t is rate o! pro!it obtains !or merc ant"s capital as an external !act, its internal connection @it t e prod%ction o! s%rpl%s-8al%e being entirely obliterated0 &!, %nder ot er@ise eD%al circ%mstances and partic%larly t e same organic composition, t e same ind%strial capital is t%rned o8er !o%r times a year instead o! t@ice, it prod%ces t@ice as m%c s%rpl%s-8al%e and, conseD%ently, pro!it0 ?nd t is is apparent as soon, and as long, as t is capital as a monopoly on an impro8ed met od o! prod%ction, @ ic makes t is accelerated t%rno8er possible0 ;on8ersely, di!!erences in t e periods o! t%rno8er in di!!erent branc es o! commerce mani!est t emsel8es in t e !act t at pro!it made on t e t%rno8er o! a gi8en commodity-capital is in in8erse proportion to t e n%mber o! times t e money-capital t%rns o8er t is commodity-capital0 $mall pro!its and D%ick ret%rns appear to t e s opkeeper to be t e principle @ ic e !ollo@s o%t o! s eer principle0 For t e rest, it is sel!-e8ident t at regardless o! alternating, m%t%ally compensating, speedier and slo@er t%rno8ers, t is la@ o! t%rno8er o! merc ant"s capital olds good in eac branc o! commerce only !or t e a8erage t%rno8ers made by t e entire merc ant"s capital in8ested in eac partic%lar branc 0 5 e capital o! ?, @ o deals in t e same branc as A, may make more or less t an t e a8erage n%mber o! t%rno8ers0 &n t is case t e ot ers make less or more0 5 is does not alter t e t%rno8er o! t e total mass o! merc ant"s capital in8ested in t is line0 A%t it is o! decisi8e moment !or t e indi8id%al merc ant or s opkeeper0 &n t is case e makes an extra pro!it, H%st as ind%strial capitalists make extra pro!its i! t ey prod%ce %nder better t an a8erage conditions0 &! competition compels im, e can sell c eaper t an is competitors @it o%t lo@ering is pro!it belo@ t e a8erage0 &! t e conditions @ ic @o%ld enable im to t%rn o8er is capital more

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rapidly, are t emsel8es !or sale, s%c as a !a8o%rable s op location, e can pay extra rent !or it, i.e., con8ert a portion o! is s%rpl%s-pro!it into gro%nd-rent0

Chapter 1*. 1one!-'ealin) Capital

5 e p%rely tec nical mo8ements per!ormed by money in t e circ%lation process o! ind%strial, and, as @e may no@ add, o! commercial capital Bsince it takes o8er a part o! t e circ%lation mo8ement o! ind%strial capital as its o@n, pec%liar mo8ementC, i! indi8id%alised as a !%nction o! some partic%lar capital per!orming H%st t ese, and only t ese, operations as its speci!ic operations, con8ert t is capital into money-dealing capital0 ? portion o! ind%strial capital, and, more precisely, also o! commercial capital, not only obtains all t e time in t e !orm o! money, as money-capital in general, b%t as money-capital engaged precisely in t ese tec nical !%nctions0 ? de!inite part o! t e total capital dissociates itsel! !rom t e rest and stands apart in t e !orm o! money-capital, @ ose capitalist !%nction consists excl%si8ely in per!orming t ese operations !or t e entire class o! ind%strial and commercial capitalists0 ?s in t e case o! commercial capital, a portion o! ind%strial capital engaged in t e circ%lation process in t e !orm o! money-capital separates !rom t e rest and per!orms t ese operations o! t e reprod%ction process !or all t e ot er capital0 5 e mo8ements o! t is money-capital are, t ere!ore, once more merely mo8ements o! an indi8id%alised part o! ind%strial capital engaged in t e reprod%ction process0 &t is only @ en, and in so !ar as, capital is ne@ly in8ested I @ ic also applies to acc%m%lation I t at capital in money-!orm appears as t e starting-point and t e end res%lt o! t e mo8ement0 A%t !or all capitals already engaged in t e process, t ese !irst and last points appear merely as points o! transit0 $ince, as already seen in t e case o! simple commodity-circ%lation, !rom t e moment o! lea8ing t e sp ere o! prod%ction to t e moment o! its re-entry ind%strial capital %ndergoes t e metamorp osis ;" I M I ;, M in !act represents t e end res%lt o! one p ase o! t e metamorp osis, H%st to become t e starting-point o! t e re8erse p ase, @ ic s%pplements it0 ?nd alt o%g t e ; I M o! ind%strial capital is al@ays M I ; I M !or merc ant"s capital, t e act%al process !or t e latter is contin%ally also ; I M I ; once it as beg%n to !%nction0 A%t it per!orms t e acts ; I M and M I ; sim%ltaneo%sly0 5 is is to say t at t ere is not H%st one capital in t e stage ; I M @ ile anot er is in t e stage M I ;, b%t t at t e same capital b%ys contin%ally and sells contin%ally at one and t e same time beca%se o! t e contin%ity o! t e prod%ction process0 &t is to be !o%nd al@ays in bot stages at one and t e same time0 W ile one o! its parts t%rns into money, later to be recon8erted into commodities, anot er t%rns sim%ltaneo%sly into commodities, to be recon8erted into money0 &t all depends on t e !orm o! t e commodity exc ange @ et er t e money ser8es ere as a means o! circ%lation or o! payment0 &n bot cases t e capitalist as to pay o%t money constantly to many persons, and to recei8e money contin%ally !rom many persons0 5 is p%rely tec nical operation o! disb%rsing and recei8ing money is in itsel! labo%r @ ic , as long as t e money ser8es as a means o! payment, necessitates dra@ing %p payment balances and acts o! balancing acco%nts0 5 is labo%r is a cost o! circ%lation, i.e., not labo%r creating 8al%e0 &t is s ortened in being carried o%t by a special section o! agents, or capitalists, !or t e rest o! t e capitalist class0 ? de!inite portion o! t e capital m%st be on and constantly as a oard, as potential money-capital I a reser8e o! means o! p%rc ase, a reser8e o! means o! payment, and idle capital in t e !orm o! money @aiting to be p%t to @ork0 ?not er portion streams back contin%ally in t is !orm0 ?side !rom collecting, paying, and book-keeping, t is entails sa!ekeeping t e oard, @ ic is an operation all in itsel!0 &t is, indeed, a contin%o%s con8ersion o! t e oard into means o! circ%lation and means o! payment, and its restoration by means o! money sec%red t ro%g sales and !rom payments d%e0 5 is constant mo8ement o! t e part o! capital existing as money, dissociated !rom t e !%nction o! capital itsel!, t is p%rely tec nical !%nction, ca%ses its o@n labo%r and expense, classi!ied as costs o! circ%lation0

<11

; apter J&J

5 e di8ision o! labo%r brings it abo%t t at t ese tec nical operations, dependent %pon t e !%nctions o! capital, s o%ld be per!ormed !or t e entire capitalist class as m%c as possible by a special section o! agents or capitalists as t eir excl%si8e !%nction I or t at t ese operations s o%ld be concentrated in t eir ands0 We a8e ere, as in merc ant"s capital, di8ision o! labo%r in a t@o!old sense0 &t becomes a specialised b%siness, and beca%se per!ormed as a specialised b%siness !or t e money-mec anism o! t e @ ole class, it is concentrated and cond%cted on a large scale0 ? !%rt er di8ision o! labo%r takes place @it in it, bot t ro%g di8ision into 8ario%s independent branc es, and t ro%g segmentation o! @ork @it in t ese branc es Blarge o!!ices, n%mero%s book-keepers and cas iers, and !ar-reac ing di8ision o! labo%rC0 ,aying and recei8ing money, settling acco%nts, keeping c%rrent acco%nts, storing money, etc0 I all t is, dissociated !rom t e acts necessitating t ese tec nical operations, makes money-dealing capital o! t e capital ad8anced !or t ese !%nctions0 5 e 8ario%s operations, @ ose indi8id%alisation into speci!ic b%sinesses gi8es rise to t e money trade, spring !rom t e di!!erent p%rposes o! money itsel! and !rom its !%nctions, @ ic capital in its money-!orm m%st t ere!ore like@ise carry o%t0 & a8e pointed o%t earlier t at !inance de8eloped originally !rom t e exc ange o! prod%cts bet@een di!!erent comm%nities01 5rading in money, commerce in t e money-commodity, !irst de8eloped t ere!ore o%t o! international commerce0 E8er since di!!erent national coins a8e existed merc ants b%ying in !oreign co%ntries a8e ad to exc ange t eir national coins !or local coins, and 8ice 8ersa, or to exc ange di!!erent coins !or %ncoined p%re sil8er or gold I t e @orld-money0 6ence t e exc ange b%siness @ ic is to be regarded as one o! t e nat%ral !o%ndations o! modern !inance0 < 3%t o! it de8eloped banks o! exc ange, in @ ic sil8er Bor goldC ser8es as @orld-money I no@ called bank money or commercial money I as distinct !rom c%rrency0 Exc ange transactions, in t e sense o! mere notes o! payment to tra8ellers !rom a money-c anger in one co%ntry to a c anger in anot er co%ntry, de8eloped back in )ome and :reece o%t o! t e act%al money-c anging0 5rading in gold and sil8er as commodities Bra@ materials !or t e making o! l%x%ry articlesC is t e nat%ral basis o! t e b%llion trade, or t e trade @ ic acts as a medi%m !or t e !%nctions o! money as %ni8ersal money0 5 ese !%nctions, as pre8io%sly explained BA%c &, Kap0 &&&, 3, c / Englis edition: ; 0 &&&, 3, c0 J 0d.1C, are t@o-!old: c%rrency mo8ement back and !ort bet@een t e 8ario%s national sp eres o! circ%lation in order to balance international payments and in connection @it t e migrations o! capital in D%est o! interest# sim%ltaneo%sly, !lo@ o! precio%s metals !rom t eir so%rces o! prod%ction 8ia t e @orld-market and t eir distrib%tion among t e 8ario%s national sp eres o! circ%lation0 :oldsmit s acted as bankers still d%ring t e greater part o! t e 1>t cent%ry in England0 We s all completely disregard t e @ay in @ ic t e balancing o! international acco%nts de8eloped !%rt er in t e bill Hobbing, etc0, and e8eryt ing re!erring to transactions in 8al%able papers# in s ort, @e s all lea8e o%t o! consideration all special !orms o! t e credit system, @ ic do not as yet concern %s ere0 -ational money discards its local c aracter in t e capacity o! %ni8ersal money# one national c%rrency is expressed in anot er, and t %s all o! t em are !inally red%ced to t eir content o! gold or sil8er, @ ile t e latter, being t e t@o commodities circ%lating as @orld-money, are sim%ltaneo%sly red%ced to t eir reciprocal 8al%e-ratio, @ ic c anges contin%ally0 &t is t is intermediate operation @ ic t e money trader makes is special occ%pation0 Money-c anging and t e b%llion trade are t %s t e original !orms o! t e money trade, and spring !rom t e t@o-!old !%nctions o! money I as national money and @orld-money0 5 e capitalist process o! prod%ction, H%st as commerce in general, e8en %nder pre-capitalist met ods, imply: 'irst, t e acc%m%lation o! money as a oard, i.e., ere as t at part o! capital @ ic m%st al@ays be on and in t e !orm o! money as a reser8e !%nd o! means o! payment and p%rc ase0 5 is is t e

<1<

; apter J&J

!irst !orm o! a oard, as it reappears %nder t e capitalist mode o! prod%ction, and as it appears generally @it t e de8elopment o! merc ant"s capital, at least !or t e p%rposes o! t is capital0 Aot remarks apply to national, as @ell as international, circ%lation0 5 e oard is in contin%o%s !l%x, po%rs ceaselessly into circ%lation, and ret%rns ceaselessly !rom it0 5 e second !orm o! a oard is t at o! idle, temporarily %nemployed capital in t e s ape o! money, incl%ding ne@ly acc%m%lated and not yet in8ested money-capital0 5 e !%nctions entailed by t is !ormation o! a oard are primarily t ose o! sa!ekeeping, bookkeeping, etc0 Secondly, o@e8er, t is in8ol8es o%tlays o! money !or p%rc ases, collecting money !rom sales, making and recei8ing payments, balancing payments, etc0 5 e money-dealer per!orms all t ese ser8ices at !irst as a simple cashier o! t e merc ants and ind%strial capitalists0 3 5 e money trade becomes !%lly de8eloped, e8en in its !irst stages, as soon as its ordinary !%nctions are s%pplemented by lending and borro@ing and by credit0 3! t is more in t e next part, @ ic deals @it interest-bearing capital0 5 e b%llion trade itsel!, t e trans!er o! gold or sil8er !rom one co%ntry to anot er, is merely t e res%lt o! trading in commodities0 &t is determined by t e rate o! exc ange @ ic expresses t e standing o! international payments and t e interest rates in t e di!!erent markets0 5 e b%llion trader as s%c acts merely as an intermediary o! t e res%lts0 &n disc%ssing money and t e @ay its mo8ements and !orms de8elop o%t o! simple commoditycirc%lation, @e sa@ BAook 1 ; 0 &&&C t at t e mo8ements o! t e mass o! money circ%lating as means o! p%rc ase and payment depend on t e metamorp osis o! commodities, on t e 8ol%me and 8elocity o! t is metamorp osis, @ ic @e no@ kno@ to be b%t a p ase in t e entire process o! reprod%ction0 ?s !or sec%ring t e money materials I gold and sil8er I !rom t eir so%rces o! prod%ction, t is resol8es itsel! into a direct exc ange o! commodities, an exc ange o! gold and sil8er as commodities !or ot er commodities0 6ence, it is itsel! as m%c a p ase o! t e exc ange o! commodities as t e sec%ring o! iron or ot er metals0 6o@e8er, so !ar as t e mo8ement o! precio%s metals on t e @orld-market is concerned B@e ere lea8e aside mo8ements expressing t e trans!er o! capital by loans I a type o! trans!er @ ic also obtains in t e s ape o! commoditycapitalC, it is D%ite as m%c determined by t e international exc ange o! commodities as t e mo8ement o! money as a national means o! p%rc ase and payment is determined by t e exc ange o! commodities in t e ome market0 5 e in!lo@ and o%t!lo@ o! precio%s metals !rom one national sp ere o! circ%lation to anot er, inasm%c as t is is ca%sed merely by a depreciation o! t e national c%rrency, or by a do%ble standard, are alien to money circ%lation as s%c and merely represent corrections o! de8iations bro%g t abo%t arbitrarily by state decrees0 Finally, as concerns t e !ormations o! oards @ ic constit%te reser8e !%nds !or means o! p%rc ase and payment, be it !or ome or !oreign trade, and @ ic also merely represent a !orm o! temporarily idle capital, t ey are in bot cases necessary precipitates o! t e circ%lation process0 &! t e entire circ%lation o! money is in 8ol%me, !orm and mo8ement p%rely a res%lt o! commoditycirc%lation, @ ic , in its t%rn, !rom t e capitalist point o! 8ie@, is only t e circ%lation process o! capital Balso embracing t e exc ange o! capital !or re8en%e, and o! re8en%e !or re8en%e, so !ar as o%tlay o! re8en%e is e!!ected t ro%g retail tradeC, it is sel!-e8ident t at dealing in money does not merely promote t e circ%lation o! money, a mere res%lt and p enomenon o! commoditycirc%lation0 5 is circ%lation o! money itsel!, a p ase in commodity-circ%lation, is taken !or granted in money-dealing0 W at t e latter promotes is merely t e tec nical operations o! money circ%lation @ ic it concentrates, s ortens, and simpli!ies0 7ealing in money does not !orm t e oards0 &t pro8ides t e tec nical means by @ ic t e !ormation o! oards may, so !ar as it is 8ol%ntary B ence, not an expression o! %nemployed capital or o! dist%rbances in t e reprod%ction processC, be red%ced to its economic minim%m beca%se, i! managed !or t e capitalist class as a @ ole, t e reser8e !%nds o! means o! p%rc ase and payment need not be as large as t ey @o%ld a8e to be i! eac capitalist @ere to manage is o@n0 5 e money-dealers do not b%y t e precio%s metals0 5 ey merely andle t eir distrib%tion as soon as t e commodity trade as bo%g t t em0

<13

; apter J&J

5 ey !acilitate t e settling o! balances, inasm%c as money ser8es as t e means o! payment, and red%ce t ro%g t e arti!icial mec anism o! t ese settlements t e amo%nt o! money reD%ired !or t is p%rpose0 A%t t ey do not determine eit er t e connections, or t e 8ol%me, o! t e m%t%al payments0 5 e bills o! exc ange and t e c eD%es, !or instance, @ ic are exc anged !or one anot er in banks and clearing o%ses, represent D%ite independent transactions and are t e res%lts o! gi8en operations, and it is merely a D%estion o! a better tec nical settlement o! t ese res%lts0 $o !ar as money circ%lates as a means o! p%rc ase, t e 8ol%me and n%mber o! p%rc ases and sales a8e no connection @ ate8er @it money-dealing0 5 e latter can do no more t an s orten t e tec nical operations t at go @it b%ying and selling, and t %s red%ce t e amo%nt o! cas money reD%ired to t%rn o8er t e commodities0 Money-dealing in its p%re !orm, @ ic @e consider ere, i.e0, set apart !rom t e credit system, is t %s concerned only @it t e tec niD%e o! a certain p ase o! commodity-circ%lation, namely, t at o! money circ%lation and t e di!!erent !%nctions o! money arising in its circ%lation0 5 is s%bstantially disting%is es dealing in money !rom t e dealing in commodities, @ ic promotes t e metamorp osis o! commodities and t eir exc ange, or e8en gi8es t is process o! t e commodity-capital t e appearance o! a process o! a capital set apart !rom ind%strial capital0 W ile, t ere!ore, commercial capital as its o@n !orm o! circ%lation, M I ; I M, in @ ic t e commodity c anges ands t@ice and t %s pro8ides a re!l%x o! money, as distinct !rom ; I M I ;, in @ ic money c anges ands t@ice and t %s promotes commodity exc ange, t ere is no s%c special !orm in t e case o! money-dealing capital0 &n so !ar as money-capital is ad8anced by a separate class o! capitalists in t is tec nical promotion o! money circ%lation I a capital @ ic on a red%ced scale represents t e additional capital t e merc ants and ind%strial capitalists @o%ld ot er@ise a8e to ad8ance t emsel8es !or t ese p%rposes I t e general !orm o! capital, M I M", occ%rs ere as @ell0 Ay ad8ancing M, t e ad8ancing capitalist sec%res M U cM0 A%t promotion o! M I M" does not ere concern t e material, b%t only t e tec nical, processes o! t e metamorp osis0 &t is e8ident t at t e mass o! money-capital @it @ ic t e money-dealers operate is t e moneycapital o! merc ants and ind%strial capitalists in t e process o! circ%lation, and t at t e moneydealers" operations are act%ally operations o! merc ants and ind%strial capitalists, in @ ic t ey act as middlemen0 &t is eD%ally e8ident t at t e money-dealers" pro!it is not ing b%t a ded%ction !rom t e s%rpl%s8al%e, since t ey operate @it already realised 8al%es Be8en @ en realised in t e !orm o! creditors" claimsC0 P%st as in t e commodity trade, t ere is a d%plication o! !%nctions, beca%se a part o! t e tec nical operations connected @it money circ%lation m%st be carried o%t by t e dealers and prod%cers o! commodities t emsel8es0

Chapter 2/. 8istorical #acts a9out 1erchant7s Capital

5 e partic%lar !orm in @ ic commercial and money-dealing capitals acc%m%late money @ill be disc%ssed in t e next part0 &t is sel!-e8ident !rom @ at as gone be!ore t at not ing co%ld be more abs%rd t an to regard merc ant"s capital, @ et er in t e s ape o! commercial or o! money-dealing capital, as a partic%lar 8ariety o! ind%strial capital, s%c as, say, mining, agric%lt%re, cattle-raising, man%!act%ring, transport, etc0, @ ic are side lines o! ind%strial capital occasioned by t e di8ision o! social labo%r, and ence di!!erent sp eres o! in8estment0 5 e simple obser8ation t at in t e circ%lation p ase o! its reprod%ction process e8ery ind%strial capital per!orms as commoditycapital and as money-capital t e 8ery !%nctions @ ic appear as t e excl%si8e !%nctions o! t e t@o !orms o! merc ant"s capital, s o%ld r%le o%t s%c a cr%de notion0 3n t e ot er and, in commercial and money-dealing capital t e di!!erences bet@een ind%strial capital as prod%cti8e capital and t e same capital in t e sp ere o! circ%lation are indi8id%alised t ro%g t e !act t at t e de!inite !orms and !%nctions @ ic capital ass%mes !or t e moment appear as independent !orms and !%nctions o! a separate portion o! t e capital and are excl%si8ely bo%nd %p @it it0 5 e transm%ted !orm o! ind%strial capital and t e material di!!erences bet@een prod%cti8e capitals applied in di!!erent branc es o! ind%stry, @ ic arise !rom t e nat%re o! t ese 8ario%s branc es, are @orlds apart0 ?side !rom t e cr%dity @it @ ic t e economist generally considers distinctions o! !orm, @ ic really concern im only !rom t eir s%bstanti8e side, t is misconception by t e 8%lgar economist is explained on t@o additional co%nts0 First, is inability to explain t e pec%liar nat%re o! mercantile pro!it# and, secondly, is apologetic endea8o%rs to ded%ce commodity-capital and money-capital, and later commercial capital and money-dealing capital as !orms arising necessarily !rom t e process o! prod%ction as s%c , @ ereas t ey are d%e to t e speci!ic !orm o! t e capitalist mode o! prod%ction, @ ic abo8e all pres%pposes t e circ%lation o! commodities, and ence o! money, as its basis0 &! commercial capital and money-dealing capital do not di!!er !rom grain prod%ction any more t an t is di!!ers !rom cattle-raising and man%!act%ring, it is plain as day t at prod%ction and capitalist prod%ction are altoget er identical, and t at, among ot er t ings, t e distrib%tion o! t e social prod%cts among t e members o! a society, be it !or prod%cti8e or indi8id%al cons%mption, m%st H%st as consistently be andled by merc ants and bankers as t e cons%mption o! meat by cattle-raising and t at o! clot ing by t eir man%!act%re0 1 5 e great economists, s%c as $mit , )icardo, etc0, are perplexed o8er mercantile capital being a special 8ariety, since t ey consider t e basic !orm o! capital, capital as ind%strial capital, and circ%lation capital Bcommodity-capital and money-capitalC solely beca%se it is a p ase in t e reprod%ction process o! e8ery capital0 5 e r%les concerning t e !ormation o! 8al%e, pro!it, etc0, immediately ded%ced by t em !rom t eir st%dy o! ind%strial capital, do not extend directly to merc ant"s capital0 For t is reason, t ey lea8e merc ant"s capital entirely aside and mention it only as a kind o! ind%strial capital0 W ere8er t ey make a special analysis o! it, as )icardo does in dealing @it !oreign trade, t ey seek to demonstrate t at it creates no 8al%e Band conseD%ently no s%rpl%s-8al%eC0 A%t @ ate8er is tr%e o! !oreign trade, is also tr%e o! ome trade0 6it erto @e a8e considered merc ant"s capital merely !rom t e standpoint, and @it in t e limits, o! t e capitalist mode o! prod%ction0 6o@e8er, not commerce alone, b%t also merc ant"s capital,

<1+

; apter JJ

is older t an t e capitalist mode o! prod%ction, is, in !act, istorically t e oldest !ree state o! existence o! capital0 $ince @e a8e already seen t at money-dealing and t e capital ad8anced !or it reD%ire not ing more !or t eir de8elopment t an t e existence o! @ olesale commerce, and !%rt er o! commercial capital, it is only t e latter @ ic @e m%st occ%py o%rsel8es @it ere0 $ince merc ant"s capital is penned in t e sp ere o! circ%lation, and since its !%nction consists excl%si8ely o! promoting t e exc ange o! commodities, it reD%ires no ot er conditions !or its existence I aside !rom t e %nde8eloped !orms arising !rom direct barter I o%tside t ose necessary !or t e simple circ%lation o! commodities and money0 3r rat er, t e latter is t e condition o! its existence0 -o matter @ at t e basis on @ ic prod%cts are prod%ced, @ ic are t ro@n into circ%lation as commodities I @ et er t e basis o! t e primiti8e comm%nity, o! sla8e prod%ction, o! small peasant and petty bo%rgeois, or t e capitalist basis, t e c aracter o! prod%cts as commodities is not altered, and as commodities t ey m%st pass t ro%g t e process o! exc ange and its attendant c anges o! !orm0 5 e extremes bet@een @ ic merc ant"s capital acts as mediator exist !or it as gi8en, H%st as t ey are gi8en !or money and !or its mo8ements0 5 e only necessary t ing is t at t ese extremes s o%ld be on and as commodities, regardless o! @ et er prod%ction is @ olly a prod%ction o! commodities, or @ et er only t e s%rpl%s o! t e independent prod%cers" immediate needs, satis!ied by t eir o@n prod%ction, is t ro@n on t e market0 Merc ant"s capital promotes only t e mo8ements o! t ese extremes, o! t ese commodities, @ ic are preconditions o! its o@n existence0 5 e extent to @ ic prod%cts enter trade and go t ro%g t e merc ants" ands depends on t e mode o! prod%ction, and reac es its maxim%m in t e %ltimate de8elopment o! capitalist prod%ction, @ ere t e prod%ct is prod%ced solely as a commodity, and not as a direct means o! s%bsistence0 3n t e ot er and, on t e basis o! e8ery mode o! prod%ction, trade !acilitates t e prod%ction o! s%rpl%s-prod%cts destined !or exc ange, in order to increase t e enHoyments, or t e @ealt , o! t e prod%cers B ere meant are t e o@ners o! t e prod%ctsC0 6ence, commerce imparts to prod%ction a c aracter directed more and more to@ards exc ange-8al%e0 5 e metamorp osis o! commodities, t eir mo8ement, consists 1C materially, o! t e exc ange o! di!!erent commodities !or one anot er, and <C !ormally, o! t e con8ersion o! commodities into money by sale, and o! money into commodities by p%rc ase0 ?nd t e !%nction o! merc ant"s capital resol8es itsel! into t ese 8ery acts o! b%ying and selling commodities0 &t t ere!ore merely promotes t e exc ange o! commodities# yet t is exc ange is not to be concei8ed at t e o%tset as a bare exc ange o! commodities bet@een direct prod%cers0 (nder sla8ery, !e%dalism and 8assalage Bso !ar as primiti8e comm%nities are concernedC it is t e sla8e-o@ner, t e !e%dal lord, t e trib%tecollecting state, @ o are t e o@ners, ence sellers, o! t e prod%cts0 5 e merc ant b%ys and sells !or many0 ,%rc ases and sales are concentrated in is ands and conseD%ently are no longer bo%nd to t e direct reD%irements o! t e b%yer Bas merc antC0 A%t @ ate8er t e social organisation o! t e sp eres o! prod%ction @ ose commodity exc ange t e merc ant promotes, is @ealt exists al@ays in t e !orm o! money, and is money al@ays ser8es as capital0 &ts !orm is al@ays M I ; I M"0 Money, t e independent !orm o! exc ange-8al%e, is t e point o! depart%re, and increasing t e exc ange-8al%e an end in itsel!0 ;ommodity exc ange as s%c and t e operations e!!ecting it I separated !rom prod%ction and per!ormed by non-prod%cers I are H%st a means o! increasing @ealt not as mere @ealt , b%t as @ealt in its most %ni8ersal social !orm, as exc ange-8al%e0 5 e compelling moti8e and determining p%rpose are t e con8ersion o! M into M U cM0 5 e transactions M I ; and ; I M", @ ic promote M I M", appear merely as stages o! transition in t is con8ersion o! M into M U cM0 5 is M I ; I M", t e c aracteristic mo8ement o! merc ant"s capital, disting%is es it !rom ; I M I ;, trade in commodities directly bet@een prod%cers, @ ic as !or its %ltimate end t e exc ange o! %se8al%es0

<16

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5 e less de8eloped t e prod%ction, t e more @ealt in money is concentrated in t e ands o! merc ants or appears in t e speci!ic !orm o! merc ants" @ealt 0 Wit in t e capitalist mode o! prod%ction I i.e., as soon as capital as establis ed its s@ay o8er prod%ction and imparted to it a @ olly c anged and speci!ic !orm I merc ant"s capital appears merely as a capital @it a specific !%nction0 &n all pre8io%s modes o! prod%ction, and all t e more, @ ere8er prod%ction ministers to t e immediate @ants o! t e prod%cer, merc ant"s capital appears to per!orm t e !%nction par e cellence o! capital0 5 ere is, t ere!ore, not t e least di!!ic%lty in %nderstanding @ y merc ant"s capital appears as t e istorical !orm o! capital long be!ore capital establis ed its o@n domination o8er prod%ction0 &ts existence and de8elopment to a certain le8el are in t emsel8es istorical premises !or t e de8elopment o! capitalist prod%ction 1C as premises !or t e concentration o! money @ealt , and <C beca%se t e capitalist mode o! prod%ction pres%pposes prod%ction !or trade, selling on a large scale, and not to t e indi8id%al c%stomer, ence also a merc ant @ o does not b%y to satis!y is personal @ants b%t concentrates t e p%rc ases o! many b%yers in is one p%rc ase0 3n t e ot er and, all de8elopment o! merc ant"s capital tends to gi8e prod%ction more and more t e c aracter o! prod%ction !or exc ange-8al%e and to t%rn prod%cts more and more into commodities0 .et its de8elopment, as @e s all presently see, is incapable by itsel! o! promoting and explaining t e transition !rom one mode o! prod%ction to anot er0 Wit in capitalist prod%ction merc ant"s capital is red%ced !rom its !ormer independent existence to a special p ase in t e in8estment o! capital, and t e le8elling o! pro!its red%ces its rate o! pro!it to t e general a8erage0 &t !%nctions only as an agent o! prod%cti8e capital0 5 e special social conditions t at take s ape @it t e de8elopment o! merc ant"s capital, are ere no longer paramo%nt0 3n t e contrary, @ ere8er merc ant"s capital still predominates @e !ind back@ard conditions0 5 is is tr%e e8en @it in one and t e same co%ntry, in @ ic , !or instance, t e speci!ically merc ant to@ns present !ar more striking analogies @it past conditions t an ind%strial to@ns0< 5 e independent and predominant de8elopment o! capital as merc ant"s capital is tantamo%nt to t e non-s%bHection o! prod%ction to capital, and ence to capital de8eloping on t e basis o! an alien social mode o! prod%ction @ ic is also independent o! it0 5 e independent de8elopment o! merc ant"s capital, t ere!ore, stands in in8erse proportion to t e general economic de8elopment o! society0 &ndependent mercantile @ealt as a predominant !orm o! capital represents t e separation o! t e circ%lation process !rom its extremes, and t ese extremes are t e exc anging prod%cers t emsel8es0 5 ey remain independent o! t e circ%lation process, H%st as t e latter remains independent o! t em0 5 e prod%ct becomes a commodity by @ay o! commerce0 &t is commerce @ ic ere t%rns prod%cts into commodities, not t e prod%ced commodity @ ic by its mo8ements gi8es rise to commerce0 5 %s, capital appears ere !irst as capital in t e process o! circ%lation0 &t is in t e circ%lation process t at money de8elops into capital0 &t is in circ%lation t at prod%cts !irst de8elop as exc ange-8al%es, as commodities and as money0 ;apital can, and m%st, !orm in t e process o! circ%lation, be!ore it learns to control its extremes I t e 8ario%s sp eres o! prod%ction bet@een @ ic circ%lation mediates0 Money and commodity circ%lation can mediate bet@een sp eres o! prod%ction o! @idely di!!erent organisation, @ ose internal str%ct%re is still c ie!ly adH%sted to t e o%tp%t o! %se-8al%es0 5 is indi8id%alisation o! t e circ%lation process, in @ ic sp eres o! prod%ction are interconnected by means o! a t ird, as a t@o-!old signi!icance0 3n t e one and, t at circ%lation as not as yet establis ed a old on prod%ction, b%t is related to it as to a gi8en premise0 3n t e ot er and, t at t e prod%ction process as not as yet absorbed circ%lation as a mere p ase o! prod%ction0 Aot , o@e8er, are t e case in capitalist prod%ction0 5 e prod%ction process rests @ olly %pon circ%lation, and circ%lation is a mere transitional p ase o! prod%ction, in @ ic t e prod%ct created as a commodity is realised and its elements o! prod%ction, like@ise created as commodities, are replaced0 5 at !orm o! capital I merc ant"s

<1>

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capital I @ ic de8eloped directly o%t o! circ%lation appears ere merely as one o! t e !orms o! capital occ%rring in its reprod%ction process0 5 e la@ t at t e independent de8elopment o! merc ant"s capital is in8ersely proportional to t e degree o! de8elopment o! capitalist prod%ction is partic%larly e8ident in t e istory o! t e carrying trade, as among t e 4enetians, :enoese, 7%tc , etc0, @ ere t e principal gains @ere not t %s made by exporting domestic prod%cts, b%t by promoting t e exc ange o! prod%cts o! commercially and ot er@ise economically %nde8eloped societies, and by exploiting bot prod%cing co%ntries03 6ere, merc ant"s capital is in its p%re !orm, separated !rom t e extremes I t e sp eres o! prod%ction bet@een @ ic it mediates0 5 is is t e main so%rce o! its de8elopment0 A%t t is monopoly o! t e carrying trade disintegrates, and @it it t is trade itsel!, proportionately to t e economic de8elopment o! t e peoples, @ om it exploits at bot ends o! its co%rse, and @ ose lack o! de8elopment @as t e basis o! its existence0 &n t e case o! t e carrying trade t is appears not only as t e decline o! a special branc o! commerce, b%t also t at o! t e predominance o! t e p%rely trading nations, and o! t eir commercial @ealt in general, @ ic rested %pon t e carrying trade0 5 is is b%t a special !orm, in @ ic is expressed t e s%bordination o! merc ants to ind%strial capital @it t e ad8ance o! capitalist prod%ction0 5 e be a8io%r o! merc ant"s capital @ ere8er it r%les o8er prod%ction is strikingly ill%strated not only by t e colonial economy Bt e so-called colonial systemC in general, b%t D%ite speci!ically by t e met ods o! t e old 7%tc East &ndia ;ompany0 $ince t e mo8ement o! merc ant"s capital is M I ; I M", t e merc ant"s pro!it is made, !irst, in acts @ ic occ%r only @it in t e circ%lation process, ence in t e t@o acts o! b%ying and selling# and, secondly, it is realised in t e last act, t e sale0 &t is t ere!ore pro!it %pon alienation0 &rima facie, a p%re and independent commercial pro!it seems impossible so long as prod%cts are sold at t eir 8al%e0 5o b%y c eap in order to sell dear is t e r%le o! trade0 6ence, not t e exc ange o! eD%i8alents0 5 e conception o! 8al%e is incl%ded in it in so !ar as t e 8ario%s commodities are all 8al%es, and t ere!ore money0 &n respect to D%ality t ey are all expressions o! social labo%r0 A%t t ey are not 8al%es o! eD%al magnit%de0 5 e D%antitati8e ratio in @ ic prod%cts are exc anged is at !irst D%ite arbitrary0 5 ey ass%me t e !orm o! commodities inasm%c as t ey are exc angeables, i.e., expressions o! one and t e same t ird0 ;ontin%ed exc ange and more reg%lar reprod%ction !or exc ange red%ces t is arbitrariness more and more0 A%t at !irst not !or t e prod%cer and cons%mer, b%t !or t eir go-bet@een, t e merc ant, @ o compares money-prices and pockets t e di!!erence0 &t is t ro%g is o@n mo8ements t at e establis es eD%i8alence0 Merc ant"s capital is originally merely t e inter8ening mo8ement bet@een extremes @ ic it does not control, and bet@een premises @ ic it does not create0 P%st as money originates !rom t e bare !orm o! commodity-circ%lation, ; I M I ;, not only as a meas%re o! 8al%e and a medi%m o! circ%lation, b%t also as t e absol%te !orm o! commodity, and ence o! @ealt , or oard, so t at its conser8ation and acc%m%lation as money becomes an end in itsel!, so, too, does money, t e oard, as somet ing t at preser8es and increases itsel! t ro%g mere alienation, originate !rom t e bare !orm o! t e circ%lation o! merc ant"s capital, M I ; I M"0 5 e trading nations o! ancient times existed like t e gods o! Epic%r%s in t e intermediate @orlds o! t e %ni8erse, or rat er like t e Pe@s in t e pores o! ,olis society0 5 e trade o! t e !irst independent !lo%ris ing merc ant to@ns and trading nations rested as a p%re carrying trade %pon t e barbarism o! t e prod%cing nations, bet@een @ om t ey acted t e middleman0 &n t e pre-capitalist stages o! society commerce r%led ind%stry0 &n modern society t e re8erse is tr%e0 3! co%rse, commerce @ill a8e more or less o! a co%nter-e!!ect on t e comm%nities bet@een @ ic it is carried on0 &t @ill s%bordinate prod%ction more and more to exc ange-8al%e by making l%x%ries and s%bsistence more dependent on sale t an on t e immediate %se o! t e prod%cts0 5 ereby it dissol8es t e old relations ips0 &t m%ltiplies money circ%lation0 &t encompasses no longer merely t e s%rpl%s o! prod%ction, b%t bites deeper and deeper into t e latter, and makes

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entire branc es o! prod%ction dependent %pon it0 -e8ert eless t is disintegrating e!!ect depends 8ery m%c on t e nat%re o! t e prod%cing comm%nity0 $o long as merc ant"s capital promotes t e exc ange o! prod%cts bet@een %nde8eloped societies, commercial pro!it not only appears as o%t-bargaining and c eating, b%t also largely originates !rom t em0 ?side !rom t e !act t at it exploits t e di!!erence bet@een t e prices o! prod%ction o! 8ario%s co%ntries Band in t is respect it tends to le8el and !ix t e 8al%es o! commoditiesC, t ose modes o! prod%ction bring it abo%t t at merc ant"s capital appropriates an o8er@ elming portion o! t e s%rpl%s-prod%ct partly as a mediator bet@een comm%nities @ ic still s%bstantially prod%ce !or %se-8al%e, and !or @ ose economic organisation t e sale o! t e portion o! t eir prod%ct entering circ%lation, or !or t at matter any sale o! prod%cts at t eir 8al%e, is o! secondary importance# and partly, beca%se %nder t ose earlier modes o! prod%ction t e principal o@ners o! t e s%rpl%s-prod%ct @it @ om t e merc ant dealt, namely, t e sla8e-o@ner, t e !e%dal lord, and t e state B!or instance, t e oriental despotC represent t e cons%ming @ealt and l%x%ry @ ic t e merc ant seeks to trap, as ?dam $mit correctly scented in t e passage on !e%dal times D%oted earlier0 Merc ant"s capital, @ en it olds a position o! dominance, stands e8ery@ ere !or a system o! robbery,2 so t at its de8elopment among t e trading nations o! old and modern times is al@ays directly connected @it pl%ndering, piracy, kidnapping sla8es, and colonial conD%est# as in ;art age, )ome, and later among t e 4enetians, ,ort%g%ese, 7%tc , etc0 5 e de8elopment o! commerce and merc ant"s capital gi8es rise e8ery@ ere to t e tendency to@ards prod%ction o! exc ange-8al%es, increases its 8ol%me, m%ltiplies it, makes it cosmopolitan, and de8elops money into @orld-money0 ;ommerce, t ere!ore, as a more or less dissol8ing in!l%ence e8ery@ ere on t e prod%cing organisation, @ ic it !inds at and and @ ose di!!erent !orms are mainly carried on @it a 8ie@ to %se-8al%e0 5o @ at extent it brings abo%t a dissol%tion o! t e old mode o! prod%ction depends on its solidity and internal str%ct%re0 ?nd @ it er t is process o! dissol%tion @ill lead, in ot er @ords, @ at ne@ mode o! prod%ction @ill replace t e old, does not depend on commerce, b%t on t e c aracter o! t e old mode o! prod%ction itsel!0 &n t e ancient @orld t e e!!ect o! commerce and t e de8elopment o! merc ant"s capital al@ays res%lted in a sla8e economy# depending on t e point o! depart%re, only in t e trans!ormation o! patriarc al sla8e system de8oted to t e prod%ction o! immediate means o! s%bsistence into one de8oted to t e prod%ction o! s%rpl%s-8al%e0 6o@e8er, in t e modern @orld, it res%lts in t e capitalist mode o! prod%ction0 &t !ollo@s t ere!rom t at t ese res%lts spring in t emsel8es !rom circ%mstances ot er t an t e de8elopment o! merc ant"s capital0 &t is in t e nat%re o! t ings t at as soon as to@n ind%stry as s%c separates !rom agric%lt%ral ind%stry, its prod%cts are !rom t e o%tset commodities and t %s reD%ire t e mediation o! commerce !or t eir sale0 5 e leaning o! commerce to@ards t e de8elopment o! to@ns, and, on t e ot er and, t e dependence o! to@ns %pon commerce, are so !ar nat%ral0 6o@e8er, it depends on altoget er di!!erent circ%mstances to @ at meas%re ind%strial de8elopment @ill go and in and @it t is de8elopment0 ?ncient )ome, in its later rep%blican days, de8eloped merc ant"s capital to a ig er degree t an e8er be!ore in t e ancient @orld, @it o%t s o@ing any progress in t e de8elopment o! cra!ts, @ ile in ;orint and ot er :recian to@ns in E%rope and ?sia Minor t e de8elopment o! commerce @as accompanied by ig ly de8eloped cra!ts0 3n t e ot er and, D%ite contrary to t e gro@t o! to@ns and attendant conditions, t e trading spirit and t e de8elopment o! merc ant"s capital occ%r !reD%ently among %nsettled nomadic peoples0 5 ere is no do%bt I and it is precisely t is !act @ ic as led to @ olly erroneo%s conceptions I t at in t e 16t and 1>t cent%ries t e great re8ol%tions, @ ic took place in commerce @it t e geograp ical disco8eries and speeded t e de8elopment o! merc ant"s capital, constit%te one o! t e principal elements in !%rt ering t e transition !rom !e%dal to capitalist mode o! prod%ction0 5 e s%dden expansion o! t e @orld-market, t e m%ltiplication o! circ%lating commodities, t e competiti8e Eeal o! t e E%ropean nations to possess t emsel8es o! t e prod%cts o! ?sia and t e treas%res o! ?merica, and t e colonial system I all contrib%ted materially to@ard destroying t e

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!e%dal !etters on prod%ction0 6o@e8er, in its !irst period I t e man%!act%ring period I t e modern mode o! prod%ction de8eloped only @ ere t e conditions !or it ad taken s ape @it in t e Middle ?ges0 ;ompare, !or instance, 6olland @it ,ort%gal0 + ?nd @ en in t e 16t , and partially still in t e 1>t , cent%ry t e s%dden expansion o! commerce and emergence o! a ne@ @orld-market o8er@ elmingly contrib%ted to t e !all o! t e old mode o! prod%ction and t e rise o! capitalist prod%ction, t is @as accomplis ed con8ersely on t e basis o! t e already existing capitalist mode o! prod%ction0 5 e @orld-market itsel! !orms t e basis !or t is mode o! prod%ction0 3n t e ot er and, t e immanent necessity o! t is mode o! prod%ction to prod%ce on an e8er-enlarged scale tends to extend t e @orld-market contin%ally, so t at it is not commerce in t is case @ ic re8ol%tionises ind%stry, b%t ind%stry @ ic constantly re8ol%tionises commerce0 ;ommercial s%premacy itsel! is no@ linked @it t e pre8alence to a greater or lesser degree o! conditions !or a large ind%stry0 ;ompare, !or instance, England and 6olland0 5 e istory o! t e decline o! 6olland as t e r%ling trading nation is t e istory o! t e s%bordination o! merc ant"s capital to ind%strial capital0 5 e obstacles presented by t e internal solidity and organisation o! pre-capitalistic, national modes o! prod%ction to t e corrosi8e in!l%ence o! commerce are strikingly ill%strated in t e interco%rse o! t e Englis @it &ndia and ; ina0 5 e broad basis o! t e mode o! prod%ction ere is !ormed by t e %nity o! small-scale agric%lt%re and ome ind%stry, to @ ic in &ndia @e s o%ld add t e !orm o! 8illage comm%nities b%ilt %pon t e common o@ners ip o! land, @ ic , incidentally, @as t e original !orm in ; ina as @ell0 &n &ndia t e Englis lost no time in exercising t eir direct political and economic po@er, as r%lers and landlords, to disr%pt t ese small economic comm%nities06 Englis commerce exerted a re8ol%tionary in!l%ence on t ese comm%nities and tore t em apart only in so !ar as t e lo@ prices o! its goods ser8ed to destroy t e spinning and @ea8ing ind%stries, @ ic @ere an ancient integrating element o! t is %nity o! ind%strial and agric%lt%ral prod%ction0 ?nd e8en so t is @ork o! dissol%tion proceeds 8ery grad%ally0 ?nd still more slo@ly in ; ina, @ ere it is not rein!orced by direct political po@er0 5 e s%bstantial economy and sa8ing in time a!!orded by t e association o! agric%lt%re @it man%!act%re p%t %p a st%bborn resistance to t e prod%cts o! t e big ind%stries, @ ose prices incl%de t e fau frais o! t e circ%lation process @ ic per8ades t em0 (nlike t e Englis , )%ssian commerce, on t e ot er and, lea8es t e economic gro%nd@ork o! ?siatic prod%ction %nto%c ed0 > 5 e transition !rom t e !e%dal mode o! prod%ction is t@o-!old0 5 e prod%cer becomes merc ant and capitalist, in contrast to t e nat%ral agric%lt%ral economy and t e g%ild-bo%nd andicra!ts o! t e medie8al %rban ind%stries0 5 is is t e really re8ol%tionising pat 0 3r else, t e merc ant establis es direct s@ay o8er prod%ction0 6o@e8er m%c t is ser8es istorically as a steppingstone I @itness t e Englis 1>t -cent%ry clot ier, @ o brings t e @ea8ers, independent as t ey are, %nder is control by selling t eir @ool to t em and b%ying t eir clot I it cannot by itsel! contrib%te to t e o8ert ro@ o! t e old mode o! prod%ction, b%t tends rat er to preser8e and retain it as its precondition0 5 e man%!act%rer in t e Frenc silk ind%stry and in t e Englis osiery and lace ind%stries, !or example, @as t %s mostly b%t nominally a man%!act%rer %ntil t e middle o! t e 1*t cent%ry0 &n point o! !act, e @as merely a merc ant, @ o let t e @ea8ers carry on in t eir old %norganised @ay and exerted only a merc ant"s control, !or t at @as !or @ om t ey really @orked08 5 is system presents e8ery@ ere an obstacle to t e real capitalist mode o! prod%ction and goes %nder @it its de8elopment0 Wit o%t re8ol%tionising t e mode o! prod%ction, it only @orsens t e condition o! t e direct prod%cers, t%rns t em into mere @age-@orkers and proletarians %nder conditions @orse t an t ose %nder t e immediate control o! capital, and appropriates t eir s%rpl%s-labo%r on t e basis o! t e old mode o! prod%ction0 5 e same conditions exist in some@ at modi!ied !orm in part o! t e 'ondon andicra!t !%rnit%re ind%stry0 &t is practised notably in t e 5o@er 6amlets on a 8ery large scale0 5 e @ ole prod%ction is di8ided into 8ery n%mero%s separate branc es o! b%siness independent o! one anot er0 3ne establis ment makes only c airs, anot er only tables, a t ird only b%rea%s, etc0 A%t t ese establis ments t emsel8es are r%n more or less like andicra!ts by a single minor master and a !e@ Ho%rneymen0

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-e8ert eless, prod%ction is too large to @ork directly !or pri8ate persons0 5 e b%yers are t e o@ners o! !%rnit%re stores0 3n $at%rdays t e master 8isits t em and sells is prod%ct, t e transaction being closed @it as m%c aggling as in a pa@ns op o8er a loan0 5 e masters depend on t is @eekly sale, i! !or no ot er reason t an to be able to b%y ra@ materials !or t e !ollo@ing @eek and to pay o%t @ages0 (nder t ese circ%mstances, t ey are really only middlemen bet@een t e merc ant and t eir o@n labo%rers0 5 e merc ant is t e act%al capitalist @ o pockets t e lion"s s are o! t e s%rpl%s-8al%e0 * ?lmost t e same applies in t e transition to man%!act%re o! branc es !ormerly carried on as andicra!ts or side lines to r%ral ind%stries0 5 e transition to large-scale ind%stry depends on t e tec nical de8elopment o! t ese small o@ner-operated establis ments I @ ere8er t ey employ mac inery t at admits o! a andicra!t-like operation0 5 e mac ine is dri8en by steam, instead o! by and0 5 is is o! late t e case, !or instance, in t e Englis osiery ind%stry0 5 ere is, conseD%ently, a t ree-!old transition0 'irst, t e merc ant becomes directly an ind%strial capitalist0 5 is is tr%e in cra!ts based on trade, especially cra!ts prod%cing l%x%ries and imported by merc ants toget er @it t e ra@ materials and labo%rers !rom !oreign lands, as in &taly !rom ;onstantinople in t e 1+t cent%ry0 Second, t e merc ant t%rns t e small masters into is middlemen, or b%ys directly !rom t e independent prod%cer, lea8ing im nominally independent and is mode o! prod%ction %nc anged0 4hird, t e ind%strialist becomes merc ant and prod%ces directly !or t e @ olesale market0 &n t e Middle ?ges, t e merc ant @as merely one @ o, as ,oppe rig tly says, Ktrans!erredL t e goods prod%ced by g%ilds or peasants /,oppe, Geschichte der 4echnologie seit der "iederherstellung der "issenschaften bis an das 0nde des acht#ehnten Jahrhunderts , Aand &, :dttingen0 18=>, $0 >=0 I 0d01 5 e merc ant becomes ind%strialist, or rat er, makes cra!tsmen, partic%larly t e small r%ral prod%cers, @ork !or im0 ;on8ersely, t e prod%cer becomes merc ant0 5 e master @ea8er, !or instance, b%ys is @ool or yarn imsel! and sells is clot to t e merc ant, instead o! recei8ing is @ool !rom t e merc ant piecemeal and @orking !or im toget er @it is Ho%rneymen0 5 e elements o! prod%ction pass into t e prod%ction process as commodities bo%g t by imsel!0 ?nd instead o! prod%cing !or some indi8id%al merc ant, or !or speci!ied c%stomers, e prod%ces !or t e @orld o! trade0 5 e prod%cer is imsel! a merc ant0 Merc ant"s capital does no more t an carry on t e process o! circ%lation0 3riginally, commerce @as t e precondition !or t e trans!ormation o! t e cra!ts, t e r%ral domestic ind%stries, and !e%dal agric%lt%re, into capitalist enterprises0 &t de8elops t e prod%ct into a commodity, partly by creating a market !or it, and partly by introd%cing ne@ commodity eD%i8alents and s%pplying prod%ction @it ne@ ra@ and a%xiliary materials, t ereby opening ne@ branc es o! prod%ction based !rom t e !irst %pon commerce, bot as concerns prod%ction !or t e ome and @orld-market, and as concerns conditions o! prod%ction originating in t e @orld-market0 ?s soon as man%!act%re gains s%!!icient strengt , and partic%larly large-scale ind%stry, it creates in its t%rn a market !or itsel!, by capt%ring it t ro%g its commodities0 ?t t is point commerce becomes t e ser8ant o! ind%strial prod%ction, !or @ ic contin%ed expansion o! t e market becomes a 8ital necessity0 E8er more extended mass prod%ction !loods t e existing market and t ereby @orks contin%ally !or a still greater expansion o! t is market !or breaking o%t o! its limits0 W at restricts t is mass prod%ction is not commerce Bin so !ar as it expresses t e existing demandC, b%t t e magnit%de o! employed capital and t e le8el o! de8elopment o! t e prod%cti8ity o! labo%r0 5 e ind%strial capitalist al@ays as t e @orld-market be!ore im, compares, and m%st constantly compare, is o@n cost-prices @it t e market-prices at ome, and t ro%g o%t t e @orld0 &n t e earlier period s%c comparison !ell almost entirely to t e merc ants, and t %s sec%red t e predominance o! merc ant"s capital o8er ind%strial capital0 5 e !irst t eoretical treatment o! t e modern mode o! prod%ction I t e mercantile system I proceeded necessarily !rom t e s%per!icial p enomena o! t e circ%lation process as indi8id%alised in t e mo8ements o! merc ant"s capital, and t ere!ore grasped only t e appearance o! matters0

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,artly beca%se merc ant"s capital is t e !irst !ree state o! existence o! capital in general0 ?nd partly beca%se o! t e o8er@ elming in!l%ence @ ic it exerted d%ring t e !irst re8ol%tionising period o! !e%dal prod%ction I t e genesis o! modern prod%ction0 5 e real science o! modern economy only begins @ en t e t eoretical analysis passes !rom t e process o! circ%lation to t e process o! prod%ction0 &nterest-bearing capital is, indeed, like@ise a 8ery old !orm o! capital0 A%t @e s all see later @ y mercantilism does not take it as its point o! depart%re, b%t rat er carries on a polemic against it0

Part !. +ivision of Profit into Interest an" Profit of Enterprise. Interest -earing Capital
Chapter 21. 5nterest-(earin) Capital
&n o%r !irst disc%ssion o! t e general, or a8erage, rate o! pro!it B,art && o! t is bookC @e did not a8e t is rate be!ore %s in its complete !orm, t e eD%alisation o! pro!it appearing only as eD%alisation bet@een ind%strial capitals in8ested in di!!erent sp eres0 5 is @as s%pplemented in t e preceding part, @ ic dealt @it t e participation o! merc ant"s capital in t is eD%alisation, and also commercial pro!it0 5 e general rate o! pro!it and t e a8erage pro!it no@ appeared in narro@er limits t an be!ore0 &t s o%ld be remembered in t e co%rse o! o%r analysis t at in any !%t%re re!erence to t e general rate o! pro!it or to a8erage pro!it @e mean t is latter connotation, ence only t e !inal !orm o! a8erage rate0 ?nd since t is rate is t e same !or mercantile, as @ell as ind%strial, capital, it is no longer necessary, so !ar as t is a8erage pro!it is concerned, to make a distinction bet@een ind%strial and commercial pro!it0 W et er ind%strially in8ested in t e sp ere o! prod%ction, or commercially in t e sp ere o! circ%lation, capital yields t e same a8erage ann%al pro!it pro rata to its magnit%de0 Money I ere taken as t e independent expression o! a certain amo%nt o! 8al%e existing eit er act%ally as money or as commodities I may be con8erted into capital on t e basis o! capitalist prod%ction, and may t ereby be trans!ormed !rom a gi8en 8al%e to a sel!-expanding, or increasing, 8al%e0 &t prod%ces pro!it, i.e., it enables t e capitalist to extract a certain D%antity o! %npaid labo%r, s%rpl%s-prod%ct and s%rpl%s-8al%e !rom t e labo%rers, and to appropriate it0 &n t is @ay, aside !rom its %se-8al%e as money, it acD%ires an additional %se-8al%e, namely t at o! ser8ing as capital0 &ts %se-8al%e t en consists precisely in t e pro!it it prod%ces @ en con8erted into capital0 &n t is capacity o! potential capital, as a means o! prod%cing pro!it, it becomes a commodity, b%t a commoditysui generis0 3r, @ at amo%nts to t e same, capital as capital becomes a commodity0 1 $%ppose t e ann%al a8erage rate o! pro!it is <=T0 &n t at case a mac ine 8al%ed at V1==, employed as capital %nder a8erage conditions and an a8erage amo%nt o! intelligence and p%rposi8e e!!ort, @o%ld yield a pro!it o! V<=0 ? man in possession o! V1==, t ere!ore, possesses t e po@er to make V1<= o%t o! V1==, or to prod%ce a pro!it o! V<=0 6e possesses a potential capital o! V1==0 &! e gi8es t ese V1== to anot er !or one year, so t e latter may %se t em as real capital, e gi8es im t e po@er to prod%ce a pro!it o! V<= I a s%rpl%s-8al%e @ ic costs t is ot er not ing, and !or @ ic e pays no eD%i8alent0 &! t is ot er s o%ld pay, say, V+ at t e close o! t e year to t e o@ner o! t e V1== o%t o! t e pro!it prod%ced, e @o%ld t ereby pay t e %se-8al%e o! t e V1== I t e %se-8al%e o! its !%nction as capital, t e !%nction o! prod%cing a pro!it o! V<=0 5 e part o! t e pro!it paid to t e o@ner is called interest, @ ic is H%st anot er name, or special term, !or a part o! t e pro!it gi8en %p by capital in t e process o! !%nctioning to t e o@ner o! t e capital, instead o! p%tting it into its o@n pocket0 &t is plain t at t e possession o! V1== gi8es t eir o@ner t e po@er to pocket t e interest I t at certain portion o! pro!it prod%ced by means o! is capital0 &! e ad not gi8en t e V1== to t e ot er person, t e latter co%ld not a8e prod%ced any pro!it, and co%ld not at all a8e acted as a capitalist @it re!erence to t ese V1==0<

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5o speak ere o! nat%ral H%stice, as :ilbart does Bsee noteC, is nonsense0 5 e H%stice o! t e transactions bet@een agents o! prod%ction rests on t e !act t at t ese arise as nat%ral conseD%ences o%t o! t e prod%ction relations ips0 5 e H%ristic !orms in @ ic t ese economic transactions appear as @il!%l acts o! t e parties concerned, as expressions o! t eir common @ill and as contracts t at may be en!orced by la@ against some indi8id%al party, cannot, being mere !orms, determine t is content0 5 ey merely express it0 5 is content is H%st @ ene8er it corresponds, is appropriate, to t e mode o! prod%ction0 &t is %nH%st @ ene8er it contradicts t at mode0 $la8ery on t e basis o! capitalist prod%ction is %nH%st# like@ise !ra%d in t e D%ality o! commodities0 5 e V1== prod%ce t e pro!it o! V<= beca%se t ey !%nction as capital, be it ind%strial or mercantile0 A%t t e sine 3ua non o! t is !%nction as capital is t at t ey are expended as capital, i.e., are expended in p%rc asing means o! prod%ction Bin t e case o! ind%strial capitalC or commodities Bin t e case o! merc ant"s capitalC0 A%t to be expended, t ey m%st be a8ailable0 &! ?, t e o@ner o! t e V1==, @ere eit er to spend t em !or personal cons%mption, or to keep t em as a oard, t ey co%ld not a8e been in8ested as capital by A in is capacity o! !%nctioning capitalist0 A does not expend is o@n capital, b%t ?"s# o@e8er, e cannot expend ?"s capital @it o%t ?"s consent0 5 ere!ore, it is really ? @ o originally expends t e V1== as capital, albeit is !%nction as capitalist is limited to t is o%tlay o! V1== as capital0 &n respect to t ese V1==, A acts as capitalist only beca%se ? lends im t e V1==, t %s expending t em as capital0 'et %s !irst consider t e sing%lar circ%lation o! interest-bearing capital0 We s all t en secondly a8e to analyse t e pec%liar manner in @ ic it is sold as a commodity, namely loaned instead o! relinD%is ed once and !or all0 5 e point o! depart%re is t e money @ ic ? ad8ances to A0 5 is may be done @it or @it o%t sec%rity0 5 e !irst-named !orm, o@e8er, is t e more ancient, sa8e ad8ances on commodities or paper, s%c as bills o! exc ange, s ares, etc0 5 ese special !orms do not concern %s at t is point0 We are dealing ere @it interest-bearing capital in its %s%al !orm0 &n A"s possession t e money is act%ally con8erted into capital, passes t ro%g M I ; I M" and ret%rns to ? as M", as MUcM, @ ere cM represents t e interest0 For t e sake o! simplicity @e s all not consider ere t e case, in @ ic capital remains in A"s possession !or a long term and interest is paid at reg%lar inter8als0 5 e mo8ement, t ere!ore, is M I M I ; I M" I M"0 W at appears d%plicated ere, is 1C t e o%tlay o! money as capital, and <C its re!l%x as realised capital, as M" or MUcM0 &n t e mo8ement o! merc ant"s capital, M I ; I M", t e same commodity c anges ands t@ice, or more t an t@ice, i! merc ant sells to merc ant0 A%t e8ery s%c c ange o! place o! t e same commodity indicates a metamorp osis, a p%rc ase or sale o! t e commodity, no matter o@ o!ten t e process may be repeated, %ntil it enters cons%mption0 3n t e ot er and, t e same money c anges ands t@ice in ; I M I ;, b%t t is indicates t e complete metamorp osis o! t e commodity, @ ic is !irst con8erted into money and t en !rom money back into anot er commodity0 A%t in interest-bearing capital t e !irst time M c anges ands is by no means a p ase eit er o! t e commodity metamorp osis, or o! reprod%ction o! capital0 &t !irst becomes one @ en it is expended a second time, in t e ands o! t e acti8e capitalist @ o carries on trade @it it, or trans!orms it into prod%cti8e capital0 M"s !irst c ange o! ands does not express anyt ing ere, beyond its trans!er !rom ? to A I a trans!er @ ic %s%ally takes place %nder certain legal !orms and stip%lations0

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5 is do%ble o%tlay o! money as capital, o! @ ic t e !irst is merely a trans!er !rom ? to A, is matc ed by its do%ble re!l%x0 ?s M", or M U cM, it !lo@s back o%t o! t e process to A, t e person acting as capitalist0 5 e latter t en trans!ers it back to ?, b%t toget er @it a part o! t e pro!it, as realised capital, as M U cM, in @ ic cM is not t e entire pro!it, b%t only a portion o! t e pro!it I t e interest0 &t !lo@s back to A only as @ at e ad expended, as !%nctioning capital, b%t as t e property o! ?0 5o make its re!l%x complete, A m%st conseD%ently ret%rn it to ?0 A%t in addition to t e capital, A m%st also t%rn o8er to ? a portion o! t e pro!it, a part @ ic goes %nder t e name o! interest, @ ic e ad made @it t is capital since ? ad gi8en im t e money only as a capital, i.e., as 8al%e @ ic is not only preser8ed in its mo8ement, b%t also creates s%rpl%s-8al%e !or its o@ner0 &t remains in A"s ands only so long as it is !%nctioning capital0 ?nd @it its re!l%x I on t e stip%lated date I it ceases to !%nction as capital0 W en no longer acting as capital, o@e8er, it m%st again be ret%rned to ?, @ o ad ne8er ceased being its legal o@ner0 5 e !orm o! lending, @ ic is pec%liar to t is commodity, to capital as commodity, and @ ic also occ%rs in ot er transactions instead o! t at o! sale, !ollo@s !rom t e simple de!inition t at capital obtains ere as a commodity, or t at money as capital becomes a commodity0 ? distinction s o%ld be made ere0 We a8e seen BAook &&, ; ap0 &C, and recall brie!ly at t is point, t at in t e process o! circ%lation capital ser8es as commodity-capital and money-capital0 A%t in neit er !orm does capital become a commodity as capital0 ?s soon as prod%cti8e capital t%rns into commodity-capital it m%st be placed on t e market to be sold as a commodity0 5 ere it acts simply as a commodity0 5 e capitalist t en appears only as t e seller o! commodities, H%st as t e b%yer is only t e b%yer o! commodities0 ?s a commodity t e prod%ct m%st realise its 8al%e, m%st ass%me its transm%ted !orm o! money, in t e process o! circ%lation by its sale0 &t is also D%ite immaterial !or t is reason, @ et er t is commodity is bo%g t by a cons%mer as a necessity o! li!e, or by a capitalist as means o! prod%ction, i.e., as a component part o! is capital0 &n t e act o! circ%lation commodity-capital acts only as a commodity, not as a capital0 &t is commodity- capital, as distinct !rom an ordinary commodity, 1C beca%se it is @eig ted @it s%rpl%s-8al%e, t e realisation o! its 8al%e, t ere!ore, being sim%ltaneo%sly t e realisation o! s%rpl%s-8al%e# b%t t is alters not ing abo%t its simple existence as a commodity, as a prod%ct @it a certain price# <C beca%se its !%nction as a commodity is a p ase in its process o! reprod%ction as capital, and t ere!ore its mo8ement as a commodity being only a partial mo8ement o! its process, is sim%ltaneo%sly its mo8ement as capital0 .et it does not become t at t ro%g t e sale as s%c , b%t only t ro%g t e connection o! t e sale @it t e @ ole mo8ement o! t is speci!ic D%antity o! 8al%e in t e capacity o! capital0 &n t e same @ay as money-capital it really acts simply as money, i.e., as a means o! b%ying commodities Bt e elements o! prod%ctionC0 5 e !act t at t is money is sim%ltaneo%sly moneycapital, a !orm o! capital, does not emerge !rom t e act o! b%ying, t e act%al !%nction @ ic it ere per!orms as money, b%t !rom t e connection o! t is act @it t e total mo8ement o! capital, since t is act, per!ormed by capital as money, initiates t e capitalist prod%ction process0 A%t in so !ar as t ey act%ally !%nction, i.e., act%ally play a role in t e process, commodity-capital acts ere only as a commodity and money-capital only as money0 ?t no time d%ring t e metamorp osis, 8ie@ed by itsel!, does t e capitalist sell is commodities as capital to t e b%yer, alt o%g to im t ey represent capital# nor does e gi8e %p money as capital to t e seller0 &n bot cases be gi8es %p is commodities simply as commodities, and money simply as money, i.e., as a means o! p%rc asing commodities0 &t is only in connection @it t e entire process, at t e moment @ ere t e point o! depart%re appears sim%ltaneo%sly as t e point o! ret%rn, in M I M" or ; I ;", t at capital in t e process o! circ%lation appears as capital B@ ereas in t e process o! prod%ction it appears as capital t ro%g t e s%bordination o! t e labo%rer to t e capitalist and t e prod%ction o! s%rpl%s 8al%eC0 &n t is

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moment o! ret%rn, o@e8er, t e connection disappears0 W at @e a8e t en is M", or M U cM, a s%m o! money eD%al to t e s%m originally ad8anced pl%s an increment I t e realised s%rpl%s8al%e Bregardless o! @ et er t e amo%nt o! 8al%e increased by cM exists in t e !orm o! money, or commodities, or elements o! prod%ctionC0 ?nd it is precisely at t is point o! ret%rn @ ere capital exists as realised capital, as an expanded 8al%e, t at it ne8er enters t e circ%lation in t is !orm I in so !ar as t is point is !ixed as a point o! rest, @ et er real or imaginary I b%t rat er appears to a8e been @it dra@n !rom circ%lation as a res%lt o! t e @ ole process0 W ene8er it is again expended, it is ne8er gi8en %p to anot er as capital, b%t is sold to im as an ordinary commodity, or gi8en to im as ordinary money in exc ange !or commodities0 &t ne8er appears as capital in its process o! circ%lation, only as commodity or money, and at t is point t is is t e only !orm o! its existence !or others0 ;ommodities and money are ere capital not beca%se commodities c ange into money, or money into commodities, not in t eir act%al relations to sellers or b%yers, b%t only in t eir ideal relations to t e capitalist imsel! Bs%bHecti8ely speakingC, or as p ases in t e process o! reprod%ction BobHecti8ely speakingC0 ;apital exists as capital in act%al mo8ement, not in t e process o! circ%lation, b%t only in t e process o! prod%ction, in t e process by @ ic labo%rpo@er is exploited0 5 e matter is di!!erent @it interest-bearing capital, o@e8er, and it is precisely t is di!!erence @ ic lends it its speci!ic c aracter0 5 e o@ner o! money @ o desires to en ance is money as interest-bearing capital, t%rns it o8er to a t ird person, t ro@s it into circ%lation, t%rns it into a commodity as capital# not H%st capital !or imsel!, b%t also !or ot ers0 &t is not capital merely !or t e man @ o gi8es it %p, b%t is !rom t e 8ery !irst gi8en to t e t ird person as capital, as a 8al%e endo@ed @it t e %se-8al%e o! creating s%rpl%s-8al%e, o! creating pro!it# a 8al%e @ ic preser8es itsel! in its mo8ement and ret%rns to its original o@ner, in t is case t e o@ner o! money, a!ter per!orming its !%nction0 6ence it lea8es im only !or a speci!ied time, passes b%t temporarily o%t o! t e possession o! its o@ner into t e possession o! a !%nctioning capitalist, is t ere!ore neit er gi8en %p in payment nor sold, b%t merely loaned, merely relinD%is ed @it t e %nderstanding t at, !irst, it s all ret%rn to its point o! depart%re a!ter a de!inite time inter8al, and, second, t at it s all ret%rn as realised capital I a capital a8ing realised its %se-8al%e, its po@er o! creating s%rpl%s-8al%e0 ;ommodities loaned o%t as capital are loaned eit er as !ixed or as circ%lating capital, depending on t eir properties0 Money may be loaned o%t in eit er !orm0 &t may be loaned as !ixed capital, !or instance, i! it is paid back in t e !orm o! an ann%ity, @ ereby a portion o! t e capital !lo@s back toget er @it t e interest0 ;ertain commodities, s%c as o%ses, s ips, mac ines, etc0, can be loaned o%t only as !ixed capital by t e nat%re o! t eir %se-8al%es0 .et all loaned capital, @ ate8er its !orm, and no matter o@ t e nat%re o! its %se-8al%e may modi!y its ret%rn, is al@ays only a speci!ic !orm o! money-capital0 Aeca%se @ at is loaned o%t is al@ays a de!inite s%m o! money, and it is t is s%m on @ ic interest is calc%lated0 $ o%ld @ ate8er is loaned o%t be neit er money nor circ%lating capital, it is also paid back in t e @ay !ixed capital ret%rns0 5 e lender periodically recei8es interest and a portion o! t e cons%med 8al%e o! t e !ixed capital itsel!, t is being an eD%i8alent !or t e periodic @ear and tear0 ?nd at t e end o! t e stip%lated term t e %ncons%med portion o! t e loaned !ixed capital is ret%rned in kind0 &! t e loaned capital is circ%lating capital, it is like@ise ret%rned in t e manner pec%liar to circ%lating capital0 5 e manner o! re!l%x is, t ere!ore, al@ays determined by t e act%al circ%it described by capital in t e act o! reprod%ction and by its speci!ic 8arieties0 A%t as !or loaned capital, its re!l%x ass%mes t e form o! ret%rn payments, beca%se its ad8ance, by @ ic it is trans!erred, possesses t e !orm o! a loan0 &n t is c apter @e treat only o! act%al money-capital, !rom @ ic t e ot er !orms o! loaned capital are deri8ed0

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5 e loaned capital !lo@s back in t@o @ays0 &n t e process o! reprod%ction it ret%rns to t e !%nctioning capitalist, and t en its ret%rn repeats itsel! once more as trans!er to t e lender, t e money-capitalist, as ret%rn payment to t e real o@ner, its legal point o! depart%re0 &n t e act%al process o! circ%lation, capital appears al@ays as a commodity or as money, and its mo8ement al@ays is broken %p into a series o! p%rc ases and sales0 &n s ort, t e process o! circ%lation resol8es itsel! into t e metamorp osis o! commodities0 &t is di!!erent, @ en @e consider t e process o! reprod%ction as a @ ole0 &! @e start o%t @it money Band t e same is tr%e i! @e start o%t @it commodities, since @e begin @it t eir 8al%e, ence 8ie@ t em sub specie as moneyC, @e s all see t at a certain s%m o! money is expended and ret%rns a!ter a certain period @it an increment0 5 e ad8anced s%m o! money ret%rns toget er @it a s%rpl%s-8al%e0 &t as remained intact and increased in making a certain cycle0 A%t no@, being loaned o%t as capital, money is loaned as H%st t e s%m o! money @ ic preser8es and expands itsel!, @ ic ret%rns a!ter a certain period @it an increment, and is al@ays ready to per!orm t e same process o8er again0 &t is expended neit er as money nor as a commodity, t %s, neit er exc anged against a commodity @ en ad8anced in t e !orm o! money, nor sold in exc ange !or money @ en ad8anced as a commodity# rat er, it is expended as capital0 5 is relation to itsel!, in @ ic capital presents itsel! @ en t e capitalist prod%ction process is 8ie@ed as a @ ole and as a single %nity, and in @ ic capital appears as money t at begets money, is ere imparted to it as its c aracter, its designation, @it o%t any intermediary mo8ement0 ?nd it is relinD%is ed @it t is designation @ en loaned o%t as money-capital0 ? D%eer conception o! t e role o! money-capital is old by ,ro%d on B Gratuit7 du Cr7dit. Discussion entre M. '. Gastiat et M. &roudhon , ,aris, 18+=C0 'oaning seems an e8il to ,ro%d on beca%se it is not selling0 'oaning !or an interest is Kt e !ac%lty o! selling t e same article o8er and o8er again, and o! recei8ing its price again and again, @it o%t once relinD%is ing o@ners ip o! t e obHect @ ic is being soldL Bp0 *C0 /5 e cited @ords belong to ; e8e, one o! t e editors o! t e ne@spaper ,a Loi du peuple, and t e a%t or o! t e K!irst letterL in t e book Gratuit7 du Cr7dit. Discussion entre M. '. Gastiat et M. &roudhon, ,aris, 18+=0 I 0d1 5 e obHect I money, a o%se, etc0 I does not c ange o@ners as in selling and b%ying0 A%t ,ro%d on does not see t at no eD%i8alent is recei8ed in ret%rn !or money gi8en a@ay in t e !orm o! interest-bearing capital0 5r%e, t e obHect is gi8en a@ay in e8ery act o! b%ying and selling, so !ar as t ere are processes o! exc ange at all0 3@ners ip o! t e sold article is al@ays relinD%is ed0 A%t its 8al%e is not gi8en %p0 &n a sale t e commodity is gi8en a@ay, b%t not its 8al%e, @ ic is ret%rned in t e !orm o! money, or in @ at is ere H%st anot er !orm o! it I promissory notes, or titles o! payment0 W en p%rc asing, t e money is gi8en a@ay, b%t not its 8al%e, @ ic is replaced in t e !orm o! commodities0 5 e ind%strial capitalist retains t e same 8al%e in is ands t ro%g o%t t e process o! reprod%ction Bexcl%ding s%rpl%s-8al%eC, b%t in di!!erent !orms0 &nasm%c as t ere is an exc ange, i.e., an exc ange o! articles, t ere is no c ange in t e 8al%e0 5 e same capitalist al@ays retains t e same 8al%e0 A%t so long as s%rpl%s-8al%e is prod%ced by t e capitalist, t ere is no exc ange0 ?s soon as an exc ange occ%rs, t e s%rpl%s-8al%e is already incorporated in t e commodities0 &! @e 8ie@ t e entire circ%it made by capital, M I ; I M", rat er t an indi8id%al acts o! exc ange, @e s all see t at a de!inite amo%nt o! 8al%e is contin%ally ad8anced, and t at t is same amo%nt pl%s s%rpl%s-8al%e, or pro!it, is @it dra@n !rom circ%lation0

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5 e act%al acts o! exc ange do not, at any rate, re8eal o@ t is process is promoted0 ?nd it is precisely t is process o! M as capital, on @ ic t e interest o! t e money-lending capitalist rests, and !rom @ ic it is deri8ed0 K&n !act,L says ,ro%d on, Kt e at-maker, @ o sells ats, recei8es t eir 8al%e, neit er more nor less0 A%t t e money-lending capitalist 000 does not reco8er H%st is capital, e reco8ers more t an is capital, more t an e t ro@s into t e exc ange# e recei8es an interest o8er and abo8e is capitalL Bp0 6*C0 6ere t e atter represents t e prod%cti8e capitalist as distinct !rom t e loan capitalist0 ,ro%d on as ob8io%sly !ailed to grasp t e secret o! o@ t e prod%cti8e capitalist can sell commodities at t eir 8al%e BeD%alisation t ro%g prices o! prod%ction is ere immaterial to is conceptionC and recei8e a pro!it o8er and abo8e t e capital e !lings into exc ange0 $%ppose t e price o! prod%ction o! 1== ats R V11+, and t at t is price o! prod%ction appens to coincide @it t e 8al%e o! t e ats, @ ic means t at t e capital prod%cing t e ats is o! t e same composition as t e a8erage social capital0 $ o%ld t e pro!it R 1+T, t e atter makes a pro!it o! V1+ by selling is commodities at t eir 8al%e o! V11+0 5 ey cost im only V1==0 &! e prod%ced t em @it is o@n capital, e pockets t e entire s%rpl%s o! V1+ b%t i! @it borro@ed capital, e may a8e to gi8e %p V+ as interest0 5 is alters not ing in t e 8al%e o! t e ats, only in t e distrib%tion among di!!erent persons o! t e s%rpl%s-8al%e already contained in t is 8al%e0 $ince, t ere!ore, t e 8al%e o! t e ats is not a!!ected by t e payment o! interest, it is nonsense on ,ro%d on"s part to say: K?s in commerce t e interest on capital is added to t e @ages o! labo%rers in making %p t e price o! commodities, it is impossible !or t e labo%rer to b%y back t e prod%ct o! travaillant is a is o@n labo%r0 Livre en @ ic contains a principle

contradiction %nder t e r%le o! interestL Bp0 1=+C0 3 6o@ little ,ro%d on %nderstood t e nat%re o! capital is s o@n in t e !ollo@ing statement, in @ ic e describes t e mo8ement o! capital in general as a mo8ement pec%liar to interest-bearing capital: K$ince money-capital ret%rns to its so%rce !rom exc ange t ro%g t e acc%m%lation o! interest, it !ollo@s t at rein8estment al@ays made by t e same indi8id%al contin%ally brings pro!it to t e same person,L p0 1+20 W at is it t at still p%EEles im in t e pec%liar mo8ement o! interest-bearing capitalQ 5 e categories: b%ying, price, gi8ing %p articles, and t e immediate !orm in @ ic s%rpl%s-8al%e appears ere# in s ort, t e p enomenon t at capital as s%c as become a commodity, t at selling, conseD%ently, as t%rned into lending and price into a s are o! t e pro!it0 5 e ret%rn o! capital to its point o! depart%re is generally t e c aracteristic mo8ement o! capital in its total circ%it0 5 is is by no means a !eat%re o! interest-bearing capital alone0 W at singles it o%t is rat er t e external !orm o! its ret%rn @it o%t t e inter8ention o! any circ%it0 5 e loaning

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capitalist gi8es a@ay is capital, trans!ers it to t e ind%strial capitalist, @it o%t recei8ing any eD%i8alent0 6is trans!er is not an act belonging to t e real circ%lation process o! capital at all0 &t ser8es merely to introd%ce t is circ%it, @ ic is e!!ected by t e ind%strial capitalist0 5 is !irst c ange o! position o! money does not express any act o! t e metamorp osis I neit er b%ying nor selling0 3@ners ip is not relinD%is ed, beca%se t ere is no exc ange and no eD%i8alent is recei8ed0 5 e ret%rn o! t e money !rom t e ands o! t e ind%strial capitalist to t ose o! t e loaning capitalist merely s%pplements t e !irst act o! gi8ing a@ay t e capital0 ?d8anced in t e !orm o! money, t e capital again ret%rns to t e ind%strial capitalist t ro%g t e circ%lar process in t e !orm o! money0 A%t since it did not belong to im @ en e in8ested it, it cannot belong to im on its ret%rn0 ,assing t ro%g t e process o! reprod%ction cannot by any means t%rn t e capital into is property0 6e m%st t ere!ore restore it to t e lender0 5 e !irst expendit%re, @ ic trans!ers t e capital !rom t e lender to t e borro@er, is a legal transaction @ ic as not ing to do @it t e act%al process o! reprod%ction0 &t is merely a prel%de to t is process0 5 e ret%rn payment, @ ic again trans!ers t e capital t at as !lo@ed back !rom t e borro@er to t e lender is anot er legal transaction, a s%pplement o! t e !irst0 3ne introd%ces t e act%al process, t e ot er is an act s%pplementary to t is process0 ,oint o! depart%re and point o! ret%rn, t e gi8ing a@ay and t e reco8ery o! t e loaned capital, t %s appear as arbitrary mo8ements promoted by legal transactions, @ ic take place be!ore and a!ter t e act%al mo8ement o! capital and a8e not ing to do @it it as s%c 0 &t @o%ld a8e been all t e same as concerns t is act%al mo8ement i! t e capital ad !rom t e !irst belonged to t e ind%strial capitalist and ad ret%rned to im, t ere!ore, as is o@n0 &n t e !irst introd%ctory act t e lender gi8es is capital to t e borro@er0 &n t e s%pplemental and closing act t e borro@er ret%rns t e capital to t e lender0 ?s concerns t e transaction bet@een t ese t@o I and aside !rom t e interest !or t e present I as concerns t e mo8ement o! t e loaned capital bet@een lender and borro@er, t ere!ore, t e t@o acts Bseparated by a longer or s orter time inter8al, d%ring @ ic t e act%al reprod%ction process o! t e capital takes placeC embrace t e entire mo8ement0 ?nd t is mo8ement, disposing on condition o! ret%rning, constit%tes per se t e mo8ement o! lending and borro@ing, t at speci!ic !orm o! conditionally alienating money or commodities0 5 e c aracteristic mo8ement o! capital in general, t e ret%rn o! t e money to t e capitalist, i.e., t e ret%rn o! capital to its point o! depart%re, ass%mes in t e case o! interest-bearing capital a @ olly external appearance, separated !rom t e act%al mo8ement, o! @ ic it is a !orm0 ? gi8es a@ay is money not as money, b%t as capital0 -o trans!ormation occ%rs in t e capital0 &t merely c anges ands0 &ts real trans!ormation into capital does not take place %ntil it is in t e ands o! A0 A%t !or ? it becomes capital as soon as e gi8es it to A0 5 e act%al re!l%x o! capital !rom t e processes o! prod%ction and circ%lation takes place only !or A0 A%t !or ? t e re!l%x ass%mes t e same !orm as t e alienation0 5 e capital ret%rns !rom A to ?0 :i8ing a@ay, i.e., loaning money !or a certain time and recei8ing it back @it interest Bs%rpl%s-8al%eC is t e complete !orm o! t e mo8ement pec%liar to interest-bearing capital as s%c 0 5 e act%al mo8ement o! loaned money as capital is an operation lying o%tside t e transactions bet@een lender and borro@er0 &n t ese t e intermediate act is obliterated, in8isible, not directly incl%ded0 ? special sort o! commodity, capital as its o@n pec%liar mode o! alienation0 -eit er does its ret%rn, t ere!ore, express itsel! as t e conseD%ence and res%lt, o! some de!inite series o! economic processes, b%t as t e e!!ect o! a speci!ic legal agreement bet@een b%yer and seller0 5 e time o! ret%rn depends on t e progress o! t e process o! reprod%ction# in t e case o! interest-bearing capital, its ret%rn as capital seems to depend on t e mere agreement bet@een lender and borro@er0 $o t at in regard to t is transaction t e ret%rn o! capital no longer appears as a res%lt arising o%t o! t e process o! reprod%ction# it appears as i! t e loaned capital ne8er lost t e !orm o! money0 5o be s%re, t ese transactions are really determined by t e act%al reprod%cti8e ret%rns0 A%t t is is not e8ident in t e transaction itsel!0 -or is it by any means al@ays t e case in practice0 &! t e act%al ret%rn does not take place

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in d%e time, t e borro@er m%st look !or ot er reso%rces to meet is obligations 8is-O-8is t e lender0 5 e bare form o! capital I money expended as a certain s%m, ?, @ ic ret%rns as s%m ? U 1Nx ? a!ter a gi8en lapse o! time @it o%t any ot er intermediate act sa8e t is lapse o! time I is only a meaningless !orm o! t e act%al mo8ement o! capital0 &n t e act%al mo8ement o! capital its ret%rn is a p ase in t e process o! circ%lation0 5 e money is !irst con8erted into means o! prod%ction# prod%ction trans!orms t em into commodities# t ro%g sale o! t e commodities t ey are recon8erted into money and ret%rn in t is !orm into t e ands o! t e capitalist @ o ad originally ad8anced t e capital in t e !orm o! money0 A%t in t e case o! interest-bearing capital, t e ret%rn, like alienation, is t e res%lt o! a legal transaction bet@een t e o@ner o! t e capital and a second party0 We see only t e alienation and t e ret%rn payment0 W ate8er passes in t e interim is obliterated0 A%t since money ad8anced as capital as t e property o! ret%rning to t e person @ o ad8anced it, to t e one @ o expended it as capital, and since M I ; I M" is t e immanent !orm o! t e mo8ement o! capital, t e o@ner o! t e money can, !or t is 8ery reason, loan it o%t as capital, as somet ing t at as t e property o! ret%rning to its point o! depart%re, o! preser8ing, and increasing, its 8al%e in t e co%rse o! its mo8ement0 6e gi8es it a@ay as capital, beca%se it ret%rns to its point o! depart%re a!ter a8ing been employed as capital, ence can be restored by t e borro@er a!ter a certain period precisely beca%se it as come back to im0 'oaning money as capital I its alienation on t e condition o! it being ret%rned a!ter a certain timepres%pposes, t ere!ore, t at it @ill be act%ally employed as capital, and t at it act%ally !lo@s back to its starting-point0 5 e real cycle made by money as capital is, t ere!ore, t e premise !or t e legal transaction by @ ic t e borro@er m%st ret%rn t e money to t e lender0 &! t e borro@er does not %se t e money as capital, t at is is o@n b%siness0 5 e lender loans it as capital, and as s%c it is s%pposed to per!orm t e !%nctions o! capital, @ ic incl%de t e circ%it o! money-capital %ntil it ret%rns to its starting-point in t e !orm o! money0 5 e acts o! circ%lation, M I ; and ; I M", in @ ic a certain amo%nt o! 8al%e !%nctions as money or commodities, are b%t intermediate processes, mere p ases o! t e total mo8ement0 ?s capital, it per!orms t e entire mo8ement M I M"0 &t is ad8anced as money or a s%m o! 8al%es in one !orm or anot er, and ret%rns as a s%m o! 8al%es0 5 e lender o! money does not expend it in p%rc asing commodities, or, i! t is s%m o! 8al%es is in commodity-!orm, does not sell it !or money0 6e ad8ances it as capital, as M I M", as a 8al%e, @ ic ret%rns to its point o! depart%re a!ter a certain term0 6e lends instead o! b%ying or selling0 5 is lending, t ere!ore, is t e appropriate !orm o! alienating 8al%e as capital, instead o! alienating it as money or commodities0 &t does not !ollo@, o@e8er, t at lending cannot also take t e !orm o! transactions @ ic a8e not ing to do @it t e capitalist process o! reprod%ction0 We a8e so !ar only considered t e mo8ements o! loaned capital bet@een its o@ner and t e ind%strial capitalist0 -o@ @e m%st inD%ire into interest0 5 e lender expends is money as capital# t e amo%nt o! 8al%e, @ ic e relinD%is es to anot er, is capital, and conseD%ently ret%rns to im0 A%t t e mere ret%rn o! it @o%ld not be t e re!l%x o! t e loaned s%m o! 8al%e as capital, b%t merely t e ret%rn o! a loaned s%m o! 8al%e0 5o ret%rn as capital, t e ad8anced s%m o! 8al%e m%st not only be preser8ed in t e mo8ement b%t m%st also expand, m%st increase in 8al%e, i.e., m%st ret%rn @it a s%rpl%s-8al%e, as M U cM, t e latter being interest or a portion o! t e a8erage pro!it, @ ic does not remain in t e ands o! t e operating capitalist, b%t !alls to t e s are o! t e money-capitalist0 5 e !act t at t e latter as relinD%is ed it as capital implies t at it m%st be restored to im as M U cM0 'ater, @e s all also a8e to t%rn o%r attention to t e !orm in @ ic interest is paid in t e meantime at !ixed inter8als, b%t @it o%t t e capital, @ ose ret%rn !ollo@s at t e end o! a lengt y period0

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W at does t e money-capitalist gi8e to t e borro@er, t e ind%strial capitalistQ W at does e really t%rn o8er to imQ &t is only t is act o! anding o8er money @ ic c anges lending money into alienation o! money as capital, i.e., alienation o! capital as a commodity0 &t is only by t is act o! alienating t at capital is loaned by t e money-lender as a commodity, or t at t e commodity at is disposal is gi8en to anot er as capital0 W at is alienated in an ordinary saleQ -ot t e 8al%e o! t e sold commodity, !or t is merely c anges its !orm0 5 e 8al%e exists ideally in a commodity as its price be!ore it act%ally passes as money into t e ands o! t e seller0 5 e same 8al%e and t e same amo%nt o! 8al%e merely c ange t eir !orm0 &n t e one instance t ey exist in commodity-!orm, in t e ot er in t e !orm o! money0 W at is really alienated by t e seller, and, t ere!ore, passes into t e indi8id%al or prod%cti8e cons%mption o! t e b%yer, is t e %se-8al%e o! t e commodity I t e commodity as a %se-8al%e0 W at, no@, is t e %se-8al%e @ ic t e money-capitalist gi8es %p !or t e period o! t e loan and relinD%is es to t e prod%cti8e capitalist I t e borro@erQ &t is t e %se-8al%e @ ic t e money acD%ires by being capable o! becoming capital, o! per!orming t e !%nctions o! capital, and creating a de!inite s%rpl%s-8al%e, t e a8erage pro!it B@ ate8er is abo8e or belo@ it appears ere as a mere accidentC d%ring its process, besides preser8ing its original magnit%de o! 8al%e0 &n t e case o! t e ot er commodities t e %se-8al%e is %ltimately cons%med0 5 eir s%bstance disappears, and @it it t eir 8al%e0 &n contrast, t e commodity-capital is pec%liar in t at its 8al%e and %se-8al%e not only remain intact b%t also increase, t ro%g cons%mption o! its %se-8al%e0 &t is t is %se-8al%e o! money as capital I t is !ac%lty o! prod%cing an a8erage pro!it I @ ic t e money-capitalist relinD%is es to t e ind%strial capitalist !or t e period, d%ring @ ic e places t e loaned capital at t e latter"s disposal0 Money t %s loaned as in t is respect a certain similarity @it labo%r-po@er in its relation to t e ind%strial capitalist0 Wit t e di!!erence t at t e latter pays !or t e 8al%e o! labo%r-po@er, @ ereas e simply pays back t e 8al%e o! t e loaned capital0 5 e %se-8al%e o! labo%r-po@er !or t e ind%strial capitalist is t at labo%r-po@er creates more 8al%e Bpro!itC in its cons%mption t an it possesses itsel!, and t an it costs0 5 is additional 8al%e is %se-8al%e !or t e ind%strial capitalist0 ?nd in like manner t e %se-8al%e o! loaned capital appears as its !ac%lty o! begetting and increasing 8al%e0 5 e money-capitalist, in !act, alienates a %se-8al%e, and t %s @ ate8er e gi8es a@ay is gi8en as a commodity0 &t is to t is extent t at t e analogy @it a commodity per se is complete0 &n t e !irst place, it is a 8al%e @ ic passes !rom one and to anot er0 &n t e case o! an ordinary commodity, a commodity as s%c , t e same 8al%e remains in t e ands o! t e b%yer and seller, only in di!!erent !orms# bot a8e t e same 8al%e @ ic t ey ad be!ore t e transaction, and @ ic t ey ad alienated I t e one in t e !orm o! a commodity, t e ot er in t e !orm o! money0 5 e di!!erence is t at in a loan t e money-capitalist is t e only one in t e transaction @ o gi8es a@ay 8al%e# b%t e preser8es it t ro%g t e prospecti8e ret%rn0 &n t e loan transaction H%st one party recei8es 8al%e, since only one party relinD%is es 8al%e0 I &n t e second place, a real %se-8al%e is relinD%is ed on t e one side, and recei8ed and cons%med on t e ot er0 A%t in contrast to ordinary commodities t is %se-8al%e is 8al%e in itsel!, namely t e excess o8er t e original 8al%e realised t ro%g t e %se o! money as capital0 5 e pro!it is t is %se-8al%e0 5 e %se-8al%e o! t e loaned money lies in its being able to ser8e as capital and, as s%c , to prod%ce t e a8erage pro!it %nder a8erage conditions0 2 W at, no@, does t e ind%strial capitalist pay, and @ at is, t ere!ore, t e price o! t e loaned capitalQ

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K5 at @ ic men pay as interest !or t e %se o! @ at t ey borro@L is, according to Massie, Ka part o! t e pro!it it is capable o! prod%cing,L 10 c0, p0 2*0 + W at t e b%yer o! an ordinary commodity b%ys is its %se-8al%e# @ at e pays !or is its 8al%e0 W at t e borro@er o! money b%ys is like@ise its %se-8al%e as capital# b%t @ at does e pay !orQ $%rely not its price, or 8al%e, as in t e case o! ordinary commodities0 -o c ange o! !orm occ%rs in t e 8al%e passing bet@een borro@er and lender, as occ%rs bet@een b%yer and seller @ en it exists in one instance in t e !orm o! money, and in anot er in t e !orm o! a commodity0 5 e sameness o! t e alienated and ret%rned 8al%e is re8ealed ere in an entirely di!!erent @ay0 5 e s%m o! 8al%e, i.e., t e money, is gi8en a@ay @it o%t an eD%i8alent, and is ret%rned a!ter a certain period0 5 e lender al@ays remains t e o@ner o! t e same 8al%e, e8en a!ter it passes !rom is ands into t ose o! t e borro@er0 &n an ordinary exc ange o! commodities money al@ays comes !rom t e b%yer"s side# b%t in a loan it comes !rom t e side o! t e seller0 6e is t e one @ o gi8es a@ay money !or a certain period, and t e b%yer o! capital is t e one @ o recei8es it as a commodity0 A%t t is is only possible as long as t e money acts as capital and is t ere!ore ad8anced0 5 e borro@er borro@s money as capital, as a 8al%e prod%cing more 8al%e0 A%t at t e moment @ en it is ad8anced it is still only potential capital, like any ot er capital at its starting-point, t e moment it is ad8anced0 &t is only t ro%g its employment t at it expands its 8al%e and realises itsel! as capital0 6o@e8er, it as to be ret%rned by t e borro@er as realised capital, ence as 8al%e pl%s s%rpl%s-8al%e BinterestC0 ?nd t e latter can only be a portion o! t e realised pro!it0 3nly a portion, not all o! it0 For t e %se8al%e o! t e loaned capital to t e borro@er consists in prod%cing pro!it !or im0 3t er@ise t ere @o%ld not a8e been any alienation o! %se-8al%e on t e lender"s part0 3n t e ot er and, not all t e pro!it can !all to t e borro@er"s s are0 3t er@ise e @o%ld pay not ing !or t e alienated %se8al%e, and @o%ld ret%rn t e ad8anced money to t e lender as ordinary money, not as capital, as realised capital, !or it is realised capital only as M U cM0 Aot o! t em, lender and borro@er, expend t e same s%m o! money as capital0 A%t it is only in t e ands o! t e latter t at it ser8es as capital0 5 e pro!it is not do%bled by t e do%ble existence o! t e same s%m o! money as capital !or t@o persons0 &t can ser8e as capital !or bot o! t em only by di8iding t e pro!it0 5 e portion @ ic !alls to t e lender is called interest0 5 e entire transaction, as ass%med, takes place bet@een t@o kinds o! capitalists I t e moneycapitalist and t e ind%strial or merc ant capitalist0 &t m%st al@ays be borne in mind t at ere capital as capital is a commodity, or t at t e commodity ere disc%ssed is capital0 ?ll t e relations in e8idence ere @o%ld t ere!ore be irrational !rom t e standpoint o! an ordinary commodity, or !rom t at o! capital in so !ar as it acts as a commodity-capital in t e process o! reprod%ction0 'ending and borro@ing, instead o! selling and b%ying, is a distinction @ ic ere springs !rom t e speci!ic nat%re o! t e commodity-capital0 $imilarly, t e !act t at it is interest, not t e price o! t e commodity, @ ic is paid ere0 &! @e @ant to call interest t e price o! money-capital, t en it is an irrational !orm o! price D%ite at 8ariance @it t e conception o! t e price o! commodities0 6 5 e price is ere red%ced to its p%rely abstract and meaningless !orm, signi!ying t at it is a certain s%m o! money paid !or somet ing ser8ing in one @ay or anot er as a %se-8al%e# @ ereas t e conception o! price really signi!ies t e 8al%e o! some %se-8al%e expressed in money0 &nterest, signi!ying t e price o! capital, is !rom t e o%tset D%ite an irrational expression0 5 e commodity in D%estion as a do%ble 8al%e, !irst a 8al%e, and t en a price di!!erent !rom t is 8al%e, @ ile price represents t e expression o! 8al%e in money0 Money-capital is not ing b%t a s%m o! money, or t e 8al%e o! a certain D%antity o! commodities !ixed in a s%m o! money0 &! a commodity is loaned o%t as capital, it is only a disg%ised !orm o! a s%m o! money0 Aeca%se @ at is loaned o%t as capital is not so and so many po%nds o! cotton, b%t so m%c and so m%c money

<3<

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existing in t e !orm o! cotton as its 8al%e0 5 e price o! capital, t ere!ore, re!ers to it as to a s%m o! money, e8en i! not c%rrency, as Mr0 5orrens t inks Bsee Footnote +*C0 6o@, t en, can a s%m o! 8al%e a8e a price besides its o@n price, besides t e price expressed in its o@n money-!ormQ ,rice, a!ter all, is t e 8al%e o! a commodity Bt is is also tr%e o! t e market-price, @ ose di!!erence !rom 8al%e is not one o! D%ality, b%t only one o! D%antity, re!erring only to t e magnit%de o! 8al%eC as distinct !rom its %se-8al%e0 ? price @ ic di!!ers !rom 8al%e in D%ality is an abs%rd contradiction0> ;apital mani!ests itsel! as capital t ro%g sel!-expansion0 5 e degree o! its sel!-expansion expresses t e D%antitati8e degree in @ ic it realises itsel! as capital0 5 e s%rpl%s-8al%e or pro!it prod%ced by it I its rate or magnit%de I is meas%rable only by comparison @it t e 8al%e o! t e ad8anced capital0 5 e greater or lesser sel!-expansion o! interest-bearing capital is, t ere!ore, like@ise only meas%rable by comparing t e amo%nt o! interest, its s are in t e total pro!its, @it t e 8al%e o! t e ad8anced capital0 &!, t ere!ore, price expresses t e 8al%e o! t e commodity, t en interest expresses t e sel!-expansion o! money-capital and t %s appears as t e price paid !or it to t e lender0 5 is s o@s o@ abs%rd it is !rom t e 8ery !irst to apply ereto t e simple relations o! exc ange t ro%g t e medi%m o! money in b%ying and selling, as ,ro%d on does0 5 e basic premise is precisely t at money !%nctions as capital and may t %s be trans!erred as s%c , i.e., as potential capital, to a t ird person0 ;apital, o@e8er, appears ere as a commodity, inasm%c as it is o!!ered on t e market, and t e %se-8al%e o! money is act%ally alienated as capital0 &ts %se-8al%e, o@e8er, lies in prod%cing pro!it0 5 e 8al%e o! money or o! commodities employed as capital does not depend on t eir 8al%e as money or as commodities, b%t on t e D%antity o! s%rpl%s-8al%e t ey prod%ce !or t eir o@ner0 5 e prod%ct o! capital is pro!it0 3n t e basis o! capitalist prod%ction it is merely a di!!erent %se o! money I @ et er it is expended as money# or ad8anced as capital0 Money, or commodities, are in t emsel8es potentially capital, H%st as labo%r-po@er is potential capital0 Aeca%se, 1C money may be con8erted into elements o! prod%ction and is, as is, merely an abstract expression o! t em I t eir existence as 8al%e# <C t e material elements o! @ealt a8e t e property o! potentially becoming capital, beca%se t eir s%pplementary opposite, @ ic makes t em into capital, namely @age-labo%r, is a8ailable on t e basis o! capitalist prod%ction0 5 e contradictory social !eat%res o! material @ealt I its antagonism to labo%r as @age-labo%r I are expressed in capitalist property as s%c independently o! t e prod%ction process0 5 is partic%lar !act, set apart !rom t e process o! capitalist prod%ction itsel!, !rom @ ic it constantly res%lts and as @ ose constant res%lt it ser8es as a constant prereD%isite, expresses itsel! in t at money and commodities alike are latent, potential, capital, so t at t ey may be sold as capital, and in t at t ey can in t is !orm command t e labo%r o! ot ers besto@ing a claim to appropriate t e labo%r o! ot ers, and t ere!ore represent sel!-expanding 8al%es0 &t also becomes clearly apparent t at t is relations ip, and not t e labo%r o!!ered as an eD%i8alent on t e part o! t e capitalist, s%pplies t e title and t e means to appropriate t e labo%r o! ot ers0 F%rt ermore, capital appears as a commodity, inasm%c as t e di8ision o! pro!it into interest and pro!it proper is reg%lated by s%pply and demand, t at is, by competition, H%st as t e market-prices o! commodities0 A%t t e di!!erence ere is H%st as apparent as t e analogy0 &! s%pply and demand coincide, t e market-price o! commodities corresponds to t eir price o! prod%ction, i.e., t eir price t en appears to be reg%lated by t e immanent la@s o! capitalist prod%ction, independently o! competition, since t e !l%ct%ations o! s%pply and demand explain not ing b%t de8iations o! market-prices !rom prices o! prod%ction0 5 ese de8iations m%t%ally balance one anot er, so t at in t e co%rse o! certain longer periods t e a8erage market-prices eD%al t e prices o! prod%ction0 ?s soon as s%pply and demand coincide, t ese !orces cease to operate, i.e., compensate one anot er, and t e general la@ determining prices t en also comes to apply to indi8id%al cases0 5 e market-price t en corresponds e8en in its immediate !orm, and not only as t e a8erage o! marketprice mo8ements, to t e price o! prod%ction, @ ic is reg%lated by t e immanent la@s o! t e

<33

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mode o! prod%ction itsel!0 5 e same applies to @ages0 &! s%pply and demand coincide, t ey ne%tralise eac ot er"s e!!ect, and @ages eD%al t e 8al%e o! labo%r-po@er0 A%t it is di!!erent @it t e interest on money-capital0 ;ompetition does not, in t is case, determine t e de8iations !rom t e r%le0 5 ere is rat er no la@ o! di8ision except t at en!orced by competition, beca%se, as @e s all later see, no s%c t ing as a Knat%ralL rate o! interest exists0 Ay t e nat%ral rate o! interest people merely mean t e rate !ixed by !ree competition0 5 ere are no Knat%ralL limits !or t e rate o! interest0 W ene8er competition does not merely determine t e de8iations and !l%ct%ations, @ ene8er, t ere!ore, t e ne%tralisation o! opposing !orces p%ts a stop to any and all determination, t e t ing to be determined becomes somet ing arbitrary and la@less0 More on t is in t e next c apter0 &n t e case o! interest-bearing capital e8eryt ing appears s%per!icial: t e ad8ance o! capital as mere trans!er !rom lender to borro@er# t e re!l%x o! realised capital as mere trans!er back, as a ret%rn payment @it interest, by borro@er to lender0 5 e same is tr%e o! t e !act, immanent in t e capitalist mode o! prod%ction, t at t e rate o! pro!it is not only determined by t e relation o! pro!it made in one single t%rno8er to ad8anced capital-8al%e, b%t also by t e lengt o! t is period o! t%rno8er, ence determined as pro!it yielded by ind%strial capital @it in de!inite spans o! time0 &n t e case o! interest-bearing capital t is like@ise appears on t e s%r!ace to mean t at a de!inite interest is paid to t e lender !or a de!inite time span0 Wit is %s%al insig t into t e internal connection o! t ings, t e romantic ?dam Meller says B0lemente der Staats-unst, Aerlin, 18=*, 7ritter 5 eil, $0 138C# K&n determining t e prices o! t ings, time is not considered# @ ile in determining interest, time is t e principal !actor0L 6e does not see o@ t e time o! prod%ction and t e time o! circ%lation enter into t e determination o! commodity-prices, and o@ t is is H%st @ at determines t e rate o! pro!it !or a gi8en period o! t%rno8er o! capital, @ ereas interest is determined by precisely t is determination o! pro!it !or a gi8en period0 6is sagacity ere, as else@ ere, consists in obser8ing t e clo%ds o! d%st on t e s%r!ace and pres%mpt%o%sly declaring t is d%st to be somet ing mysterio%s and important0

Chapter 22. 'ivision of Profit. Rate of 5nterest. :atural Rate of 5nterest.

5 e s%bHect o! t is c apter, like all t e ot er p enomena o! credit @e s all come across later on, cannot be analysed ere in detail0 5 e competition bet@een lenders and borro@ers and t e res%ltant minor !l%ct%ations o! t e money-market !all o%tside t e scope o! o%r inD%iry0 5 e circ%it described by t e rate o! interest d%ring t e ind%strial cycle reD%ires !or its presentation t e analysis o! t is cycle itsel!, b%t t is like@ise cannot be gi8en ere0 5 e same applies to t e greater or lesser approximate eD%alisation o! t e rate o! interest in t e @orld-market0 We are ere concerned @it t e independent !orm o! interest-bearing capital and t e indi8id%alisation o! interest, as distinct !rom pro!it0 $ince interest is merely a part o! pro!it paid, according to o%r earlier ass%mption, by t e ind%strial capitalist to t e money-capitalist, t e maxim%m limit o! interest is t e pro!it itsel!, in @ ic case t e portion pocketed by t e prod%cti8e capitalist @o%ld R =0 ?side !rom exceptional cases, in @ ic interest mig t act%ally be larger t an pro!it, b%t t en co%ld not be paid o%t o! t e pro!it, one mig t consider as t e maxim%m limit o! interest t e total pro!it min%s t e portion Bto be s%bseD%ently analysedC @ ic resol8es itsel! into @ages o! s%perintendence0 5 e minim%m limit o! interest is altoget er indeterminable0 &t may !all to any lo@0 .et in t at case t ere @ill al@ays be co%nteracting in!l%ences to raise it again abo8e t is relati8e minim%m0 K5 e relation bet@een t e s%m paid !or t e %se o! capital and t e capital expresses t e rate o! interest as meas%red in money0L K5 e rate o! interest depends 1C on t e rate o! pro!it# <C on t e proportion in @ ic t e entire pro!it is di8ided bet@een t e lender and borro@er0L B0conomist, Pan%ary <<, 18+30C K&! t at @ ic men pay as interest !or t e %se o! @ at t ey borro@, be a part o! t e pro!its it is capable o! prod%cing, t is interest m%st al@ays be go8erned by t ose pro!its0L BMassie, 10c0, p02*0C 'et %s !irst ass%me t at t ere is a !ixed relation bet@een t e total pro!it and t at part o! it @ ic as to be paid as interest to t e money-capitalist0 &t is t en clear t at t e interest @ill rise or !all @it t e total pro!it, and t e latter is determined by t e general rate o! pro!it and its !l%ct%ations0 For instance, i! t e a8erage rate o! pro!it @ere R <=T and t e interest R [ o! t e pro!it, t e rate o! interest @o%ld R +T# i! t e a8erage rate o! pro!it @ere R 16T, t e rate o! interest @o%ld R 2T0 Wit t e rate o! pro!it at <=T, t e rate o! interest mig t rise to 8T, and t e ind%strial capitalist @o%ld still make t e same pro!it as e @o%ld at a rate o! pro!it R 16T and a rate o! interest R 2T, namely 1<T0 $ o%ld interest rise only to 6T or >T, e @o%ld still keep a larger s are o! t e pro!it0 &! t e interest amo%nted to a constant D%ota o! t e a8erage pro!it, it @o%ld !ollo@ t at t e ig er t e general rate o! pro!it, t e greater t e absol%te di!!erence bet@een t e total pro!it and t e interest, and t e greater t e portion o! t e total pro!it pocketed by t e prod%cti8e capitalist, and 8ice 8ersa0 5ake it t at interest R 1N+ o! t e a8erage pro!it0 3ne-!i!t o! 1= is <# t e di!!erence bet@een total pro!it and interest R 80 3ne-!i!t o! <= R 2# di!!erence R <= - 2 R 16# 1N+ o! <+ R +#

<3+

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di!!erence R <+ - + R <=# 1N+ o! 3= R 6# di!!erence R 3= - 6 R <2# 1N+ o! 3+ R ># di!!erence R 3+ - > R <80 5 e di!!erent rates o! interest o! 2, +, 6, >T @o%ld ere al@ays represent no more t an 1N+, or <=T o! t e total pro!it0 &! t e rates o! pro!it are di!!erent, t ere!ore, di!!erent rates o! interest may represent t e same aliD%ot parts o! t e total pro!it, or t e same percentage o! t e total pro!it0 Wit s%c constant proportions o! interest, t e ind%strial pro!it Bt e di!!erence bet@een t e total pro!it and t e interestC @o%ld rise proportionately to t e general rate o! pro!it, and con8ersely0 ?ll ot er conditions taken as eD%al, i.e., ass%ming t e proportion bet@een interest and total pro!it to be more or less constant, t e !%nctioning capitalist is able and @illing to pay a ig er or lo@er interest directly proportional to t e le8el o! t e rate o! pro!it0 1 $ince @e a8e seen t at t e rate o! pro!it is in8ersely proportional to t e de8elopment o! capitalist prod%ction, it !ollo@s t at t e ig er or lo@er rate o! interest in a co%ntry is in t e same in8erse proportion to t e degree o! ind%strial de8elopment, at least in so !ar as t e di!!erence in t e rate o! interest act%ally expresses t e di!!erence in t e rates o! pro!it0 &t s all later de8elop t at t is need not al@ays be t e case0 &n t is sense it may be said t at interest is reg%lated t ro%g pro!it, or, more precisely, t e general rate o! pro!it0 ?nd t is mode o! reg%lating interest applies e8en to its a8erage0 &n any e8ent t e a8erage rate o! pro!it is to be regarded as t e %ltimate determinant o! t e maxim%m limit o! interest0 5 e !act t at interest is to be related to a8erage pro!it @ill be considered presently at greater lengt 0 W ene8er a speci!ied entity, s%c as pro!it, is to be di8ided bet@een t@o parties, t e matter nat%rally inges abo8e all on t e magnit%de o! t e entity @ ic is to be di8ided, and t is, t e magnit%de o! t e pro!it, is determined by its a8erage rate0 $%ppose t e general rate o! pro!it, ence t e magnit%de o! pro!it, !or a capital o! gi8en siEe, say, R 1==, is ass%med as gi8en0 5 en t e 8ariations o! interest @ill ob8io%sly be in8ersely proportional to t ose o! t e part o! pro!it remaining in t e ands o! t e prod%cing capitalist, @orking @it a borro@ed capital0 ?nd t e circ%mstances determining t e amo%nt o! pro!it to be distrib%ted, o! t e 8al%e prod%ced by %npaid labo%r, di!!er @idely !rom t ose @ ic determine its distrib%tion bet@een t ese t@o kinds o! capitalists, and !reD%ently prod%ce entirely opposite e!!ects0 < &! @e obser8e t e cycles in @ ic modern ind%stry mo8es I state o! inacti8ity, mo%nting re8i8al, prosperity, o8er-prod%ction, crisis, stagnation, state o! inacti8ity, etc0, @ ic !all beyond t e scope o! o%r analysis I @e s all !ind t at a lo@ rate o! interest generally corresponds to periods o! prosperity or extra pro!it, a rise in interest separates prosperity and its re8erse, and a maxim%m o! interest %p to a point o! extreme %s%ry corresponds to t e period o! crisis0 3 5 e s%mmer o! 1823 %s ered in a period o! remarkable prosperity# t e rate o! interest, still 2ZT in t e spring o! 182<, !ell to <T in t e spring and s%mmer o! 1823# 2 in $eptember it !ell as lo@ as 1ZT B:ilbart, &, p0 166C# @ ere%pon it rose to 8T and ig er d%ring t e crisis o! 182>0 &t is possible, o@e8er, !or lo@ interest to go along @it stagnation, and !or moderately rising interest to go along @it re8i8ed acti8ity0 5 e rate o! interest reac es its peak d%ring crises, @ en money is borro@ed at any cost to meet payments0 $ince a rise in interest implies a !all in t e price o! sec%rities, t is sim%ltaneo%sly o!!ers a !ine opport%nity to people @it a8ailable money-capital, to acD%ire at ridic%lo%sly lo@ prices s%c interest-bearing sec%rities as m%st, in t e co%rse o! t ings, at least regain t eir a8erage price as soon as t e rate o! interest !alls again0 + 6o@e8er, t e rate o! interest also as a tendency to !all D%ite independently o! t e !l%ct%ations in t e rate o! pro!it0 ?nd, indeed, d%e to t@o main ca%ses: &0 KWere @e e8en to s%ppose t at capital @as ne8er borro@ed @it any 8ie@ b%t to prod%cti8e

<36

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employment, & t ink it 8ery possible t at interest mig t 8ary @it o%t any c ange in t e rate o! gross pro!its0 For, as a nation ad8ances in t e career o! @ealt , a class o! men springs %p and increases more and more, @ o by t e labo%rs o! t eir ancestors !ind t emsel8es in t e possession o! !%nds s%!!iciently ample to a!!ord a andsome maintenance !rom t e interest alone0 4ery many also @ o d%ring yo%t and middle age @ere acti8ely engaged in b%siness, retire in t eir latter days" to li8e D%ietly on t e interest o! t e s%ms t ey a8e t emsel8es acc%m%lated0 5 is class, as @ell as t e !ormer, as a tendency to increase @it t e increasing ric es o! t e co%ntry, !or t ose @ o begin @it a tolerable stock are likely to make an independence sooner t an t ey @ o commence @it little0 5 %s it comes to pass, t at in old and ric co%ntries, t e amo%nt o! national capital belonging to t ose @ o are %n@illing to take t e tro%ble o! employing it t emsel8es, bears a larger proportion to t e @ ole prod%cti8e stock o! t e society, t an in ne@ly settled and poorer districts0 6o@ m%c more n%mero%s in proportion to t e pop%lation is t e class o! rentiers 000 in EnglandS ?s t e class o! rentiers increases, so also does t at o! lenders o! capital, !or t ey are one and t e same0L B)amsay, +n 0ssay on the Distribution of "ealth, pp0 <=1-=<0C &&0 5 e de8elopment o! t e credit system and t e attendant e8er-gro@ing control o! ind%strialists and merc ants o8er t e money sa8ings o! all classes o! society t at is e!!ected t ro%g t e bankers, and t e progressi8e concentration o! t ese sa8ings in amo%nts @ ic can ser8e as money-capital, m%st also depress t e rate o! interest0 More abo%t t is later0 Wit re!erence to t e determination o! t e rate o! interest, )amsay says t at it Kdepends partly %pon t e rate o! gross pro!its, partly on t e proportion in @ ic t ese are separated into pro!its o! capital and t ose o! enterprise0 5 is proportion again depends %pon t e competition bet@een t e lenders o! capital and t e borro@ers#

<3>

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@ ic competition is in!l%enced, t o%g by no means entirely reg%lated, by t e rate o! gross pro!it expected to be realised06 ?nd t e reason @ y competition is not excl%si8ely reg%lated by t is ca%se, is, beca%se on t e one and many borro@ @it o%t any 8ie@ to prod%cti8e employment# and, on t e ot er, beca%se t e proportion o! t e @ ole capital to be lent, 8aries @it t e ric es o! t e co%ntry independently o! any c ange in gross pro!its0L B)amsay, 10 c0, pp0 <=6-=>0C 5o determine t e a8erage rate o! interest @e m%st 1C calc%late t e a8erage rate o! interest d%ring its 8ariations in t e maHor ind%strial cycles# and <C !ind t e rate o! interest !or in8estments @ ic reD%ire long-term loans o! capital0 5 e a8erage rate o! interest pre8ailing in a certain co%ntry I as distinct !rom t e contin%ally !l%ct%ating market rates I cannot be determined by any la@0 &n t is sp ere t ere is no s%c t ing as a nat%ral rate o! interest in t e sense in @ ic economists speak o! a nat%ral rate o! pro!it and a nat%ral rate o! @ages0 Massie as rig tly said in t is respect Bp02*C: K5 e only t ing @ ic any man can be in do%bt abo%t on t is occasion, is, @ at proportion o! t ese pro!its do o! rig t belong to t e borro@er, and @ at to t e lender# and t is t ere is no ot er met od o! determining t an by t e opinions o! borro@ers and lenders in general# !or rig t and @rong, in t is respect, are only @ at common consent makes so0L ED%ating s%pply and demand I ass%ming t e a8erage rate o! pro!it as gi8en I means not ing0 W ere8er else t is !orm%la is resorted to Band t is is t en practically correctC, it ser8es as a !orm%la to !ind t e !%ndamental r%le Bt e reg%lating limits or limiting magnit%desC @ ic is independent o!, and rat er determines, competition# notably as a !orm%la !or t ose @ o are eld capti8e by t e practice o! competition, and by its p enomena and t e conceptions arising o%t o! t em, to arri8e at @ at is again b%t a s%per!icial idea o! t e inner connection o! economic relations obtaining @it in competition0 &t is a met od to pass !rom t e 8ariations t at go @it competition to t e limits o! t ese 8ariations0 5 is is not t e case @it t e a8erage rate o! interest0 5 ere is no good reason @ y a8erage conditions o! competition, t e balance bet@een lender and borro@er, s o%ld gi8e t e lender an interest rate o! 3, 2, +T, etc0, or else a certain percentage o! t e gross pro!its, say <=T or +=T, on is capital0 W ere8er it is competition as s%c @ ic determines anyt ing, t e determination is accidental, p%rely empirical, and only pedantry or !antasy @o%ld seek to represent t is accident as a necessity0 > -ot ing is more am%sing in t e reports o! ,arliament !or 18+> and 18+8 concerning bank legislation and commercial crises t an to ear o! Kt e real rate prod%cedL as t e directors o! t e Aank o! England, 'ondon bankers, co%ntry bankers, and pro!essional t eorists c atter back and !ort , ne8er getting beyond s%c commonplaces as t at Kt e price paid !or t e %se o! loanable capital s o%ld 8ary @it t e s%pply o! s%c capital,L t at Ka ig rate and a lo@ pro!it cannot permanently exist,L and similar specio%s platit%des08 ;%stoms, H%ristic tradition, etc0, a8e as m%c to do @it determining t e a8erage rate o! interest as competition itsel!, in so !ar as it exists not merely as an a8erage, b%t rat er as act%al

<38

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magnit%de0 &n many la@ disp%tes, @ ere interest as to be calc%lated, an a8erage rate o! interest as to be ass%med as t e legal rate0 &! @e inD%ire !%rt er as to @ y t e limits o! a mean rate o! interest cannot be ded%ced !rom general la@s, @e !ind t e ans@er lies simply in t e nat%re o! interest0 &t is merely a part o! t e a8erage pro!it0 5 e same capital appears in t@o roles I as loanable capital in t e lender"s ands and as ind%strial, or commercial, capital in t e ands o! t e !%nctioning capitalist0 A%t it !%nctions H%st once, and prod%ces pro!it H%st once0 &n t e prod%ction process itsel! t e nat%re o! capital as loanable capital plays no role0 6o@ t e t@o parties @ o a8e claim to it di8ide t e pro!it is in itsel! H%st as p%rely empirical a matter belonging to t e realm o! accident as t e distrib%tion o! percentage s ares o! a common pro!it in a b%siness partners ip0 5@o entirely di!!erent elements I labo%r-po@er and capital I act as determinants in t e di8ision bet@een s%rpl%s-8al%e and @ages, @ ic di8ision essentially determines t e rate o! pro!it# t ese are !%nctions o! t@o independent 8ariables, @ ic limit one anot er# and it is t eir 3ualitative difference t at is t e so%rce o! t e 3uantitative division o! t e prod%ced 8al%e0 We s all see later t at t e same occ%rs in t e splitting o! s%rpl%s-8al%e into rent and pro!it0 -ot ing o! t e kind occ%rs in t e case o! interest0 6ere t e 3ualitative differentiation as @e s all presently see, proceeds rat er !rom t e purely 3uantitative division o! t e same s%m o! s%rpl%s-8al%e0 &t !ollo@s !rom t e a!oresaid t at t ere is no s%c t ing as a Knat%ralL rate o! interest0 A%t i!, %nlike t e general rate o! pro!it, t ere is on t e one and no general la@ to determine t e limits o! t e a8erage interest, or a8erage rate o! interest as distinct !rom t e contin%ally !l%ct%ating market rates o! interest, beca%se it is merely a D%estion o! di8iding t e gross pro!it bet@een t@o o@ners o! capital %nder di!!erent title# on t e ot er and, t e rate o! interest I be it t e a8erage or t e market rate pre8alent in eac partic%lar case I appears as a %ni!orm, de!inite and tangible magnit%de in a D%ite di!!erent @ay !rom t e general rate o! pro!it0 * 5 e rate o! interest is similarly related to t e rate o! pro!it as t e market-price o! a commodity is to its 8al%e0 &n so !ar as t e rate o! interest is determined by t e rate o! pro!it, t is is al@ays t e general rate o! pro!it and not any speci!ic rate o! pro!it pre8ailing in some partic%lar branc o! ind%stry, and still less any extra pro!it @ ic an indi8id%al capitalist may make in a partic%lar sp ere o! b%siness01= &t is a !act, t ere!ore, t at t e general rate o! pro!it appears as an empirical, gi8en reality in t e a8erage rate o! interest, alt o%g t e latter is not a p%re or reliable expression o! t e !ormer0 &t is indeed tr%e t at t e rate o! interest itsel! 8aries in accordance @it t e di!!erent classes o! sec%rities o!!ered by borro@ers, and in accordance @it t e lengt o! time !or @ ic t e money is borro@ed# b%t it is %ni!orm in eac o! t ese classes at a gi8en moment0 5 is distinction, t en, does not militate against a !ixed and %ni!orm appearance o! t e rate o! interest0 11 5 e a8erage rate o! interest appears in e8ery co%ntry o8er !airly long periods as a constant magnit%de, beca%se t e general rate o! pro!it 8aries only at longer inter8als I in spite o! constant 8ariations in speci!ic rates o! pro!it, in @ ic a c ange in one sp ere is o!!set by an opposite c ange in anot er0 ?nd its relati8e constancy is re8ealed precisely in t is more or less constant nat%re o! t e a8erage, or common, rate o! interest0 ?s concerns t e perpet%ally !l%ct%ating market rate o! interest, o@e8er, it exists at any moment as a !ixed magnit%de, H%st as t e market-price o! commodities, beca%se in t e money-market all loanable capital contin%ally !aces !%nctioning capital as an aggregate mass, so t at t e relation bet@een t e s%pply o! loanable capital on one side, and t e demand !or it on t e ot er, decides t e market le8el o! interest at any gi8en time0 5 is is all t e more so, t e more t e de8elopment, and t e attendant concentration, o! t e credit system gi8es to loanable capital a general social c aracter and t ro@s it all at once on t e money-market0 3n t e ot er and, t e general rate o! pro!it is ne8er anyt ing more t an a tendency, a mo8ement to eD%alise speci!ic rates o! pro!it0 5 e competition bet@een capitalists I @ ic is itsel! t is mo8ement to@ard eD%ilibri%m I consists ere o! t eir grad%ally @it dra@ing capital !rom sp eres in @ ic pro!it is !or an appreciable lengt o! time belo@ a8erage, and grad%ally in8esting capital into sp eres in @ ic

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pro!it is abo8e a8erage0 3r it may also consist in additional capital distrib%ting itsel! grad%ally and in 8arying proportions among t ese sp eres0 &t is contin%al 8ariation in s%pply and @it dra@al o! capital in regard to t ese di!!erent sp eres, and ne8er a sim%ltaneo%s mass e!!ect, as in t e determination o! t e rate o! interest0 We a8e seen t at interest-bearing capital, alt o%g a category @ ic di!!ers absol%tely !rom a commodity, becomes a commodity sui generis, so t at interest becomes its price, !ixed at all times by s%pply and demand like t e market-price o! an ordinary commodity0 5 e market rate o! interest, @ ile !l%ct%ating contin%ally, appears t ere!ore at any gi8en moment H%st as constantly !ixed and %ni!orm as t e market-price o! a commodity pre8ailing in eac indi8id%al case0 Moneycapitalists s%pply t is commodity, and !%nctioning capitalists b%y it, creating t e demand !or it0 5 is does not occ%r @ en eD%alisation creates a general rate o! pro!it0 &! prices o! commodities in one sp ere are belo@ or abo8e t e price o! prod%ction B@ erein @e deliberately lea8e aside t e !l%ct%ations attendant %pon t e 8ario%s p ases o! t e ind%strial cycle in eac and e8ery enterpriseC t e balance is e!!ected t ro%g t e expansion or c%rtailment o! prod%ction, i.e., t e expansion or c%rtailment o! t e masses o! commodities t ro@n on t e market by ind%strial capitals I ca%sed by in!lo@ or o%t!lo@ o! capital to and !rom indi8id%al sp eres o! prod%ction0 &t is by t is eD%alisation o! t e a8erage market-prices o! commodities to prices o! prod%ction t at de8iations o! speci!ic rates o! pro!it !rom t e general, or a8erage, rate o! pro!it are corrected0 &t cannot be t at in t is process ind%strial or mercantile capital as such s o%ld e8er ass%me t e appearance o! commodities 8is-O-8is t e b%yer, as in t e case o! interest-bearing capital0 &! perceptible at all, t is process is so only in t e !l%ct%ations and eD%alisations o! market-prices o! commodities to prices o! prod%ction, not as a direct !ixation o! t e a8erage pro!it0 5 e general rate o! pro!it is, indeed, determined 1C by t e s%rpl%s-8al%e prod%ced by t e total capital, <C by t e proportion o! t is s%rpl%s-8al%e to t e 8al%e o! t e total capital, and 3C by competition, b%t only in so !ar as t is is a mo8ement @ ereby capitals in8ested in partic%lar prod%ction sp eres seek to dra@ eD%al di8idends o%t o! t is s%rpl%s-8al%e in proportion to t eir relati8e magnit%des0 5 e general rate o! pro!it, t ere!ore, deri8es act%ally !rom ca%ses !ar di!!erent and !ar more complicated t an t e market rate o! interest, @ ic is directly and immediately determined by t e proportion bet@een s%pply and demand, and ence is not as tangible and ob8io%s a !act as t e rate o! interest0 5 e indi8id%al rates o! pro!it in 8ario%s sp eres o! prod%ction are t emsel8es more or less %ncertain# b%t in so !ar as t ey appear, it is not t eir %ni!ormity b%t t eir di!!erences @ ic are perceptible0 5 e general rate o! pro!it, o@e8er, appears only as t e lo@est limit o! pro!it, not as an empirical, directly 8isible !orm o! t e act%al rate o! pro!it0 &n emp asising t is di!!erence bet@een t e rate o! interest and t e rate o! pro!it, @e still omit t e !ollo@ing t@o points, @ ic !a8o%r consolidation o! t e rate o! interest: 1C t e istorical preexistence o! interest-bearing capital and t e existence o! a traditional general rate o! interest# <C t e !ar greater direct in!l%ence exerted by t e @orld-market on establis ing t e rate o! interest, irrespecti8e o! t e economic conditions o! a co%ntry, as compared @it its in!l%ence on t e rate o! pro!it0 5 e a8erage pro!it does not obtain as a directly establis ed !act, b%t rat er is to be determined as an end res%lt o! t e eD%alisation o! opposite !l%ct%ations0 -ot so @it t e rate o! interest0 &t is a t ing !ixed daily in its general, at least local, 8alidity I a t ing @ ic ser8es ind%strial and mercantile capitals e8en as a prereD%isite and a !actor in t e calc%lation o! t eir operation0 &t becomes t e general endo@ment o! e8ery s%m o! money o! V1== to yield V<, 3, 2, +0 Meteorological reports ne8er denote t e readings o! t e barometer and t ermometer @it greater acc%racy t an stock exc ange reports denote t e rate o! interest, not !or one or anot er capital, b%t !or capital in t e money-market, i.e., !or loanable capital generally0 &n t e money-market only lenders and borro@ers !ace one anot er0 5 e commodity as t e same !orm-money0 ?ll speci!ic !orms o! capital in accordance @it its in8estment in partic%lar sp eres o! prod%ction or circ%lation are ere obliterated0 &t exists in t e %ndi!!erentiated omogeneo%s

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!orm o! independent 8al%e-money0 5 e competition o! indi8id%al sp eres does not a!!ect it0 5 ey are all t ro@n toget er as borro@ers o! money, and capital con!ronts t em all in a !orm, in @ ic it is as yet indi!!erent to t e prospecti8e manner o! its in8estment0 &t obtains most emp atically in t e s%pply and demand o! capital asessentially the common capital of a class I somet ing ind%strial capital does only in t e mo8ement and competition o! capital bet@een t e 8ario%s indi8id%al sp eres0 3n t e ot er and, money-capital in t e money-market act%ally possesses t e !orm, in @ ic , indi!!erent to its speci!ic employment, it is di8ided as a common element among t e 8ario%s sp eres, among t e capitalist class, as t e reD%irements o! prod%ction in eac indi8id%al sp ere may dictate0 Moreo8er, @it t e de8elopment o! large-scale ind%stry moneycapital, so !ar as it appears on t e market, is not represented by some indi8id%al capitalist, not t e o@ner o! one or anot er !raction o! t e capital in t e market, b%t ass%mes t e nat%re o! a concentrated, organised mass, @ ic , D%ite di!!erent !rom act%al prod%ction, is s%bHect to t e control o! bankers, i.e., t e representati8es o! social capital0 $o t at, as concerns t e !orm o! demand, loanable capital is con!ronted by t e class as a @ ole, @ ereas in t e pro8ince o! s%pply it is loanable capital @ ic obtains en masse0 5 ese are some o! t e reasons @ y t e general rate o! pro!it appears bl%rred and aEy alongside t e de!inite interest rate, @ ic may !l%ct%ate in magnit%de, b%t al@ays con!ronts borro@ers as gi8en and !ixed beca%se it 8aries %ni!ormly !or all o! t em0 P%st as 8ariations in t e 8al%e o! money do not pre8ent it !rom a8ing t e same 8al%e 8is-O-8is all commodities0 P%st as t e daily !l%ct%ations in market-prices o! commodities do not pre8ent t em !rom being daily reported in t e papers0 $o t e rate o! interest is reg%larly reported as Kt e price o! money0L &t is so, beca%se capital itsel! is being o!!ered ere in t e !orm o! money as a commodity0 5 e !ixation o! its price is t %s a !ixation o! its market-price, as @it all ot er commodities0 5 e rate o! interest, t ere!ore, al@ays appears as t e general rate o! interest, as so m%c money !or so m%c money, as a de!inite D%antity0 5 e rate o! pro!it, on t e ot er and, may 8ary e8en @it in t e same sp ere !or commodities @it t e same price, depending on di!!erent conditions %nder @ ic di!!erent capitals prod%ce t e same commodity, beca%se t e rate o! pro!it o! an indi8id%al capital is not determined by t e market-price o! a commodity, b%t rat er by t e di!!erence bet@een marketprice and cost-price0 ?nd t ese di!!erent rates o! pro!it can strike a balance I !irst @it in t e same sp ere and t en bet@een di!!erent sp eres I only t ro%g contin%al !l%ct%ation0 B-ote !or later elaboration0C ? speci!ic !orm o! credit: &t is kno@n t at @ en money ser8es as a means o! payment instead o! a means o! p%rc ase, t e commodity is alienated, b%t its 8al%e is realised only later0 &! payment is not made %ntil a!ter t e commodity as again been sold, t is sale does not appear as t e res%lt o! t e p%rc ase# rat er it is t ro%g t is sale t at t e p%rc ase is realised0 &n ot er @ords, t e sale becomes a means o! p%rc ase0 $econdly: titles to debts, bills o! exc ange, etc0, become means o! payment !or t e creditor0 5 irdly: t e compensation o! titles to debts replaces money0

Chapter 23. 5nterest and Profit of Enterprise

&nterest, as @e a8e seen in t e t@o preceding c apters, appears originally, is originally, and remains in !act merely a portion o! t e pro!it, i.e., o! t e s%rpl%s-8al%e, @ ic t e !%nctioning capitalist, ind%strialist or merc ant as to pay to t e o@ner and lender o! money-capital @ ene8er e %ses loaned capital instead o! is o@n0 &! e employs only is o@n capital, no s%c di8ision o! pro!it takes place# t e latter is t en entirely is0 &ndeed, as long as t e o@ners o! t e capital employ it on t eir o@n in t e reprod%ction process, t ey do not compete in determining t e rate o! interest0 5 is alone s o@s t at t e category o! interest I impossible @it o%t determining t e rate o! interest I is alien to t e mo8ements o! ind%strial capital as s%c 0 K5 e rate o! interest may be de!ined to be t at proportional s%m @ ic t e lender is content to recei8e, and t e borro@er to pay, ann%ally, or !or any longer or s orter period, !or t e %se o! a certain amo%nt o! moneyed capital0000 W en t e o@ner o! a capital employs it acti8ely in reprod%ction, e does not come %nder t e ead o! t ose capitalists, t e proportion o! @ om, to t e n%mber o! borro@ers, determines t e rate o! interest0L# B5 0 5ooke, (istory of &rices, 'ondon, 1838, &&, pp0 3++-+60C &t is indeed only t e separation o! capitalists into money-capitalists and ind%strial capitalists t at trans!orms a portion o! t e pro!it into interest, t at generally creates t e category o! interest# and it is only t e competition bet@een t ese t@o kinds o! capitalists @ ic creates t e rate o! interest0 ?s long as capital !%nctions in t e process o! reprod%ction I ass%ming t at it e8en belongs to t e ind%strial capitalist and e as no need o! paying it back to a lender I t e capitalist, as a pri8ate indi8id%al, does not a8e at is disposal t is capital itsel!, b%t only t e pro!it, @ ic e may spend as re8en%e0 ?s long as is capital !%nctions as capital, it belongs to t e process o! reprod%ction, is tied %p in it0 6e is, indeed, its o@ner, b%t t is o@ners ip does not enable im to dispose o! it in any ot er @ay, so long as e %ses it as capital !or t e exploitation o! labo%r0 5 e same is tr%e o! t e money-capitalist0 $o long as is capital is loaned o%t and t ereby ser8es as money-capital, it brings im interest, a portion o! t e pro!it, b%t e cannot dispose o! t e principal0 5 is is e8ident @ ene8er e loans o%t is capital !or, say, a year, or more, and recei8es interest at certain stip%lated times @it o%t t e ret%rn o! is principal0 A%t e8en t e ret%rn o! t e principal makes no di!!erence ere0 &! e gets it back, e m%st al@ays loan it o%t again, so long as it is to !%nction !or im as capital I ere as money-capital0 ?s long as e keeps it in is o@n ands, it does not collect interest and does not act as capital# and as long as it does gat er interest and ser8e as capital, it is o%t o! is ands0 6ence t e possibility o! loaning o%t capital !or all time0 5 e !ollo@ing remarks by 5ooke directed against AosanD%et are, t ere!ore, entirely @rong0 6e D%otes AosanD%et BMetallic, &aper and Credit Currency, 'ondon, 182<, p0 >3C: KWere t e rate o! interest red%ced as lo@ as 1T, capital borro@ed @o%ld be placed nearly on a par @it capital possessed0L#

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5o t is 5ooke adds t e !ollo@ing marginal note: K5 at a capital borro@ed at t at, or e8en a lo@er rate, s o%ld be considered nearly on a par @it capital possessed, is a proposition so strange as ardly to @arrant serio%s notice @ere it not ad8anced by a @riter so intelligent, and, on some points o! t e s%bHect, so @ell in!ormed0 6as circ%mstance, or does e o8erlooked t e e consider it o! little

conseD%ence, t at t ere m%st, by t e s%pposition, be a condition o! repaymentQL# B5 0 5ooke, +n Dn3uiry into the Currency &rinciple , <nd ed0, 'ondon, 1822, p0 8=0C &! interest @ere R =, t e ind%strial capitalist operating on borro@ed capital @o%ld stand on a par @it a capitalist %sing is o@n capital0 Aot @o%ld pocket t e same a8erage pro!it, and capital, @ et er borro@ed or o@ned, ser8es as capital only as long as it prod%ces pro!it0 5 e condition o! ret%rn payment @o%ld alter not ing0 5 e nearer t e rate o! interest approac es Eero, !alling, !or instance, to 1T, t e nearer borro@ed capital is to being on a par @it o@ner"s capital0 $o long as money-capital is to exist as money-capital, it m%st al@ays be loaned o%t, and indeed at t e pre8ailing rate o! interest, say o! 1T, and al@ays to t e same class o! ind%strial and commercial capitalists0 $o long as t ese !%nction as capitalists, t e sole di!!erence bet@een t e one @orking @it borro@ed capital and t e ot er @it is o@n is t at t e !ormer m%st pay interest and t e latter m%st not# t e one pockets t e entire pro!it p, and t e ot er p - i, t e pro!it min%s t e interest0 5 e nearer interest approac es Eero, t e nearer p - i approac es p, and ence t e nearer t e t@o capitals are to being on a par0 5 e one m%st pay back t e capital and borro@ ane@# yet t e ot er m%st like@ise ad8ance it again and again to t e prod%ction process, so long as is capital is to !%nction, and cannot dispose o! it !reely, independent o! t is process0 5 e sole remaining di!!erence bet@een t e t@o is t e ob8io%s di!!erence t at one is t e o@ner o! is capital, and t e ot er is not0 5 e D%estion @ ic no@ arises is t is0 6o@ does t is p%rely D%antitati8e di8ision o! pro!it into net pro!it and interest t%rn into a D%alitati8e oneQ &n ot er @ords, o@ is it t at a capitalist @ o employs solely is o@n, not borro@ed capital, classi!ies a portion o! is gross pro!it %nder t e speci!ic category o! interest and as s%c calc%lates it separatelyQ ?nd, !%rt ermore, o@ is it t at all capital, @ et er borro@ed or not, is di!!erentiated as interest-bearing capital !rom itsel! as capital prod%cing a net pro!itQ &t is %nderstood t at not e8ery accidental D%antitati8e di8ision o! pro!it t%rns in t is manner into a D%alitati8e one0 For instance, some ind%strial capitalists Hoin ands to operate a b%siness and t en di8ide t e pro!it among t emsel8es in accordance @it some legal agreement0 3t ers do t eir b%siness, eac on is o@n, @it o%t any partners0 5 ese last do not calc%late t eir pro!it %nder t@o eads I one part as indi8id%al pro!it, and t e ot er as company pro!it !or t eir non-existent partners0 &n t is case t e D%antitati8e di8ision t ere!ore does not become a D%alitati8e one0 5 is occ%rs @ ene8er o@ners ip appens to be 8ested in se8eral H%ridical persons0 &t does not occ%r @ ene8er t is is not t e case0 &n order to ans@er t is D%estion, @e m%st d@ell some@ at longer on t e act%al point o! depart%re in t e !ormation o! interest# t at is, @e m%st proceed !rom t e ass%mption t at t e moneycapitalist and ind%strial capitalist really con!ront one anot er not H%st as legally di!!erent persons,

<23

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b%t as persons playing entirely di!!erent roles in t e reprod%ction process, or as persons in @ ose ands t e same capital really per!orms a t@o-!old and @ olly di!!erent mo8ement0 5 e one merely loans it, t e ot er employs it prod%cti8ely0 For t e prod%cti8e capitalist @ o @orks on borro@ed capital, t e gross pro!it !alls into t@o parts I t e interest, @ ic e is to pay t e lender, and t e s%rpl%s o8er and abo8e t e interest, @ ic makes %p is o@n s are o! t e pro!it0 &! t e general rate o! pro!it is gi8en, t is latter portion is determined by t e rate o! interest# and i! t e rate o! interest is gi8en, t en by t e general rate o! pro!it0 ?nd !%rt ermore: o@e8er t e gross pro!it, t e act%al 8al%e o! t e total pro!it, may di8erge in eac indi8id%al case !rom t e a8erage pro!it, t e portion belonging to t e !%nctioning capitalist is determined by t e interest, since t is is !ixed by t e general rate o! interest Blea8ing aside any special legal stip%lationsC and ass%med to be gi8en be!ore and, be!ore t e process o! prod%ction begins, ence be!ore its res%lt, t e gross pro!it, is ac ie8ed0 We a8e seen t at t e act%al speci!ic prod%ct o! capital is s%rpl%s-8al%e, or, more precisely, pro!it0 A%t !or t e capitalist @orking on borro@ed capital it is not pro!it, b%t pro!it min%s interest, t at portion o! pro!it @ ic remains to im a!ter paying interest0 5 is portion o! t e pro!it, t ere!ore, necessarily appears to im to be t e prod%ct o! a capital as long as it is operati8e# and t is it is, as !ar as e is concerned, beca%se e represents capital only as !%nctioning capital0 6e is its personi!ication as long as it !%nctions, and it !%nctions as long as it is pro!itably in8ested in ind%stry or commerce and s%c operations are %ndertaken @it it t ro%g its employer as are prescribed by t e branc o! ind%stry concerned0 ?s distinct !rom interest, @ ic e as to pay to t e lender o%t o! t e gross pro!it, t e portion o! pro!it @ ic !alls to is s are necessarily ass%mes t e !orm o! ind%strial or commercial pro!it, or, to %se a :erman term embracing bot , t e !orm o! Nnternehmergewinn Bpro!it o! enterpriseC0 &! t e gross pro!it eD%als t e a8erage pro!it, t e siEe o! t e pro!it o! enterprise is determined excl%si8ely by t e rate o! interest0 &! t e gross pro!it de8iates !rom t e a8erage pro!it, its di!!erence !rom t e a8erage pro!it Ba!ter interest is ded%cted !rom bot C is determined by all t e circ%mstances @ ic ca%se a temporary de8iation, be it o! t e rate o! pro!it in any partic%lar sp ere !rom t e general rate o! pro!it, or t e pro!it o! some indi8id%al capitalist in a certain sp ere !rom t e a8erage pro!it o! t is sp ere0 We a8e seen o@e8er t at t e rate o! pro!it @it in t e prod%ction process itsel! does not depend on s%rpl%s-8al%e alone, b%t also on many ot er circ%mstances, s%c as p%rc ase prices o! means o! prod%ction, met ods more prod%cti8e t an t e a8erage, on sa8ings o! constant capital, etc0 ?nd aside !rom t e price o! prod%ction, it depends on special circ%mstances, and in e8ery single b%siness transaction on t e greater or lesser s re@dness and ind%stry o! t e capitalist, @ et er, and to @ at extent, e b%ys or sells abo8e or belo@ t e price o! prod%ction and t %s appropriates a greater or smaller portion o! t e total s%rpl%s-8al%e in t e process o! circ%lation0 &n any case, t e D%antitati8e di8ision o! t e gross pro!it t%rns ere into a D%alitati8e one, and all t e more so beca%se t e D%antitati8e di8ision itsel! depends on what is to be di8ided, t e manner in @ ic t e acti8e capitalist manages is capital, and @ at gross pro!it it yields to im as a !%nctioning capital, i.e., in conseD%ence o! is !%nctions as an acti8e capitalist0 5 e !%nctioning capitalist is ere ass%med as a non-o@ner o! capital0 3@ners ip o! t e capital is represented in relation to im by t e money-capitalist, t e lender0 5 e interest e pays to t e latter t %s appears as t at portion o! gross pro!it @ ic is d%e to t e o@ners ip o! capital as s%c 0 ?s distinct !rom t is, t at portion o! pro!it @ ic !alls to t e acti8e capitalist appears no@ as pro!it o! enterprise, deri8ing solely !rom t e operations, or !%nctions, @ ic e per!orms @it t e capital in t e process o! reprod%ction, ence partic%larly t ose !%nctions @ ic e per!orms as entreprene%r in ind%stry or commerce0 &n relation to im interest appears t ere!ore as t e mere !r%it o! o@ning capital, o! capital as s%c abstracted !rom t e reprod%ction process o! capital, inasm%c as it does not K@ork,L# does not !%nction# @ ile pro!it o! enterprise appears to im as t e excl%si8e !r%it o! t e !%nctions @ ic e per!orms @it t e capital, as t e !r%it o! t e mo8ement and per!ormance o! capital, o! a per!ormance @ ic appears to im as is o@n acti8ity, as opposed to t e inacti8ity, t e non-participation o! t e money-

<22

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capitalist in t e prod%ction process0 5 is D%alitati8e distinction bet@een t e t@o portions o! gross pro!it t at interest is t e !r%it o! capital as s%c , o! t e o@ners ip o! capital irrespecti8e o! t e prod%ction process, and t at pro!it o! enterprise is t e !r%it o! per!orming capital, o! capital !%nctioning in t e prod%ction process, and ence o! t e acti8e role played by t e employer o! t e capital in t e reprod%ction process I t is D%alitati8e distinction is by no means merely a s%bHecti8e notion o! t e money-capitalist, on t e one and, and t e ind%strial capitalist, on t e ot er0 &t rests %pon an obHecti8e !act, !or interest !lo@s to t e money-capitalist, to t e lender, @ o is t e mere o@ner o! capital, ence represents only o@ners ip o! capital be!ore t e prod%ction process and o%tside o! it# @ ile t e pro!it o! enterprise !lo@s to t e !%nctioning capitalist alone, @ o is non-o@ner o! t e capital0 5 e merely D%antitati8e di8ision o! t e gross pro!it bet@een t@o di!!erent persons @ o bot a8e di!!erent legal claims to t e same capital, and ence to t e pro!it prod%ced by it, t %s t%rns into a D%alitati8e di8ision !or bot t e ind%strial capitalist in so !ar as e is operating on borro@ed capital, and !or t e money-capitalist, in so !ar as e does not imsel! apply is capital0 3ne portion o! t e pro!it appears no@ as !r%it d%e as s%c to capital in one !orm, as interest# t e ot er portion appears as a speci!ic !r%it o! capital in an opposite !orm, and t %s as pro!it o! enterprise0 3ne appears excl%si8ely as t e !r%it o! operating @it t e capital, t e !r%it o! per!orming capital, or o! t e !%nctions per!ormed by t e acti8e capitalist0 ?nd t is ossi!ication and indi8id%alisation o! t e t@o parts o! t e gross pro!it in respect to one anot er, as t o%g t ey originated !rom t@o essentially di!!erent so%rces, no@ takes !irm s ape !or t e entire capitalist class and t e total capital0 ?nd, indeed, regardless o! @ et er t e capital employed by t e acti8e capitalist is borro@ed or not, and @ et er t e capital belonging to t e money-capitalist is employed by imsel! or not0 5 e pro!it o! e8ery capital, and conseD%ently also t e a8erage pro!it establis ed by t e eD%alisation o! capitals, splits, or is separated, into t@o D%alitati8ely di!!erent, m%t%ally independent and separately indi8id%alised parts, to @it I interest and pro!it o! enterprise I bot o! @ ic are determined by separate la@s0 5 e capitalist operating on is o@n capital, like t e one operating on borro@ed capital, di8ides t e gross pro!it into interest d%e to imsel! as o@ner, as is o@n lender, and into pro!it o! enterprise d%e to im as to an acti8e capitalist per!orming is !%nction0 ?s concerns t is di8ision, t ere!ore, as a D%alitati8e one, it is immaterial @ et er t e capitalist really as to s are @it anot er, or not0 5 e employer o! capital, e8en @ en @orking @it is o@n capital, splits into t@o personalities I t e o@ner o! capital and t e employer o! capital# @it re!erence to t e categories o! pro!it @ ic it yields, is capital also splits into capital1property, capital outside t e prod%ction process, and yielding interest o! itsel!, and capital in t e prod%ction process @ ic yields a pro!it o! enterprise t ro%g its !%nction0 &nterest, t ere!ore, becomes !irmly establis ed in a @ay t at it no longer appears as a di8ision o! gross pro!it o! indi!!erence to prod%ction, @ ic occ%rs occasionally @ en t e ind%strial capitalist appens to operate @it someone else"s capital0 6is pro!it splits into interest and pro!it o! enterprise e8en @ en e operates on is o@n capital0 ? merely D%antitati8e di8ision t %s t%rns into a D%alitati8e one0 &t occ%rs regardless o! t e !ort%ito%s circ%mstance @ et er t e ind%strial capitalist is, or is not, t e o@ner o! is capital0 &t is not only a matter o! di!!erent D%otas o! pro!it assigned to di!!erent persons, b%t t@o di!!erent categories o! pro!it @ ic are di!!erently related to t e capital, ence related to di!!erent aspects o! t e capital0 -o@ t at t is di8ision o! gross pro!it into interest and pro!it o! enterprise as become a D%alitati8e one, it is easy to disco8er t e reasons @ y it acD%ires t is c aracter o! a D%alitati8e di8ision !or t e total capital and t e entire class o! capitalists0 'irstly, t is !ollo@s !rom t e simple empirical circ%mstance t at t e maHority o! ind%strial capitalists, e8en i! in di!!erent n%merical proportions, @ork @it t eir o@n and @it borro@ed capital, and t at at di!!erent times t e proportion bet@een one"s o@n and borro@ed capital c anges0

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Secondly, t e trans!ormation o! a portion o! t e gross pro!it into t e !orm o! interest con8erts its ot er portion into pro!it o! enterprise0 5 e latter is, indeed, b%t t e opposite !orm ass%med by t e excess o! gross pro!it o8er interest as soon as t is exists as an independent category0 5 e entire analysis o! t e problem o@ gross pro!it is di!!erentiated into interest and pro!it o! enterprise, resol8es itsel! into t e inD%iry o! o@ a portion o! t e gross pro!it becomes %ni8ersally ossi!ied and indi8id%alised as interest0 .et istorically interest-bearing capital existed as a completed traditional !orm, and ence interest as a completed s%b-di8ision o! s%rpl%s-8al%e prod%ced by capital, long be!ore t e capitalist mode o! prod%ction and its attendant conceptions o! capital and pro!it0 5 %s it is t at to t e pop%lar mind money-capital, or interest-bearing capital, is still capital as s%c , as capital par e cellence. 5 %s it is, on t e ot er and, t at %p to t e time o! Massie t e notion pre8ailed t at it is money as s%c @ ic is paid in interest0 5 e !act t at loaned capital yields interest @ et er act%ally employed as capital or not I e8en @ en borro@ed only !or cons%mption I lends strengt to t e idea t at t is !orm o! capital exists independently0 5 e best proo! o! t e independence @ ic interest possessed d%ring t e early periods o! t e capitalist mode o! prod%ction in re!erence to pro!it, and @ ic interest-bearing capital possessed in re!erence to ind%strial capital, is t at it @as disco8ered Bby Massie //P0 Massie1 +n 0ssay on the Governing Causes of the $atural 9ate of Dnterest , 'ondon, 1>+=0 I 0d.1 and a!ter im by 6%me /70 6%me, K3n &nterest0L &n: KEssays and 5reatises on $e8eral $%bHects,L 4ol0 &, 'ondon, 1>620 I 0d.1 C as late as t e middle o! t e 18t cent%ry, t at interest is b%t a portion o! t e gross pro!it, and t at s%c a disco8ery @as at all necessary0 4hirdly, @ et er t e ind%strial capitalist operates on is o@n or on borro@ed capital does not alter t e !act t at t e class o! money-capitalists con!ronts im as a special kind o! capitalists, moneycapital as an independent kind o! capital, and interest as an independent !orm o! s%rpl%s-8al%e pec%liar to t is speci!ic capital0 Oualitatively speaking, interest is s%rpl%s-8al%e yielded by t e mere o@ners ip o! capital# it is yielded by capital as s%c , e8en t o%g its o@ner remains o%tside t e reprod%ction process0 6ence it is s%rpl%s-8al%e realised by capital o%tside o! its process0 Ouantitatively speaking, t at portion o! pro!it @ ic !orms interest does not seem to be related to ind%strial or commercial capital as s%c , b%t to money-capital, and t e rate o! t is portion o! s%rpl%s-8al%e, t e rate o! interest, rein!orces t is relation0 Aeca%se, in t e !irst place, t e rate o! interest is independently determined despite its dependence %pon t e general rate o! pro!it, and, in t e second place, like t e market-price o! commodities, it appears in contrast to t e intangible rate o! pro!it as a !ixed, %ni!orm, tangible and al@ays gi8en relation !or all its 8ariations0 &! all capital @ere in t e ands o! t e ind%strial capitalists t ere @o%ld be no s%c t ing as interest and rate o! interest0 5 e independent !orm ass%med by t e D%antitati8e di8ision o! gross pro!it creates t e D%alitati8e one0 &! t e ind%strial capitalist @ere to compare imsel! @it t e money-capitalist, it @o%ld be is pro!it o! enterprise alone, t e excess o! is gross pro!it o8er t e a8erage interest I t e latter appearing to be empirically gi8en by 8irt%e o! t e rate o! interest I t at @o%ld disting%is im !rom t e ot er person0 &!, on t e ot er and, e compares imsel! @it t e ind%strial capitalist @orking @it is o@n, instead o! borro@ed, capital, t e latter di!!ers !rom im only as a money-capitalist in pocketing t e interest instead o! paying it to someone else0 5 e portion o! gross pro!it disting%is ed !rom interest appears to im in eit er case as pro!it o! enterprise, and interest itsel! as a s%rpl%s-8al%e yielded by capital as s%c , @ ic it @o%ld yield e8en i! not applied prod%cti8ely0 5 is is correct in t e practical sense !or t e indi8id%al capitalist0 6e as t e c oice o! making %se o! is capital by lending it o%t as interest-bearing capital, or o! expanding its 8al%e on is o@n by %sing it as prod%cti8e capital, regardless o! @ et er it exists as money-capital !rom t e 8ery !irst, or @ et er it still as to be con8erted into money-capital0 A%t to apply it to t e total capital o! society, as some 8%lgar economists do, and to go so !ar as to de!ine it as t e ca%se o! pro!it, is, o! co%rse, prepostero%s0 5 e idea o! con8erting all t e capital into money-capital, @it o%t t ere

<26

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being people @ o b%y and p%t to %se means o! prod%ction, @ ic make %p t e total capital o%tside o! a relati8ely small portion o! it existing in money, is, o! co%rse, s eer nonsense0 &t @o%ld be still more abs%rd to pres%me t at capital @o%ld yield interest on t e basis o! capitalist prod%ction @it o%t per!orming any prod%cti8e !%nction, i.e., @it o%t creating s%rpl%s-8al%e, o! @ ic interest is H%st a part# t at t e capitalist mode o! prod%ction @o%ld r%n its co%rse @it o%t capitalist prod%ction0 &! an %nto@ardly large section o! capitalists @ere to con8ert t eir capital into money-capital, t e res%lt @o%ld be a !rig t!%l depreciation o! money-capital and a !rig t!%l !all in t e rate o! interest# many @o%ld at once !ace t e impossibility o! li8ing on t eir interest, and @o%ld ence be compelled to recon8ert into ind%strial capitalists0 A%t @e repeat t at it is a !act !or t e indi8id%al capitalist0 For t is reason, e8en @ en operating @it is o@n capital, e necessarily considers t e part o! is a8erage pro!it @ ic eD%als t e a8erage interest as !r%it o! is capital as s%c , set apart !rom t e process o! prod%ction# and as distinct !rom t is portion singled o%t as interest, e considers t e s%rpl%s o! t e gross pro!it as mere pro!it o! enterprise0 'ourthly, /? blank in t e man%script10 We a8e seen, t ere!ore, t at t e portion o! pro!it @ ic t e !%nctioning capitalist as to pay to t e o@ner o! borro@ed capital is trans!ormed into an independent !orm !or a portion o! t e pro!it, @ ic all capital as s%c , @ et er borro@ed or not, yields %nder t e name o! interest0 6o@ large t is portion is depends on t e a8erage rate o! interest0 &ts origin is only still re8ealed in t e !act t at t e !%nctioning capitalist, @ en o@ner o! is capital, does not compete I at least not acti8ely I in determining t e interest rate0 5 e p%rely D%antitati8e di8ision o! t e pro!it bet@een t@o persons @ o a8e di!!erent legal titles to it as t%rned into a D%alitati8e di8ision, @ ic seems to spring !rom t e 8ery nat%re o! capital and pro!it0 Aeca%se, as @e a8e seen, as soon as a portion o! pro!it %ni8ersally ass%mes t e !orm o! interest, t e di!!erence bet@een a8erage pro!it and interest, or t e portion o! pro!it o8er and abo8e t e interest, ass%mes a !orm opposite to interest I t e !orm o! pro!it o! enterprise0 5 ese t@o !orms, interest and pro!it o! enterprise, exist only as opposites0 6ence, t ey are not related to s%rpl%s-8al%e, o! @ ic t ey are b%t parts placed %nder di!!erent categories, eads or names, b%t rat er to one anot er0 &t is beca%se one portion o! pro!it t%rns into interest, t at t e ot er appears as pro!it o! enterprise0 Ay pro!it @e ere al@ays mean a8erage pro!it, since 8ariations do not concern %s in t is analysis, be t ey o! indi8id%al pro!its or o! pro!its in di!!erent sp eres I ence 8ariations ca%sed by t e competiti8e str%ggle and ot er circ%mstances a!!ecting t e distrib%tion o! t e a8erage pro!it, or s%rpl%s-8al%e0 5 is applies generally to t is entire inD%iry0 &nterest is t en net pro!it, as )amsay calls it, @ ic t e o@ners ip o! capital yields as s%c , eit er simply to t e lender, @ o remains o%tside t e reprod%ction process, or to t e o@ner @ o employs is capital prod%cti8ely0 A%t in t e latter"s case, too, capital yields t is net pro!it to im not in is capacity o! prod%cti8e capitalist, b%t o! money-capitalist, o! lender o! is o@n capital as interestbearing capital to imsel! as to a !%nctioning capitalist0 P%st as t e con8ersion o! money, and o! 8al%e in general, into capital is t e constant res%lt o! capitalist prod%ction, so is its existence as capital its constant precondition0 Ay its ability to be trans!ormed into means o! prod%ction it contin%ally commands %npaid labo%r and t ereby trans!orms t e processes o! prod%ction and circ%lation o! commodities into t e prod%ction o! s%rpl%s-8al%e !or its o@ner0 &nterest is, t ere!ore, t e expression o! t e !act t at 8al%e in general-materialised labo%r in its general social !orm-8al%e @ ic ass%mes t e !orm o! means o! prod%ction in t e act%al process o! prod%ction, con!ronts li8ing labo%r-po@er as an independent po@er, and is a means o! appropriating %npaid labo%r# and t at it is s%c a po@er beca%se it con!ronts t e labo%rer as t e property o! anot er0 A%t on t e ot er and, t is antit esis to @age-labo%r is obliterated in t e !orm o! interest, beca%se interest-bearing capital as s%c as not @age-labo%r, b%t prod%cti8e capital !or its opposite0 5 e lending capitalist as s%c !aces t e capitalist per!orming is act%al !%nction in t e process o! reprod%ction, not t e @age-@orker, @ o, precisely %nder capitalist prod%ction, is expropriated o! t e means o! prod%ction0 &nterest-bearing capital is capital as propertyas distinct !rom capital as a

<2>

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function. A%t so long as capital does not per!orm its !%nction, it does not exploit labo%rers and does not come into opposition to labo%r0 3n t e ot er and, pro!it o! enterprise is not related as an opposite to @age-labo%r, b%t only to interest0 'irstly, ass%ming t e a8erage pro!it to be gi8en, t e rate o! t e pro!it o! enterprise is not determined by @ages, b%t by t e rate o! interest0 &t is ig or lo@ in in8erse proportion to it 1 Secondly, t e !%nctioning capitalist deri8es is claim to pro!its o! enterprise, ence t e pro!it o! enterprise itsel!, not !rom is o@ners ip o! capital, b%t !rom t e !%nction o! capital, as distinct !rom t e de!inite !orm in @ ic it is only inert property0 5 is stands o%t as an immediately apparent contrast @ ene8er e operates @it borro@ed capital, and interest and pro!it o! enterprise t ere!ore go to di!!erent persons0 5 e pro!it o! enterprise springs !rom t e !%nction o! capital in t e reprod%ction process, ence as a res%lt o! t e operations, t e acts by @ ic t e !%nctioning capitalist promotes t is !%nction o! ind%strial and commercial capital0 A%t to represent !%nctioning capital is not a sinec%re, like representing interest-bearing capital0 3n t e basis o! capitalist prod%ction, t e capitalist directs t e process o! prod%ction and circ%lation0 Exploiting prod%cti8e labo%r entails exertion, @ et er e exploits it imsel! or as it exploited by someone else on is be al!0 5 ere!ore, is pro!it o! enterprise appears to im as distinct !rom interest, as independent o! t e o@ners ip o! capital, b%t rat er as t e res%lt o! is !%nction as a non-proprietor I a labourer. 6e necessarily concei8es t e idea !or t is reason t at is pro!it o! enterprise, !ar !rom being co%nterposed to @age-labo%r and !ar !rom being t e %npaid labo%r o! ot ers, is itsel! rat er a wage or @ages o! s%perintendence o! labo%r, ig er t an a common labo%rer"s, 1C beca%se t e @ork is !ar more complicated, and <C beca%se e pays t em to imsel!0 5 e !act t at is !%nction as a capitalist consists in creating s%rpl%s-8al%e, i.e., %npaid labo%r, and creating it %nder t e most economical conditions, is entirely lost sig t o! in t e contrast t at interest !alls to t e s are o! t e capitalist e8en @ en e does not per!orm t e !%nction o! a capitalist and is merely t e o@ner o! capital# and t at, on t e ot er and, pro!it o! enterprise does !all to t e s are o! t e !%nctioning capitalist e8en @ en e is not t e o@ner o! t e capital on @ ic e operates0 6e !orgets, d%e to t e antit etical !orm o! t e t@o parts into @ ic pro!it, ence s%rpl%s-8al%e, is di8ided, t at bot are merely parts o! t e s%rpl%s-8al%e, and t at t is di8ision alters not ing in t e nat%re, origin, and @ay o! existence o! s%rpl%s-8al%e0 &n t e process o! reprod%ction t e !%nctioning capitalist represents capital as t e property o! anot er 8is-O-8is t e @age-labo%rers, and t e money-capitalist, represented by t e !%nctioning capitalist, takes a and in exploiting labo%r0 5 e !act t at t e in8esting capitalist can per!orm is !%nction o! making t e labo%rers @ork !or im, or o! employing means o! prod%ction as capital, only as t e personi!ication o! t e means o! prod%ction 8is-O-8is t e labo%rers, is !orgotten in t e contradiction bet@een t e !%nction o! capital in t e reprod%ction process and t e mere o@ners ip o! capital o%tside o! t e reprod%ction process0 &n !act, t e !orm o! interest and pro!it o! enterprise ass%med by t e t@o parts o! pro!it, i.e., o! s%rpl%s-8al%e, expresses no relation to labo%r, beca%se t is relation exists only bet@een labo%r and pro!it, or rat er t e s%rpl%s-8al%e as a s%m, a @ ole, t e %nity o! t ese t@o parts0 5 e proportion in @ ic t e pro!it is di8ided, and t e di!!erent legal titles by @ ic t is di8ision is sanctioned, are based on t e ass%mption t at pro!it is already in existence0 &!, t ere!ore, t e capitalist is t e o@ner o! t e capital on @ ic e operates, e pockets t e @ ole pro!it, or s%rpl%s8al%e0 &t is absol%tely immaterial to t e labo%rer @ et er t e capitalist does t is, or @ et er e as to pay a part o! it to a t ird person as its legal proprietor0 5 e reasons !or di8iding t e pro!it among t@o kinds o! capitalists t %s t%rn imperceptibly into t e reasons !or t e existence o! t e pro!it, t e s%rpl%s-8al%e, t at is to be di8ided, and @ ic capital as s%c deri8es !rom t e reprod%ction process regardless o! any s%bseD%ent di8ision0 $ince interest is opposed to pro!it o!

<28

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enterprise, and pro!it o! enterprise to interest, and since t ey are bot co%nterposed to one anot er, b%t not to labo%r, it !ollo@s t at pro!it o! enterprise pl%s interest, i.e., pro!it, and !%rt er s%rpl%s-8al%e, are deri8ed I !rom @ atQ From t e antit etical !orm o! its t@o partsS A%t pro!it is prod%ced be!ore its di8ision is %ndertaken, and be!ore t ere can be any t o%g t o! it0 &nterest-bearing capital remains as s%c only so long as t e loaned money is act%ally con8erted into capital and a s%rpl%s is prod%ced @it it, o! @ ic interest is a part0 A%t t is does not r%le o%t t at dra@ing interest, regardless o! t e process o! prod%ction, is its organic property0 $o does labo%r-po@er preser8e its property o! prod%cing 8al%e only so long as it is employed and materialised in t e labo%r-process# yet t is does not arg%e against t e !act t at it is potentially, as a po@er, an acti8ity @ ic creates 8al%e, and t at as s%c it does not spring !rom t e process o! prod%ction, b%t rat er antecedes it0 &t is bo%g t as s%c a capacity !or creating 8al%e0 3ne mig t also b%y it @it o%t setting it to @ork prod%cti8ely# !or p%rely personal ends, !or instance, !or personal ser8ices, etc0 5 e same applies to capital0 &t is t e borro@er"s a!!air @ et er e employs it as capital, ence act%ally sets in motion its in erent property o! prod%cing s%rpl%s-8al%e0 W at e pays !or, is in eit er case t e potential s%rpl%s-8al%e in erently contained in capital as a commodity0 'et %s no@ consider pro!it o! enterprise in greater detail0 $ince t e speci!ic social attrib%te o! capital %nder capitalist prod%ction I t at o! being property commanding t e labo%r-po@er o! anot er I becomes !ixed, so t at interest appears as a part o! s%rpl%s-8al%e prod%ced by capital in t is interrelation, t e ot er part o! s%rpl%s-8al%e I pro!it o! enterprise I m%st necessarily appear as coming not !rom capital as s%c , b%t !rom t e process o! prod%ction, separated !rom its speci!ic social attrib%te, @ ose distinct mode o! existence is already expressed by t e term interest on capital0 A%t t e process o! prod%ction, separated !rom capital, is simply a labo%r-process0 5 ere!ore, t e ind%strial capitalist, as distinct !rom t e o@ner o! capital, does not appear as operating capital, b%t rat er as a !%nctionary irrespecti8e o! capital, or, as a simple agent o! t e labo%r-process in general, as a labo%rer, and indeed as a @agelabo%rer0 &nterest as s%c expresses precisely t e existence o! t e conditions o! labo%r as capital, in t eir social antit esis to labo%r, and in t eir trans!ormation into personal po@er 8is-O-8is and o8er labo%r0 &t represents t e o@ners ip o! capital as a means o! appropriating t e prod%cts o! t e labo%r o! ot ers0 A%t it represents t is c aracteristic o! capital as somet ing @ ic belongs to it o%tside t e prod%ction process and by no means is t e res%lt o! t e speci!ically capitalist attrib%te o! t is prod%ction process itsel!0 &nterest represents t is c aracteristic not as directly co%nterposed to labo%r, b%t rat er as %nrelated to labo%r, and simply as a relations ip o! one capitalist to anot er0 6ence, as an attrib%te o%tside o! and irrele8ant to t e relation o! capital to labo%r0 &n interest, t ere!ore, in t at speci!ic !orm o! pro!it in @ ic t e antit etical c aracter o! capital ass%mes an independent !orm, t is is done in s%c a @ay t at t e antit esis is completely obliterated and abstracted0 &nterest is a relations ip bet@een t@o capitalists, not bet@een capitalist and labo%rer0 3n t e ot er and, t is !orm o! interest lends t e ot er portion o! pro!it t e D%alitati8e !orm o! pro!it o! enterprise, and !%rt er o! @ages o! s%perintendence0 5 e speci!ic !%nctions @ ic t e capitalist as s%c as to per!orm, and @ ic !all to im as distinct !rom and opposed to t e labo%rer, are presented as mere !%nctions o! labo%r0 6e creates s%rpl%s-8al%e not beca%se e @orks as a capitalist, b%t beca%se e also @orks, regardless o! is capacity o! capitalist0 5 is portion o! s%rpl%s-8al%e is t %s no longer s%rpl%s-8al%e, b%t its opposite, an eD%i8alent !or labo%r per!ormed0 7%e to t e alienated c aracter o! capital, its antit esis to labo%r, being relegated to a place o%tside t e act%al process o! exploitation, namely to t e interest-bearing capital, t is process o! exploitation itsel! appears as a simple labo%r-process in @ ic t e !%nctioning capitalist merely per!orms a di!!erent kind o! labo%r t an t e labo%rer0 $o t at t e labo%r o! exploiting and t e exploited labo%r bot appear identical as labo%r0 5 e labo%r o! exploiting is

<2*

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H%st as m%c labo%r as exploited labo%r0 5 e social !orm o! capital !alls to interest, b%t expressed in a ne%tral and indi!!erent !orm0 5 e economic !%nction o! capital !alls to pro!it o! enterprise, b%t abstracted !rom t e speci!ic capitalist c aracter o! t is !%nction0 5 e same t ing passes t ro%g t e mind o! t e capitalist in t is case as in t e case o! t e reasons indicated in ,art && o! t is book !or compensation in t e eD%alisation to a8erage pro!it0 5 ese reasons !or compensation @ ic enter t e distrib%tion o! s%rpl%s-8al%e as determinants are distorted in a capitalist"s mind to appear as bases o! origin and t e Bs%bHecti8eC H%sti!ications o! pro!it itsel!0 5 e conception o! pro!it o! enterprise as t e @ages o! s%per8ising labo%r, arising !rom t e antit esis o! pro!it o! enterprise to interest, is !%rt er strengt ened by t e !act t at a portion o! pro!it may, indeed, be separated, and is separated in reality, as @ages, or rat er t e re8erse, t at a portion o! @ages appears %nder capitalist prod%ction as integral part o! pro!it0 5 is portion, as ?dam $mit correctly ded%ced, presents itsel! in p%re !orm, independently and @ olly separated !rom pro!it Bas t e s%m o! interest and pro!it o! enterpriseC, on t e one and, and on t e ot er, !rom t at portion o! pro!it @ ic remains, a!ter interest is ded%cted, as pro!it o! enterprise in t e salary o! management o! t ose branc es o! b%siness @ ose siEe, etc0, permits o! a s%!!icient di8ision o! labo%r to H%sti!y a special salary !or a manager0 5 e labo%r o! s%per8ision and management is nat%rally reD%ired @ ere8er t e direct process o! prod%ction ass%mes t e !orm o! a combined social process, and not o! t e isolated labo%r o! independent prod%cers0< 6o@e8er, it as a do%ble nat%re0 3n t e one and, all labo%r in @ ic many indi8id%als co-operate necessarily reD%ires a commanding @ill to co-ordinate and %ni!y t e process, and !%nctions @ ic apply not to partial operations b%t to t e total acti8ity o! t e @orks op, m%c as t at o! an orc estra cond%ctor0 5 is is a prod%cti8e Hob, @ ic m%st be per!ormed in e8ery combined mode o! prod%ction0 3n t e ot er and I D%ite apart !rom any commercial department I t is s%per8ision @ork necessarily arises in all modes o! prod%ction based on t e antit esis bet@een t e labo%rer, as t e direct prod%cer, and t e o@ner o! t e means o! prod%ction0 5 e greater t is antagonism, t e greater t e role played by s%per8ision0 6ence it reac es its peak in t e sla8e system0 3 A%t it is indispensable also in t e capitalist mode o! prod%ction, since t e prod%ction process in it is sim%ltaneo%sly a process by @ ic t e capitalist cons%mes labo%r-po@er0 P%st as in despotic states, s%per8ision and all-ro%nd inter!erence by t e go8ernment in8ol8es bot t e per!ormance o! common acti8ities arising !rom t e nat%re o! all comm%nities, and t e speci!ic !%nctions arising !rom t e antit esis bet@een t e go8ernment and t e mass o! t e people0 &n t e @orks o! ancient @riters, @ o ad t e sla8e system be!ore t em, bot sides o! t e @ork o! s%per8ision are as inseparably combined in t eory as t ey @ere in practice0 'ike@ise in t e @orks o! modern economists, @ o regard t e capitalist mode o! prod%ction as absol%te0 3n t e ot er and, as & s all presently ill%strate @it an example, t e apologists o! t e modern sla8e system %tilise t e @ork o! s%per8ision D%ite as m%c as a H%sti!ication o! sla8ery, as t e ot er economists do to H%sti!y t e @age system0 5 e villicus in ;ato"s time: K?t t e ead o! t e estate @it sla8e economy Bfamilia rusticaC stands t e manager Bvillicus, deri8ed !rom villaC, @ o recei8es and expends, b%ys and sells, takes instr%ctions !rom t e master, in @ ose absence e gi8es orders and metes o%t p%nis ment0000 5 e manager nat%rally ad more !reedom o! action t an

<+=

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t e ot er sla8es# t e Magonian books ad8ise t at e be permitted to marry, raise c ildren, and a8e is o@n !%nds, and ;ato recommends t at e be married to t e !emale manager# e alone probably ad t e prospect o! @inning is !reedom !rom t e master in t e e8ent o! good be a8io%r0 ?s !or t e rest, all !ormed a common o%se old0000 E8ery sla8e, is incl%ding t e manager imsel!, @as s%pplied

necessities at is master"s expense at de!inite inter8als and !ixed rates, and ad to get along on t em000 5 e D%antity 8aried in accordance @it labo%r, @ ic is @ y t e manager, !or example, @ ose @ork @as lig ter t an t e ot er sla8es", recei8ed a smaller ration t an t ey0L# BMommsen, 9Kmische Geschichte, <nd ed0, 18+6, 1, pp0 8=*-1=0C ?ristotle: K , 0L BKFor t e masterL I t e capitalist I Kpro8es imsel! s%c not by obtaining sla8esL I o@ners ip o! capital @ ic gi8es im po@er to b%y labo%r-po@er I Kb%t in employing sla8esL I %sing labo%rers, no@adays @age-labo%rers, in t e prod%ction process0C K 0L BKA%t t ere is not ing great or s%blime abo%t t is science0LC K 0L KA%t @ ate8er t e sla8e m%st be able to per!orm, t e master m%st be able to order0LC K , 0L BKW ene8er t e masters are not compelled to plag%e t emsel8es @it s%per8ision, t e manager ass%mes this honour, @ ile

<+1

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t e masters attend to a!!airs o! state or st%dy p ilosop y0LC B?ristotle, De republica, Aekker edition, Aook &, >0C ?ristotle says in H%st so many @ords t at s%premacy in t e political and economic !ields imposes t e !%nctions o! go8ernment %pon t e r%ling po@ers, and ence t at t ey m%st, in t e economic !ield, kno@ t e art o! cons%ming labo%r-po@er0 ?nd e adds t at t is s%per8isory @ork is not a matter o! great moment and t at !or t is reason t e master lea8es t e K ono%rL o! t is dr%dgery to an o8erseer as soon as e can a!!ord it0 5 e @ork o! management and s%per8ision I so !ar as it is not a special !%nction determined by t e nat%re o! all combined social labo%r, b%t rat er by t e antit esis bet@een t e o@ner o! means o! prod%ction and t e o@ner o! mere labo%r-po@er, regardless o! @ et er t is labo%r-po@er is p%rc ased by b%ying t e labo%rer imsel!, as it is %nder t e sla8e system, or @ et er t e labo%rer imsel! sells is labo%r-po@er, so t at t e prod%ction process also appears as a process by @ ic capital cons%mes is labo%r I t is !%nction arising o%t o! t e ser8it%de o! t e direct prod%cers as all too o!ten been D%oted to H%sti!y t is relations ip0 ?nd exploitation, t e appropriation o! t e %npaid labo%r o! ot ers, as D%ite as o!ten been represented as t e re@ard H%stly d%e to t e o@ner o! capital !or is @ork# b%t ne8er better t an by a c ampion o! sla8ery in t e (nited $tates, a la@yer named 3";onnor, at a meeting eld in -e@ .ork on 7ecember 1*, 18+*, %nder t e slogan o! KP%stice !or t e $o%t 0L K-o@, gentlemen,L e said amid t %ndero%s appla%se, Kto t at condition o! bondage t e -egro is assigned by -at%re000 6e as strengt , and as t e po@er to labo%r# b%t t e -at%re @ ic created t e po@er denied to im eit er t e intellect to go8ern, or @illingness to @ork0L B?ppla%se0C KAot @ere denied to im0 ?nd t at -at%re @ ic depri8ed im o! t e @ill to labo%r, ga8e im a master to coerce t at @ill, and to make im a %se!%l000 ser8ant in t e clime in @ ic e @as capable o! li8ing %se!%l !or imsel! and !or t e master @ o go8erns im000 & maintain t at it is not inH%stice to lea8e t e -egro in t e condition in @ ic -at%re placed im, to gi8e im a master to go8ern im 000 nor is it depri8ing im o! any o! is rig ts to compel im to labo%r in ret%rn, and a!!ord to t at master H%st compensation !or t e labo%r and talent employed in go8erning im and rendering im %se!%l to imsel! and to t e society0L /$ew EorDaily 4ribune,-o8ember <=, 18+*, pp0 >-80 I 0d1 -o@, t e @age-labo%rer, like t e sla8e, m%st a8e a master @ o p%ts im to @ork and r%les o8er im0 ?nd ass%ming t e existence o! t is relations ip o! lords ip and ser8it%de, it is D%ite proper

<+<

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to compel t e @age-labo%rer to prod%ce is o@n @ages and also t e @ages o! s%per8ision, as compensation !or t e labo%r o! r%ling and s%per8ising im, or KH%st compensation !or t e labo%r and talent employed in go8erning im and rendering im %se!%l to imsel! and to t e society0L 5 e labo%r o! s%per8ision and management, arising as it does o%t o! an antit esis, o%t o! t e s%premacy o! capital o8er labo%r, and being t ere!ore common to all modes o! prod%ction based on class contradictions like t e capitalist mode, is directly and inseparably connected, also %nder t e capitalist system, @it prod%cti8e !%nctions @ ic all combined social labo%r assigns to indi8id%als as t eir special tasks0 5 e @ages o! an epitropos, or r7gisseur, as e @as called in !e%dal France, are entirely di8orced !rom pro!it and ass%me t e !orm o! @ages !or skilled labo%r @ ene8er t e b%siness is operated on a s%!!iciently large scale to @arrant paying !or s%c a manager, alt o%g , !or all t at, o%r ind%strial capitalists are !ar !rom Kattending to a!!airs o! state or st%dying p ilosop y0L &t as already been remarked by Mr0 (re 2 t at it is not t e ind%strial capitalists, b%t t e ind%strial managers @ o are Kt e so%l o! o%r ind%strial system0L W ate8er concerns t e commercial part o! an establis ment @e a8e already said all t at is necessary in t e preceding part0 5 e capitalist mode o! prod%ction as bro%g t matters to a point @ ere t e @ork o! s%per8ision, entirely di8orced !rom t e o@ners ip o! capital, is al@ays readily obtainable0 &t as, t ere!ore, come to be %seless !or t e capitalist to per!orm it imsel!0 ?n orc estra cond%ctor need not o@n t e instr%ments o! is orc estra, nor is it @it in t e scope o! is d%ties as cond%ctor to a8e anyt ing to do @it t e K@agesL o! t e ot er m%sicians0 ;o-operati8e !actories !%rnis proo! t at t e capitalist as become no less red%ndant as a !%nctionary in prod%ction as e imsel!, looking do@n !rom is ig perc , !inds t e big lando@ner red%ndant0 &nasm%c as t e capitalist"s @ork does not originate in t e p%rely capitalistic process o! prod%ction, and ence does not cease on its o@n @ en capital ceases# inasm%c as it does not con!ine itsel! solely to t e !%nction o! exploiting t e labo%r o! ot ers# inasm%c as it t ere!ore originates !rom t e social !orm o! t e labo%r-process, !rom combination and co-operation o! many in p%rs%ance o! a common res%lt, it is H%st as independent o! capital as t at !orm itsel! as soon as it as b%rst its capitalistic s ell0 5o say t at t is labo%r is necessary as capitalistic labo%r, or as a !%nction o! t e capitalist, only means t at t evulgus is %nable to concei8e t e !orms de8eloped in t e lap o! capitalist prod%ction, separate and !ree !rom t eir antit etical capitalist c aracter0 5 e ind%strial capitalist is a @orker, compared to t e money-capitalist, b%t a @orker in t e sense o! capitalist, i.e., an exploiter o! t e labo%r o! ot ers0 5 e @age @ ic e claims and pockets !or t is labo%r is exactly eD%al to t e appropriated D%antity o! anot er"s labo%r and depends directly %pon t e rate o! exploitation o! t is labo%r, in so !ar as e %ndertakes t e e!!ort reD%ired !or exploitation# it does not, o@e8er, depend on t e degree o! exertion t at s%c exploitation demands, and @ ic e can s i!t to a manager !or moderate pay0 ?!ter e8ery crisis t ere are eno%g ex-man%!act%rers in t e Englis !actory districts @ o @ill s%per8ise, !or lo@ @ages, @ at @ere !ormerly t eir o@n !actories in t e capacity o! managers o! t e ne@ o@ners, @ o are !reD%ently t eir creditors0 + 5 e @ages o! management bot !or t e commercial and ind%strial manager are completely isolated !rom t e pro!its o! enterprise in t e co-operati8e !actories o! labo%rers, as @ell as in capitalist stock companies0 5 e separation o! @ages o! management !rom pro!its o! enterprise, p%rely accidental at ot er times, is ere constant0 &n a co-operati8e !actory t e antagonistic nat%re o! t e labo%r o! s%per8ision disappears, beca%se t e manager is paid by t e labo%rers instead o! representing capital co%nterposed to t em0 $tock companies in general I de8eloped @it t e credit system I a8e an increasing tendency to separate t is @ork o! management as a !%nction !rom t e o@ners ip o! capital, be it sel!-o@ned or borro@ed0 P%st as t e de8elopment o! bo%rgeois

<+3

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society @itnessed a separation o! t e !%nctions o! H%dges and administrators !rom land-o@ners ip, @ ose attrib%tes t ey @ere in !e%dal times0 A%t since, on t e one and, t e mere o@ner o! capital, t e money-capitalist, as to !ace t e !%nctioning capitalist, @ ile money-capital itsel! ass%mes a social c aracter @it t e ad8ance o! credit, being concentrated in banks and loaned o%t by t em instead o! its original o@ners, and since, on t e ot er and, t e mere manager @ o as no title @ ate8er to t e capital, @ et er t ro%g borro@ing it or ot er@ise, per!orms all t e real !%nctions pertaining to t e !%nctioning capitalist as s%c , only t e !%nctionary remains and t e capitalist disappears as s%per!l%o%s !rom t e prod%ction process0 &t is mani!est !rom t e p%blic acco%nts o! t e co-operati8e !actories in England 6 t at I a!ter ded%cting t e manager"s @ages, @ ic !orm a part o! t e in8ested 8ariable capital m%c t e same as @ages o! ot er labo%rers I t e pro!it @as ig er t an t e a8erage pro!it, alt o%g at times t ey paid a m%c ig er interest t an did pri8ate man%!act%rers0 5 e so%rce o! greater pro!its in all t ese cases @as greater economy in t e application o! constant capital0 W at interests %s in t is, o@e8er, is t e !act t at ere t e a8erage pro!it B R interest U pro!it o! enterpriseC presents itsel! act%ally and palpably as a magnit%de @ olly independent o! t e @ages o! management0 $ince t e pro!it @as ig er ere t an a8erage pro!it, t e pro!it o! enterprise @as also ig er t an %s%al0 5 e same sit%ation is obser8ed in relation to some capitalist stock companies, s%c as Hoint-stock banks0 5 e 'ondon and Westminster Aank paid an ann%al di8idend o! 3=T in 1863, @ ile t e (nion Aank o! 'ondon and ot ers paid 1+T0 ?side !rom t e directors" salary t e interest paid !or deposits is ere ded%cted !rom gross pro!it0 5 e ig pro!it is to be explained ere by t e moderate proportion o! paid-in capital to deposits0 For instance, in t e case o! t e 'ondon and Westminster Aank, in 1863: paid-in capital, V1,===,===# deposits, V12,+2=,<>+0 ?s !or t e (nion Aank o! 'ondon, in 1863: paid-in capital, V6==,===# deposits, V1<,382,1>30 ,ro!it o! enterprise and @ages o! s%per8ision, or management, @ere con!%sed originally d%e to t e antagonistic !orm ass%med in respect to interest by t e s%rpl%s o! pro!it0 5 is @as !%rt er promoted by t e apologetic aim o! representing pro!it not as a s%rpl%s-8al%e deri8ed !rom %npaid labo%r, b%t as t e capitalist"s @ages !or @ork per!ormed by im0 5 is @as met on t e part o! socialists by a demand to red%ce pro!it act%ally to @ at it pretended to be t eoretically, namely, mere @ages o! s%per8ision0 ?nd t is demand @as all t e more obnoxio%s to t eoretical embellis ment, t e more t ese @ages o! s%per8ision, like any ot er @age, !o%nd t eir de!inite le8el and de!inite market-price, on t e one and, @it t e de8elopment o! a n%mero%s class o! ind%strial and commercial managers,> and t e more t ey !ell, on t e ot er, like all @ages !or skilled labo%r, @it t e general de8elopment @ ic red%ces t e cost o! prod%ction o! specially trained labo%r-po@er08 Wit t e de8elopment o! co-operation on t e part o! t e labo%rers, and o! stock enterprises on t e part o! t e bo%rgeoisie, e8en t e last pretext !or t e con!%sion o! pro!it o! enterprise and @ages o! management @as remo8ed, and pro!it appeared also in practice as it %ndeniably appeared in t eory, as mere s%rpl%s-8al%e, a 8al%e !or @ ic no eD%i8alent @as paid, as realised %npaid labo%r0 &t @as t en seen t at t e !%nctioning capitalist really exploits labo%r, and t at t e !r%it o! is exploitation, @ en @orking @it borro@ed capital, @as di8ided into interest and pro!it o! enterprise, a s%rpl%s o! pro!it o8er interest0 3n t e basis o! capitalist prod%ction a ne@ s@indle de8elops in stock enterprises @it respect to @ages o! management, in t at boards o! n%mero%s managers or directors are placed abo8e t e act%al director, !or @ om s%per8ision and management ser8e only as a pretext to pl%nder t e stock olders and amass @ealt 0 4ery c%rio%s details concerning t is are to be !o%nd in 4he City or the &hysiology of ,ondon GusinessP with S-etches on Change, and the Coffee (ouses, 'ondon, 182+0 KW at bankers and merc ants gain by t e direction o! eig t or nine di!!erent companies, may be seen !rom

<+2

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t e !ollo@ing ill%stration: 5 e pri8ate balance s eet o! Mr0 5imot y ?bra am ;%rtis, presented to t e ;o%rt o! Aankr%ptcy @ en t at gentleman !ailed, ex ibited a sample o! t e income netted !rom directors ip 000 bet@een V8== and V*== a year0 Mr0 ;%rtis a8ing been associated @it t e ;o%rts o! t e Aank o! is England, and t e East &ndia 6o%se, it @as considered D%ite a pl%m !or a p%blic company to acD%ire ser8ices in t e boardroomL Bpp0 81, 8<C0 5 e rem%neration o! t e directors o! s%c companies !or eac @eekly meeting is at least one g%inea0 5 e proceedings o! t e ;o%rt o! Aankr%ptcy s o@ t at t ese @ages o! s%per8ision @ere, as a r%le, in8ersely proportional to t e act%al s%per8ision per!ormed by t ese nominal directors0

Chapter 24. E6ternali;ation of the Relations of Capital in the #or of 5nterest-(earin) Capital
5 e relations o! capital ass%me t eir most externalised and most !etis -like !orm in interestbearing capital0 We a8e ere M I M", money creating more money, sel!-expanding 8al%e, @it o%t t e process t at e!!ect%ates t ese t@o extremes0 &n merc ant"s capital, M I ; I M", t ere is at least t e general !orm o! t e capitalistic mo8ement, alt o%g it con!ines itsel! solely to t e sp ere o! circ%lation, so t at pro!it appears merely as pro!it deri8ed !rom alienation# b%t it is at least seen to be t e prod%ct o! a social relation, not t e prod%ct o! a mere thing. 5 e !orm o! merc ant"s capital at least presents a process, a %nity o! opposing p ases, a mo8ement t at breaks %p into t@o opposite actions I t e p%rc ase and t e sale o! commodities0 5 is is obliterated in M I M", t e !orm o! interest-bearing capital0 For instance, i! V1,=== are loaned o%t by a capitalist at a rate o! interest o! +T, t e 8al%e o! V1,=== as a capital !or one year R ; U ;i", @ ere ; is t e capital and i" t e rate o! interest0 6ence, +T R +N1== R 1N<=, and 1,=== U 1,=== \ 1N<= R V1,=+=0 5 e 8al%e o! V1,=== as capital R V1,=+=, i.e., capital is not a simple magnit%de0 &t is a relationship o! magnit%des, a relations ip o! t e principal s%m as a gi8en 8al%e to itsel! as a sel!-expanding 8al%e, as a principal s%m @ ic as prod%ced a s%rpl%s-8al%e0 ?nd capital as s%c , as @e a8e seen, ass%mes t is !orm o! a directly sel!-expanding 8al%e !or all acti8e capitalists, @ et er t ey operate on t eir o@n or borro@ed capital0 M I M"0 We a8e ere t e original starting-point o! capital, money in t e !orm%la M I ; I M" red%ced to its t@o extremes M I M", in @ ic M" R M U M, money creating more money0 &t is t e primary and general !orm%la o! capital red%ced to a meaningless condensation0 &t is ready capital, a %nity o! t e process o! prod%ction and t e process o! circ%lation, and ence capital yielding a de!inite s%rpl%s-8al%e in a partic%lar period o! time0 &n t e !orm o! interest-bearing capital t is appears directly, %nassisted by t e processes o! prod%ction and circ%lation0 ;apital appears as a mysterio%s and sel!-creating so%rce o! interest I t e so%rce o! its o@n increase0 5 e thing Bmoney, commodity, 8al%eC is no@ capital e8en as a mere t ing, and capital appears as a mere t ing0 5 e res%lt o! t e entire process o! reprod%ction appears as a property in erent in t e t ing itsel!0 &t depends on t e o@ner o! t e money, i.e., o! t e commodity in its contin%ally exc angeable !orm, @ et er e @ants to spend it as money or loan it o%t as capital0 &n interestbearing capital, t ere!ore, t is a%tomatic !etis , sel!-expanding 8al%e, money generating money, are bro%g t o%t in t eir p%re state and in t is !orm it no longer bears t e birt -marks o! its origin0 5 e social relation is cons%mmated in t e relation o! a t ing, o! money, to itsel!0 &nstead o! t e act%al trans!ormation o! money into capital, @e see ere only !orm @it o%t content0 ?s in t e case o! labo%r-po@er, t e %se-8al%e o! money ere is its capacity o! creating 8al%e I a 8al%e greater t an it contains0 Money as money is potentially sel!-expanding 8al%e and is loaned o%t as s%c I @ ic is t e !orm o! sale !or t is sing%lar commodity0 &t becomes a property o! money to generate 8al%e and yield interest, m%c as it is an attrib%te o! pear-trees to bear pears0 ?nd t e money-lender sells is money as H%st s%c an interest-bearing t ing0 A%t t at is not all0 5 e act%ally !%nctioning capital, as @e a8e seen, presents itsel! in s%c a lig t, t at it seems to yield interest not as a !%nctioning capital, b%t as capital in itsel!, as money-capital0 5 is, too, becomes distorted0 W ile interest is only a portion o! t e pro!it, i.e., o! t e s%rpl%s8al%e, @ ic t e !%nctioning capitalist sD%eeEes o%t o! t e labo%rer, it appears no@, on t e

<+6

; apter JJ&4

contrary, as t o%g interest @ere t e typical prod%ct o! capital, t e primary matter, and pro!it, in t e s ape o! pro!it o! enterprise, @ere a mere accessory and by-prod%ct o! t e process o! reprod%ction0 5 %s @e get t e !etis !orm o! capital and t e conception o! !etis capital0 &n M I M" @e a8e t e meaningless !orm o! capital, t e per8ersion and obHecti!ication o! prod%ction relations in t eir ig est degree, t e interest-bearing !orm, t e simple !orm o! capital, in @ ic it antecedes its o@n process o! reprod%ction0 &t is t e capacity o! money, or o! a commodity, to expand its o@n 8al%e independently o! reprod%ction I @ ic is a mysti!ication o! capital in its most !lagrant !orm0 For 8%lgar political economy, @ ic seeks to represent capital as an independent so%rce o! 8al%e, o! 8al%e creation, t is !orm is nat%rally a 8eritable !ind, a !orm in @ ic t e so%rce o! pro!it is no longer discernible, and in @ ic t e res%lt o! t e capitalist process o! prod%ction I di8orced !rom t e process I acD%ires an independent existence0 &t is not %ntil capital is money-capital t at it becomes a commodity, @ ose capacity !or sel!expansion as a de!inite price D%oted e8ery time in e8ery pre8ailing rate o! interest0 ?s interest-bearing capital, and partic%larly in its direct !orm o! interest-bearing money-capital Bt e ot er !orms o! interest-bearing capital, @ ic do not concern %s ere, are deri8ati8es o! t is !orm and pres%ppose its existenceC, capital ass%mes its p%re !etis !orm, M I M" being t e s%bHect, t e saleable t ing0'irstly, t ro%g its contin%al existence as money, a !orm, in @ ic all its speci!ic attrib%tes are obliterated and its real elements in8isible0 For money is precisely t at !orm in @ ic t e distincti8e !eat%res o! commodities as %se-8al%es are obsc%red, and ence also t e distincti8e !eat%res o! t e ind%strial capitals @ ic consist o! t ese commodities and conditions o! t eir prod%ction0 &t is t at !orm, in @ ic 8al%e I in t is case capital I exists as an independent exc ange-8al%e0 &n t e reprod%ction process o! capital, t e money-!orm is b%t transient I a mere point o! transit0 A%t in t e money-market capital al@ays exists in t is !orm0 Secondly, t e s%rpl%s8al%e prod%ced by it, ere again in t e !orm o! money, appears as an in erent part o! it0 ?s t e gro@ing process is to trees, so generating money B C appears innate in capital in its !orm o! money-capital0 &n interest-bearing capital t e mo8ement o! capital is contracted0 5 e inter8ening process is omitted0 &n t is @ay, a capital R 1,=== is !ixed as a t ing, @ ic in itsel! R 1,2==, and @ ic is trans!ormed a!ter a certain period into 1,1== H%st as @ine stored in a cellar impro8es its %se-8al%e a!ter a certain period0 ;apital is no@ a t ing, b%t as a t ing it is capital0 Money is no@ pregnant0 /:oet e, 'aust, ,art &, $cene +0 I 0d1 ?s soon as it is loaned o%t, or in8ested in t e reprod%ction process Binasm%c as it yields interest to t e !%nctioning capitalist as its o@ner, separate !rom pro!it o! enterpriseC, interest on it gro@s, no matter @ et er it is a@ake or asleep, is at ome or abroad, by day or by nig t0 5 %s interest-bearing money-capital Band all capital is money-capital in terms o! its 8al%e, or is considered as t e expression o! money-capitalC !%l!ils t e most !er8ent @is o! t e oarder0 &t is t is ingro@n existence o! interest in money-capital as in a t ing Bt is is o@ t e prod%ction o! s%rpl%s-8al%e t ro%g capital appears ereC, @ ic occ%pies '%t er"s attention so t oro%g ly in is nai8e onsla%g t against %s%ry0 ?!ter demonstrating t at interest may be demanded i! t e !ail%re to repay a loan on a de!inite date to a lender @ o imsel! reD%ired it to make some payment, ca%sed a loss to im, or res%lted in is missing an opport%nity to make a pro!it on a bargain, !or instance, in b%ying a garden, '%t er contin%es: K-o@ t at & a8e loaned yo% t em B1== g%ldenC, yo% ca%se me a do%ble loss d%e to my not being able to pay on t e one and nor b%y on t e ot er, so t at & a8e to lose on bot sides, and t is is called duple

<+>

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interesse, damni emergentis et lucri cessantis.... 3n earing t at Po n s%stained losses on is loan o! 1== g%lden and demands H%st damages, t ey r%s in and c arge do%ble on e8ery 1== g%lden, s%c do%ble reimb%rsement, namely, !or t e loss d%e to nonpayment and to inability to make a pro!it on a bargain, H%st as t o%g t ese 1== g%lden had the double loss grown on to them, so t at @ ene8er t ey a8e 1== g%lden, t ey loan t em o%t and c arge !or t@o losses, @ ic t ey a8e not at all s%stained000 5 ere!ore yo% are a %s%rer, @ o takes damages o%t o! is neig bo%r"s money !or an imaginary loss t at yo% did not s%stain at all, and @ ic yo% can neit er pro8e nor calc%late0 5 is sort o! loss is called by t e H%rists non verum, sed phantasticum interesse0 &t is a loss @ ic eac conH%res %p !or imsel!000 &t @ill not do to say, t ere!ore, t at t ere co%ld a8e been losses beca%se & co%ld not a8e been able to pay or b%y0 Else it @o%ld mean e contingente necessarium, @ ic is making somet ing o%t o! a t ing t at is not, and a t ing t at is %ncertain into a t ing t at is absol%tely s%re0 Wo%ld not s%c %s%ry de8o%r t e @orld in a !e@ yearsQ 000 &! an %n appy accident be!alls im against is @ill, and e m%st reco8er !rom it, e may demand damages !or it, b%t it is di!!erent in trade and H%st t e re8erse0 5 ere t ey sc eme to pro!it at t e expense o! t eir needy neig bo%rs, o@ to amass @ealt and get ric , to be laEy and idle and li8e in l%x%ry on t e labo%r o! ot ers, @it o%t any care, danger, and loss0 5o sit by t e sto8e and let my 1== g%lden gat er @ealt !or me in t e co%ntry and yet keep t em in my pocket, beca%se t ey are only loaned, @it o%t any danger or risk# my !riend, @ o @o%ld not like t atQL BMartin '%t er, +n die &farherrn wider den "ucher #u predigen, etc., Wittenberg, 1+2=0C

<+8

; apter JJ&4

5 e conception o! capital as a sel!-reprod%cing and sel!-expanding 8al%e, lasting and gro@ing eternally by 8irt%e o! its innate properties I ence by 8irt%e o! t e idden D%ality o! sc olasticists I as led to t e !ab%lo%s !ancies o! 7r0 ,rice, @ ic o%tdo by !ar t e !antasies o! t e alc emists# !ancies, in @ ic ,itt belie8ed in all earnest, and @ ic e %sed as pillars o! is !inancial administration in is la@s concerning t e sinking !%nd0 KMoney bearing compo%nd interest increases at !irst slo@ly0 A%t, t e rate o! increase being contin%ally accelerated, it becomes in some time so rapid, as to mock all t e po@ers o! t e imagination0 3ne penny, p%t o%t at o%r $a8io%r"s birt to + per cent compo%nd interest, @o%ld, be!ore t is time, a8e increased to a greater s%m, t an @o%ld be contained in a %ndred and !i!ty millions o! eart s, all solid gold0 A%t i! p%t o%t to simple interest, it @o%ld, in t e same time, a8e amo%nted to no more t an se8en s illings and !o%r pence al!-penny0 3%r go8ernment as it erto c osen to impro8e money in t e last, rat er t an t e !irst o! t ese @ays0Li 6is !ancy !lies still ig er in is :bservations on 9eversionary &ayments, etc., 'ondon, 1>><0 5 ere @e read: K? s illing p%t o%t to 6T compo%nd interest at o%r $a8io%r"s birt L Bpres%mably in t e 5emple o! Per%salemC K@o%ld 000 a8e increased to a greater s%m t an t e @ ole solar system co%ld old, s%pposing it a sp ere eD%al in diameter to t e diameter o! $at%rn"s orbit0L K? state need ne8er t ere!ore be %nder any di!!ic%lties# !or @it t e smallest sa8ings it may in as little time as its interest can reD%ire pay o!! t e largest debtsL Bpp0 J&&&, J&4C0 W at a pretty t eoretical introd%ction to t e national debt o! EnglandS ,rice @as simply daEEled by t e gargant%an dimensions obtained in a geometrical progression0 $ince e took no note o! t e conditions o! reprod%ction and labo%r, and regarded capital as a sel!reg%lating a%tomaton, as a mere n%mber t at increases itsel! H%st as Malt %s / +n 0ssay on the &rinciple of &opulation, 'ondon, 1>*8, pp0 <+-<60 I 0d1 did @it respect to pop%lation in is geometrical progression, e @as str%ck by t e t o%g t t at e ad !o%nd t e la@ o! its gro@t in t e !orm%la s R cB1 U iC n, in @ ic s R t e s%m o! capital U compo%nd interest, c R ad8anced capital, i R rate o! interest Bexpressed in aliD%ot parts o! 1==C and n stands !or t e n%mber o! years in @ ic t is process takes place0 ,itt takes 7r0 ,rice"s mysti!ication D%ite serio%sly0 &n 1>86 t e 6o%se o! ;ommons ad resol8ed to raise V1 million !or t e p%blic @eal0 ?ccording to ,rice, in @ om ,itt belie8ed, t ere @as, o!

<+*

; apter JJ&4

co%rse, no better @ay t an to tax t e people, so as to Kacc%m%lateL t is s%m a!ter raising it, and t %s to spirit a@ay t e national debt t ro%g t e mystery o! compo%nd interest0 5 e abo8e resol%tion o! t e 6o%se o! ;ommons @as soon !ollo@ed %p by ,itt @it a la@ @ ic ordered t e acc%m%lation o! V<+=,===, K%ntil, @it t e expired ann%ities, t e !%nd s o%ld a8e gro@n to V2,===,=== ann%ally0L B?ct <6, :eorge &&&, ; ap0 3l0C /K?n ?ct !or 8esting certain s%ms in ;ommissioners, at t e End o! e8ery M%arter o! a .ear, to be by t em applied to t e )ed%ction o! t e -ational 7ebtL B?nno <6 :eorgii &&&, )egis, cap0 31C0 I 0d01 &n is speec o! 1>*<, in @ ic ,itt proposed t at t e amo%nt de8oted to t e sinking !%nd be increased, e mentioned mac ines, credit, etc0, among t e ca%ses o! England"s commercial s%premacy, b%t as Kt e most @ide-spread and end%ring ca%se, t at o! acc%m%lation0 5 is principle, e said, @as completely de8eloped in t e @ork o! $mit , t at geni%s 000 and t is acc%m%lation, e contin%ed, @as accomplis ed by laying aside at least a portion o! t e ann%al pro!it !or t e p%rpose o! increasing t e principal, @ ic @as to be employed in t e same manner t e !ollo@ing year, and @ ic t %s yielded a contin%al pro!it0L Wit 7r0 ,rice"s aid ,itt t %s con8erts $mit "s t eory o! acc%m%lation into enric ment o! a nation by means o! acc%m%lating debts, and t %s arri8es at t e pleasant progression o! an in!inity o! loans I loans to pay loans0 &t ad already been noted by Posia ; ild, t e !at er o! modern banking, t at V1== at 1=T @o%ld prod%ce in >= years by compo%nd interest V1=<,2==0 B 4rait7 sur le commerce, etc. , par P0 ; ild, trad%it, etc0, ?msterdam et Aerlin, 1>+2, p0 11+0 Written in 166*0C 6o@ t o%g tlessly 7r0 ,rice"s conception is applied by modern economists, is s o@n in t e !ollo@ing passage !rom t e 0conomist: K;apital, @it compo%nd interest on e8ery portion o! capital sa8ed, is so all-engrossing t at all t e @ealt in t e @orld !rom @ ic income is deri8ed, as long ago become t e interest o! capital000 ?ll rent is no@ t e payment o! interest on capital pre8io%sly in8ested in t e land0L B0conomist, P%ly 2*, 18+10C &n its capacity o! interest-bearing capital, capital claims t e o@ners ip o! all @ealt @ ic can e8er be prod%ced, and e8eryt ing it as recei8ed so !ar is b%t an instalment !or its all-engrossing appetite0 Ay its innate la@s, all s%rpl%s-labo%r @ ic t e %man race can e8er per!orm belongs to it0 Moloc 0

<6=

; apter JJ&4

&n concl%sion, t e !ollo@ing odge-podge by t e romantic Meller: K7r0 ,rice"s immense increase o! compo%nd interest, or o! t e sel!-accelerating !orces o! man, pres%pposes an %ndi8ided, or %ninterr%pted, %ni!orm application !or se8eral cent%ries, i! t ey are to prod%ce s%c enormo%s e!!ects0 ?s soon as capital is di8ided, c%t %p into se8eral independently gro@ing s oots, t e total process o! acc%m%lating !orces begins ane@0 -at%re as distrib%ted o8er a span o! abo%t <= to <+ years t e progression o! energy @ ic !alls on an a8erage to t e s are o! e8ery labo%rer BSC0 ?!ter t e lapse o! t is time t e labo%rer lea8es is career and m%st trans!er t e capital acc%m%lated by t e compo%nd interest o! labo%r to a ne@ labo%rer, mostly distrib%ting it among se8eral labo%rers or c ildren0 5 ese m%st !irst learn to acti8ate and apply t eir s are o! capital, be!ore t ey can dra@ any act%al compo%nd interest on it0 F%rt ermore, an enormo%s D%antity o! capital gained by ci8il society e8en in t e most restless comm%nities, is grad%ally acc%m%lated o8er many years and not employed !or any immediate expansion o! labo%r0 &nstead, as soon as an appreciable s%m is gat ered toget er, it is trans!erred to anot er indi8id%al, a labo%rer, bank or state, %nder t e ead o! a loan0 ?nd t e recei8er t en sets t e capital into act%al motion and dra@s compo%nd interest on it, so t at e can easily pledge to pay simple interest to t e lender0 Finally, t e la@ o! cons%mption, greed, and @aste opposes t ose %ge progressions, in @ ic man"s po@ers and t eir prod%cts @o%ld m%ltiply i! t e la@ o! prod%ction, or t ri!t, @ere alone e!!ecti8e0L B?0 Meller, 0lemente der Staats-unst, &&&, pp0 12>-2*0C &t is impossible to concoct a more air-raising abs%rdity in so !e@ lines0 'ea8ing aside t e droll con!%sion o! labo%rer and capitalist, 8al%e o! labo%r-po@er and interest on capital, etc0, t e c arging o! compo%nd interest is s%pposed to be explained by t e !act t at capital is loaned o%t to bring in compo%nd interest0 5 e met od employed by o%r Meller is t oro%g ly c aracteristic o! t e romanticism in all @alks o! li!e0 &t is made %p o! c%rrent preH%dices, skimmed !rom t e most

<61

; apter JJ&4

s%per!icial semblance o! t ings0 5 is incorrect and trite content s o%ld t en be KexaltedL and rendered s%blime t ro%g a mysti!ying mode o! expression0 5 e process o! acc%m%lation o! capital may be concei8ed as an acc%m%lation o! compo%nd interest in t e sense t at t e portion o! pro!it Bs%rpl%s-8al%eC @ ic is recon8erted into capital, i.e., ser8es to absorb more s%rpl%s-labo%r, may be called interest0 A%t: 1C ?side !rom all incidental inter!erence, a large part o! a8ailable capital is constantly more or less depreciated in t e co%rse o! t e reprod%ction process, beca%se t e 8al%e o! commodities is not determined by t e labo%r-time originally expended in t eir prod%ction, b%t by t e labo%r-time expended in t eir reprod%ction, and t is decreases contin%ally o@ing to t e de8elopment o! t e social prod%cti8ity o! labo%r0 3n a ig er le8el o! social prod%cti8ity, all a8ailable capital appears, !or t is reason, to be t e res%lt o! a relati8ely s ort period o! reprod%ction, instead o! a long process o! acc%m%lation o! capital0ii <C ?s demonstrated in ,art &&& o! t is book, t e rate o! pro!it decreases in proportion to t e mo%nting acc%m%lation o! capital and t e correspondingly increasing prod%cti8ity o! social labo%r, @ ic is expressed precisely in t e relati8e and progressi8e decrease o! t e 8ariable as compared to t e constant portion o! capital0 5o prod%ce t e same rate o! pro!it a!ter t e constant capital set in motion by one labo%rer increases ten-!old, t e s%rpl%s labo%r-time @o%ld a8e to increase ten-!old, and soon t e total labo%r-time, and !inally t e entire <2 o%rs o! a day, @o%ld not s%!!ice, e8en i! @ olly appropriated by capital0 5 e idea t at t e rate o! pro!it does not s rink is, o@e8er, t e basis o! ,rice"s progression and in general t e basis o! Kall-engrossing capital @it compo%nd interest0Liii 5 e identity o! s%rpl%s-8al%e and s%rpl%s-labo%r imposes a D%alitati8e limit %pon t e acc%m%lation o! capital0 5 is consists o! t e total wor-ing1day, and t e pre8ailing de8elopment o! t e prod%cti8e !orces and o! t e pop%lation, @ ic limits t e n%mber o! sim%ltaneo%sly exploitable @orking-days0 A%t i! one concei8es o! s%rpl%s-8al%e in t e meaningless !orm o! interest, t e limit is merely D%antitati8e and de!ies all !antasy0 -o@, t e concept o! capital as a !etis reac es its eig t in interest-bearing capital, being a conception @ ic attrib%tes to t e acc%m%lated prod%ct o! labo%r, and at t at in t e !ixed !orm o! money, t e in erent secret po@er, as an a%tomaton, o! creating s%rpl%s-8al%e in geometrical progression, so t at t e acc%m%lated prod%ct o! labo%r, as t e 0conomist t inks, as long disco%nted all t e @ealt o! t e @orld !or all time as belonging to it and rig t!%lly coming to it0 5 e prod%ct o! past labo%r, t e past labo%r itsel!, is ere pregnant in itsel! @it a portion o! present or !%t%re li8ing s%rpl%s-labo%r0 We kno@, o@e8er, t at in reality t e preser8ation, and to t at extent also t e reprod%ction o! t e 8al%e o! prod%cts o! past labo%r is only t e res%lt o! t eir contact @it li8ing labo%r# and secondly, t at t e domination o! t e prod%cts o! past labo%r o8er li8ing s%rpl%s-labo%r lasts only as long as t e relations o! capital, @ ic rest on t ose partic%lar social relations in @ ic past labo%r independently and o8er@ elmingly dominates o8er li8ing labo%r0

Chapter 25. Credit and #ictitious Capital

?n ex a%sti8e analysis o! t e credit system and o! t e instr%ments @ ic it creates !or its o@n %se Bcredit-money, etc0C lies beyond o%r plan0 We merely @is to d@ell ere %pon a !e@ partic%lar points, @ ic are reD%ired to c aracterise t e capitalist mode o! prod%ction in general0 We s all deal only @it commercial and bank credit0 5 e connection bet@een t e de8elopment o! t is !orm o! credit and t at o! p%blic credit @ill not be considered ere0 & a8e s o@n earlier BA%c &, Kap0 &&&, 3, b /Englis edition: ; 0 &&&, 3, b0 I 0d01C o@ t e !%nction o! money as a means o! payment, and t ere@it a relation o! creditor and debtor bet@een t e prod%cer and trader o! commodities, de8elop !rom t e simple circ%lation o! commodities0 Wit t e de8elopment o! commerce and o! t e capitalist mode o! prod%ction, @ ic prod%ces solely @it an eye to circ%lation, t is nat%ral basis o! t e credit system is extended, generalised, and @orked o%t0 Money ser8es ere, by and large, merely as a means o! payment, i.e., commodities are not sold !or money, b%t !or a @ritten promise to pay !or t em at a certain date0 For bre8ity"s sake, @e may p%t all t ese promissory notes %nder t e general ead o! bills o! exc ange0 $%c bills o! exc ange, in t eir t%rn, circ%late as means o! payment %ntil t e day on @ ic t ey !all d%e# and t ey !orm t e act%al commercial money0 &nasm%c as t ey %ltimately ne%tralise one anot er t ro%g t e balancing o! claims and debts, t ey act absol%tely as money, alt o%g t ere is no e8ent%al trans!ormation into act%al money0 P%st as t ese m%t%al ad8ances o! prod%cers and merc ants make %p t e real !o%ndation o! credit, so does t e instr%ment o! t eir circ%lation, t e bill o! exc ange, !orm t e basis o! credit-money proper, o! bank-notes, etc0 5 ese do not rest %pon t e circ%lation o! money, be it metallic or go8ernment-iss%ed paper money, b%t rat er %pon t e circ%lation o! bills o! exc ange0 W0 'eat am Bbanker o! .orks ireC @rites in is ,etters on the Currency, <nd ed0, 'ondon, 182=: K& !ind, t en, t e amo%nt !or t e @ ole o! t e year o! 183* 000 to be V+<8,2*3,82<L B e ass%med t at t e !oreign bills o! exc ange made %p abo%t one-!i!t o! t e totalC Kand t e amo%nt o! bills o%t at one time in t e abo8e year, to be V13<,1<3,26=L Bp0 +6C0 5 e bills o! exc ange make %p Kone component part greater in amo%nt t an all t e rest p%t toget erL Bp0 3C0 K5 is enormo%s s%perstr%ct%re o! bills o! exc ange rests BSC %pon t e base !ormed by t e amo%nt o! bank-notes and gold, and @ en, by e8ents, t is base becomes too m%c narro@ed, its solidity and 8ery existence is endangeredL Bp0 8C0 K&! & estimate t e @ ole c%rrencyL B e means o! t e bank-notesC Kand t e amo%nt o! t e liabilities o! t e Aank and co%ntry bankers, payable on demand, & !ind a s%m o!

<63

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1+3 million, @ ic , by la@, can be con8erted into gold 000 and t e amo%nt o! gold to meet t is demandL only 12 million Bp011C0 K5 e bills o! exc ange are not 000 placed %nder any control, except by pre8enting t e ab%ndance o! money, excessi8e and lo@ rates o! interest or disco%nt, @ ic create a part o! t em, and enco%rage t eir great and dangero%s expansion0 &t is impossible to decide @ at part arises o%t o! real bonQ fide transactions, s%c as act%al bargain and sale, or @ at part is !ictitio%s and mere accommodation paper, t at is, @ ere one bill o! exc ange is dra@n to take %p anot er r%nning, in order to raise a !ictitio%s capital, by creating so m%c c%rrency0 &n times o! ab%ndance and c eap money t is & kno@ reac es an enormo%s amo%ntL Bpp0 23-22C0 P0W0 AosanD%et, Metallic, &aper and Credit Currency, 'ondon, 182<: K?n a8erage amo%nt o! payments to t e extent o! %p@ards o! V3,===,=== is settled t ro%g t e ;learing 6o%se B@ ere t e 'ondon bankers exc ange d%e bills and !iled c eD%esC e8ery day o! b%siness in t e year, and t e daily amo%nt o! money reD%ired !or t e p%rpose is little more t an V<==,===L Bp0 86C0 B&n 188*, t e total t%rno8er o! t e ;learing 6o%se amo%nted to V>,6180>+ million, @ ic , in ro%g ly 3== b%siness days, a8erages V<+Z million daily0 I'. 0.1 KAills o! exc ange act %ndo%btedly as c%rrency, independent o! money, inasm%c as t ey trans!er property !rom and to and by endorsementL Bp0 *<C0 K&t may be ass%med t at %pon an a8erage t ere are t@o endorsements %pon e8ery bill in circ%lation, and 000 eac bill per!orms t@o payments be!ore it becomes d%e0 (pon t is ass%mption it @o%ld appear, t at by endorsement alone property c anged ands, by means o! bills o! exc ange, to t e 8al%e o! t@ice !i8e %ndred and t@enty-eig t million, or V1,=+6,===,===, being at t e rate o! more t an

<62

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V3,===,=== per day, in t e co%rse o! t e year 183*0 We may sa!ely t ere!ore concl%de, t at deposits and bills o! exc ange toget er, per!orm t e !%nctions o! money, by trans!erring property !rom not less t an V18,===,===L Bp0 *3C0 5ooke says t e !ollo@ing abo%t credit in general: K;redit, in its most simple expression, is t e con!idence @ ic , @ell, or ill-!o%nded, leads a person to entr%st anot er @it a certain amo%nt o! capital, in money, or in goods comp%ted at a 8al%e in money agreed %pon, and in eac case payable at t e expiration o! a !ixed term0 &n t e case @ ere t e capital is lent in money, t at is, @ et er in banknotes, or in a cas credit, or in an order %pon a correspondent, an addition !or t e %se o! t e capital o! so m%c %pon e8ery V1== is made to t e amo%nt to be repaid0 &n t e case o! goods t e 8al%e o! @ ic is agreed in terms o! money, constit%ting a sale, t e s%m stip%lated to be repaid incl%des a consideration !or t e %se o! t e capital and !or t e risk, till t e expiration o! t e period !ixed !or payment0 Written obligations o! payment at !ixed dates mostly accompany t ese credits, and t e obligations or promissory notes a!ter date being trans!erable, !orm t e means by @ ic t e lenders, i! t ey a8e occasion !or t e %se o! t eir capital, in t e s ape @ et er o! money or goods, be!ore t e expiration o! t e term o! t e bills t ey old, are mostly enabled to borro@ or to b%y on lo@er terms, by a8ing t eir o@n credit strengt ened by t e names on t e bills in addition to t eir o@n0L )Dn3uiry into the Currency &rinciple, p0 8>0C ; 0 ;oD%elin, 7% ;rFdit et des AanD%es dans '"&nd%strie, )e8%e des 7e%x Mondes, 182<, 5ome 31: K&n e8ery co%ntry t e maHority o! credit transactions takes place @it in t e circle o! ind%strial relations000 and and to and @it o%t t e aid o! money, to an extent daily o!

<6+

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5 e prod%cer o! t e ra@ material ad8ances it to t e processing man%!act%rer, and recei8es !rom t e latter a promise to pay on a certain day0 5 e man%!act%rer, a8ing completed is s are o! t e @ork, in is t%rn ad8ances is prod%ct on similar terms to anot er man%!act%rer, @ o as to process it !%rt er, and in t is @ay credit stretc es on and on, !rom one to t e ot er, rig t %p to t e cons%mer0 5 e @ olesale dealer gi8es t e retailer commodities on credit, @ ile recei8ing credit !rom a man%!act%rer or commission agent0 ?ll borro@ @it one and and lend @it t e ot er, sometimes money, b%t more !reD%ently prod%cts0 &n t is manner an incessant exc ange o! ad8ances, @ ic combine and intersect in all directions, takes place in ind%strial relations0 5 e de8elopment o! credit consists precisely in t is m%ltiplication and gro@t o! m%t%al ad8ances, and t erein is t e real seat o! its po@er0L 5 e ot er side o! t e credit system is connected @it t e de8elopment o! money-dealing, @ ic , o! co%rse, keeps step %nder capitalist prod%ction @it t e de8elopment o! dealing in commodity0 We a8e seen in t e preceding part B; ap0 J&JC o@ t e care o! t e reser8e !%nds o! b%sinessmen, t e tec nical operations o! recei8ing and disb%rsing money, o! international payments, and t %s o! t e b%llion trade, are concentrated in t e ands o! t e money-dealers0 5 e ot er side o! t e credit system I t e management o! interest-bearing capital, or money-capital, de8elops alongside t is money-dealing as a special !%nction o! t e money-dealers0 Aorro@ing and lending money becomes t eir partic%lar b%siness0 5 ey act as middlemen bet@een t e act%al lender and t e borro@er o! money-capital0 :enerally speaking, t is aspect o! t e banking b%siness consists o! concentrating large amo%nts o! t e loanable money-capital in t e bankers" ands, so t at, in place o! t e indi8id%al money-lender, t e bankers con!ront t e ind%strial capitalists and commercial capitalists as representati8es o! all moneylenders0 5 ey become t e general managers o! money-capital0 3n t e ot er and by borro@ing !or t e entire @orld o! commerce, t ey concentrate all t e borro@ers 8is-O-8is all t e lenders0 ? bank represents a centralisation o! money-capital, o! t e lenders, on t e one and, and on t e ot er a centralisation o! t e borro@ers0 &ts pro!it is generally made by borro@ing at a lo@er rate o! interest t an it recei8es in loaning0 5 e loanable capital @ ic t e banks a8e at t eir disposal streams to t em in 8ario%s @ays0 &n t e !irst place, being t e cas iers o! t e ind%strial capitalists, all t e money-capital @ ic e8ery prod%cer and merc ant m%st a8e as a reser8e !%nd, or recei8es in payment, is concentrated in t eir ands0 5 ese !%nds are t %s con8erted into loanable money-capital0 &n t is @ay, t e reser8e !%nd o! t e commercial @orld, beca%se it is concentrated in a common treas%ry, is red%ced to its necessary minim%m, and a portion o! t e money-capital @ ic @o%ld ot er@ise a8e to lie sl%mbering as a reser8e !%nd, is loaned o%t and ser8es as interest-bearing capital0 &n t e second place, t e loanable capital o! t e banks is !ormed by t e deposits o! money-capitalists @ o entr%st t em @it t e b%siness o! loaning t em o%t0 F%rt ermore, @it t e de8elopment o! t e banking

<66

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system, and partic%larly as soon as banks came to pay interest on deposits, money sa8ings and t e temporarily idle money o! all classes @ere deposited @it t em0 $mall amo%nts, eac in itsel! incapable o! acting in t e capacity o! money-capital, merge toget er into large masses and t %s !orm a money po@er0 5 is aggregation o! small amo%nts m%st be disting%is ed as a speci!ic !%nction o! t e banking system !rom its go-bet@een acti8ities bet@een t e money-capitalists proper and t e borro@ers0 &n t e !inal analysis, t e re8en%es, @ ic are %s%ally b%t grad%ally cons%med, are also deposited @it t e banks0 5 e loan is made B@e re!er ere strictly to commercial creditC by disco%nting bills o! exc ange I by con8erting bills o! exc ange into money be!ore t ey come d%e I and by ad8ances o! 8ario%s kinds: direct ad8ances on personal credit, loans against sec%rities, s%c as interest-bearing paper, go8ernment paper, stocks o! all sorts, and, notably, o8erdra!ts against bills o! lading, dock @arrants, and ot er certi!ied titles o! o@ners ip o! commodities and o8erdra@ing deposits, etc0 5 e credit gi8en by a banker may ass%me 8ario%s !orms, s%c as bills o! exc ange on ot er banks, c eD%es on t em, credit acco%nts o! t e same kind, and !inally, i! t e bank is entitled to iss%e notes I bank-notes o! t e bank itsel!0 ? bank-note is not ing b%t a dra!t %pon a banker, payable at any time to t e bearer, and gi8en by t e banker in place o! pri8ate dra!ts0 5 is last !orm o! credit appears partic%larly important and striking to t e layman, !irst, beca%se t is !orm o! credit-money breaks o%t o! t e con!ines o! mere commercial circ%lation into general circ%lation, and ser8es t ere as money# and beca%se in most co%ntries t e principal banks iss%ing notes, being a pec%liar mixt%re o! national and pri8ate banks, act%ally a8e t e national credit to back t em, and t eir notes are more or less legal tender# beca%se it is apparent ere t at t e banker deals in credit itsel!, a bank-note being merely a circ%lating token o! credit0 A%t t e banker also as to do @it credit in all its ot er !orms, e8en @ en e ad8ances t e cas money deposited @it im0 &n !act, a bank-note simply represents t e coin o! @ olesale trade, and it is al@ays t e deposit @ ic carries t e most @eig t @it banks0 5 e best proo! o! t is is !%rnis ed by t e $cottis banks0 $pecial credit instit%tions, like special !orms o! banks, need no !%rt er consideration !or o%r p%rpose0 K5 e b%siness o! bankers 000 may be di8ided into t@o branc es000 3ne branc o! t e banker"s b%siness is to collect capital !rom t ose @ o a8e not immediate employment !or it, and to distrib%te or trans!er it to t ose @ o a8e0 5 e ot er branc is to recei8e deposits o! t e incomes o! t eir c%stomers, and to pay o%t t e amo%nt, as it is @anted !or expendit%re by t e latter in t e obHects o! t eir cons%mption000 5 e !ormer being a circ%lation o! capital, t e latter o! c%rrency000 K I K3ne relates to t e concentration o! capital on t e one and and t e distrib%tion o! it on t e ot er, t e ot er is employed in administering t e circ%lation !or local p%rposes o! t e district0L 5ooke, Dn3uiry into the Currency &rinciple, pp0 36, 3>0 We s all re8ert to t is passage later, in ; apter JJ4&&&0

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)eports o! ;ommittees, 4ol0 4&&&0 ;ommercial 7istress, 4ol0 11, ,art &, 182>-28, Min%tes o! E8idence0 BF%rt er D%oted as ;ommercial 7istress, 182>-280C &n t e !orties, @ en disco%nting bills o! exc ange in 'ondon, <1-day dra!ts o! one bank on anot er @ere o!ten accepted in lie% o! banknotes0 B5estimony o! P0 ,ease, co%ntry banker, -os0 2638 and 262+0C ?ccording to t e same report, bankers @ere in t e abit o! gi8ing s%c bills o! exc ange reg%larly in payment to t eir c%stomers @ ene8er money @as tig t0 &! t e recei8er @anted bank-notes, e ad to redisco%nt t is bill0 For t e banks t is amo%nted to a pri8ilege o! coining money0 Messrs0 Pones, 'loyd and ;o0 made payments in t is @ay K!rom time immemorial,L as soon as money @as scarce and t e rate o! interest rose abo8e +T0 5 e c%stomer @as glad to get s%c banker"s bills beca%se bills !rom Pones, 'oyd and ;o0 @ere easier disco%nted t an is o@n# besides, t ey o!ten passed t ro%g t@enty to t irty ands0 BDbid., -os0 *=1 to *=2, *=+, **<0C ?ll t ese !orms ser8e to make t e payments claim trans!erable0 K5 ere is scarcely any s ape into @ ic credit can be cast, in @ ic it @ill not at times be called to per!orm t e !%nctions o! money# and @ et er t at s ape be a bank-note, or a bill o! exc ange, or a banker"s c eD%e, t e process is in e8ery essential partic%lar t e same, and t e res%lt is t e same0L F%llarton, :n the 9egulation of Currencies, <nd ed0, 'ondon, 182+, p0 380 I KAank-notes are t e small c ange o! creditL Bp0 +1C0 5 e !ollo@ing !rom P0 W0 :ilbart"s 4he (istory and &rinciple of Gan-ing, 'ondon, 1832: K5 e trading capital o! a bank may be di8ided into t@o parts: t e in8ested capital, and t e borro@ed banking capitalL Bp0 11>C0 K5 ere are t ree @ays o! raising a banking or borro@ed capital0 First, by recei8ing# secondly, by t e iss%ing o! notes# t irdly, by t e dra@ing o! bills0 &! a person @ill lend me V1== !or not ing, and & lend t at V1== to anot er person at !o%r per cent interest, t en, in t e co%rse o! a year, & s all gain V2 by t e transaction0 ?gain, i! a person @ill take my "promise to pay"K BK& promise to payL is t e %s%al !orm%la !or Englis bank-notesC Kand bring it back to me at t e end o! t e year, and pay me !o%r per cent !or it, H%st t e same as t o%g & ad lent im 1== so8ereigns, t en & s all gain V2 by t at transaction# and again, i! a person in a co%ntry to@n brings me V1== on condition t at, t@enty-one days a!ter@ards, & s all pay t e same amo%nt to a person in

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'ondon, t en @ ate8er interest & can make o! t e money d%ring t e t@enty-one days, @ill be my pro!it0 5 is is a !air representation o! t e operations o! banking, and o! t e @ay in @ ic a banking capital is created by means o! deposits, notes, and billsL Bp0 11>C0 K5 e pro!its o! a banker are generally in proportion to t e amo%nt o! is banking or borro@ed capital000 5o ascertain t e real pro!it o! a bank, t e interest %pon t e in8ested capital s o%ld be ded%cted !rom t e gross pro!it, and @ at remains is t e banking pro!itL Bp0 118C0 /4he advances of ban-ers to their customers are made with other people5s money/ Bp0 126C0 K,recisely t ose bankers @ o do not iss%e notes, create a banking capital by t e disco%nting o! bills0 5 ey render t eir disco%nts s%bser8ient to t e increase o! t eir deposits0 5 e 'ondon bankers @ill not disco%nt except !or t ose o%ses @ o a8e deposit acco%nts @it t emL Bp0 11*C0 K? party @ o as ad bills disco%nted, and as paid interest on t e @ ole amo%nt, m%st lea8e some portion o! t at amo%nt in t e ands o! t e banker @it o%t interest0 Ay t is means t e banker obtains more t an t e c%rrent rate o! interest on t e money act%ally ad8anced, and raises a banking capital to t e amo%nt o! t e balance le!t in is andsL Bpp0 11*- <=C0 Economising on reser8e !%nds, deposits, c eD%es: KAanks o! deposit ser8e to economise t e %se o! t e circ%lating medi%m0 5 is is done %pon t e principle o! trans!er o! titles0000 5 %s it is t at banks o! deposit 000 are enabled to settle a large amo%nt o! transactions @it a small amo%nt o! money0 5 e money t %s liberated, is employed by t e banker in making ad8ances, by disco%nt or ot er@ise, to is c%stomers0 6ence t e principle o! trans!er gi8es additional e!!iciency to t e deposit system000L Bp0 1<3C0 K&t

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matters not @ et er t e t@o parties, @ o same banker or @it

a8e

dealings @it eac ot er, keep t eir acco%nts @it t e di!!erent bankers# !or, as t e bankers exc ange t eir c eD%es @it eac ot er at t e clearing o%se0000 5 e deposit system mig t t %s, by means o! trans!ers, be carried to s%c an extent as @ olly to s%persede t e %se o! a metallic c%rrency0 Were e8ery man to keep a deposit acco%nt at a bank, and make all is payments by c eD%es, money mig t be s%perseded, and c eD%es become t e sole circ%lating medi%m0 &n t is case, o@e8er, it m%st be s%pposed t at t e banker as t e money in is ands, or t e c eD%es @o%ld a8e no 8al%eL Bp0 1<2C0 ;entralisation o! local transactions in t e ands o! t e banks is e!!ected 1C t ro%g branc banks0 ;o%ntry banks a8e branc establis ments in t e smaller to@ns o! t eir district, and 'ondon banks in di!!erent districts o! t e city0 <C 5 ro%g agencies0 KEac co%ntry banker employs a 'ondon agent to pay is notes or bills 000 and to recei8e s%ms t at may be lodged by parties residing in 'ondon !or t e %se o! parties residing in t e co%ntryL Bp01<>C0 KEac banker accepts t e notes o! ot ers, b%t does not reiss%e t em0 &n all larger cities t ey come toget er once or t@ice a @eek and exc ange t eir notes0 5 e balance is paid by a dra!t on 'ondonL Bp0132C0 K&t is t e obHect o! banking to gi8e !acilities to trade, and @ ate8er gi8es !acilities to trade gi8es !acilities to spec%lation0 5rade and spec%lation are in some cases so nearly allied, t at it is impossible to say at @ at precise point trade ends and spec%lation begins0000 W ere8er t ere are banks, capital is more readily obtained, and at a c eaper rate0 5 e c eapness o! capital gi8es !acilities to spec%lation, H%st in t e same @ay as t e c eapness o! bee! and o! beer gi8es !acilities to gl%ttony and dr%nkennessL Bpp0 13>, 238C0 K?s banks o! circ%lation al@ays iss%e t eir o@n notes, it @o%ld seem t at t eir disco%nting b%siness @as carried on excl%si8ely @it t is last description o! capital, b%t it is not so0 &t is 8ery possible !or a banker to iss%e is o@n notes !or all t e bills e disco%nts, and yet nine-tent s o! t e bills in is possession s all represent real capital0 For, alt o%g in t e !irst instance, t e banker"s notes are gi8en !or t e bill, yet t ese notes may not stay in circ%lation %ntil t e bill becomes d%e I t e bill may a8e t ree mont s to r%n, t e notes may ret%rn in t ree daysL Bp0 1><C0 K5 e o8erdra@ing o! a cas credit acco%nt is a reg%lar matter o! b%siness# it is, in !act, t e p%rpose !or @ ic t e cas credit as been granted0000 ;as credits are granted not only %pon personal sec%rity, b%t also %pon t e sec%rity o! t e ,%blic F%ndsL Bpp0 1>2, 1>+C0 K;apital ad8anced, by @ay o! loan, on t e sec%rities o! merc andise, @o%ld prod%ce t e same e!!ects as i! ad8anced in t e disco%nting o! bills0 &! a party borro@s 12== on t e sec%rity o! is merc andise, it is t e same as t o%g e ad sold is merc andise !or a 81== bill, and got it disco%nted @it t e banker0 Ay obtaining t is ad8ance e is enabled to old o8er t is merc andise !or a better market, and a8oids a sacri!ice @ ic , ot er@ise, be mig t be ind%ced to make, in order to raise t e money !or %rgent p%rposesL Bpp0 18=-81C0 5 e ;%rrency 5 eory )e8ie@ed, etc0, pp0 6<-63: K&t is %nD%estionably tr%e t at t e V1,=== @ ic yo% deposit at ? today may be reiss%ed tomorro@, and

<>=

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!orm a deposit at A0 5 e day a!ter t at, reiss%ed !rom A, it may !orm a deposit at ; 000 and so on to in!init%de# and t at t e same V1,=== in money may t %s, by a s%ccession o! trans!ers, m%ltiply itsel! into a s%m o! deposits absol%tely inde!inite0 &t is possible, t ere!ore, t at nine1tenths of all the deposits in the Nnited Hingdom may have no e istence beyond their record in the boo-s of the ban-ers @ o are respecti8ely acco%ntable !or t em 000 5 %s in $cotland, !or instance, c%rrency Bmostly paper money at t atC as ne8er exceeded 13 million, t e deposits in t e banks are estimated at V<> million0000 (nless a r%n on t e banks be made, t e same V1,=== @o%ld, i! sent back %pon its tra8els, cancel @it t e same !acility a s%m eD%ally inde!inite0 ?s t e same V1,=== @it @ ic yo% cancel yo%r debt to a tradesman today, may cancel is debt to t e merc ant tomorro@, t e merc ant"s debt to t e bank t e day !ollo@ing, and so on @it o%t end# so t e same V1,=== may pass !rom and to and, and bank to bank, and cancel any concei8able s%m o! deposits0L /We a8e seen t at :ilbart kne@ e8en in 1832 t at K@ ate8er gi8es !acilities to trade gi8es !acilities to spec%lation0 5rade and spec%lation are in some cases so nearly allied, t at it is impossible to say at @ at precise point trade ends and spec%lation begins0L 5 e easier it is to obtain ad8ances on %nsold commodities, t e more s%c ad8ances are taken, and t e greater t e temptation to man%!act%re commodities, or d%mp already man%!act%red commodities in distant markets, H%st to obtain ad8ances o! money on t em0 5o @ at extent t e entire b%siness @orld o! a co%ntry may be seiEed by s%c s@indling, and @ at it !inally comes to, is amply ill%strated by t e istory o! Englis b%siness d%ring 182+-2>0 &t s o@s %s @ at credit can accomplis 0 Ae!ore passing on to t e !ollo@ing examples, a !e@ preliminary remarks0 ?t t e close o! 182< t e press%re @ ic Englis ind%stry s%!!ered almost %ninterr%ptedly since 183>, began to li!t0 7%ring t e !ollo@ing t@o years !oreign demand !or Englis man%!act%red goods increased still more# 182+ and 1826 marked a period o! greatest prosperity0 &n 1823 t e 3pi%m War ad opened ; ina to Englis commerce0 5 e ne@ market ga8e a ne@ impet%s to t e !%rt er expansion o! an expanding ind%stry, partic%larly t e cotton ind%stry0 K6o@ can @e e8er prod%ce too m%c Q We a8e to clot e 3== million people,L a Manc ester man%!act%rer said to t is @riter at t e time0 A%t all t e ne@ly erected !actory b%ildings, steam-engines, and spinning

<>1

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and @ea8ing mac ines did not s%!!ice to absorb t e s%rpl%s-8al%e po%ring in !rom 'ancas ire0 Wit t e same Eeal as @as s o@n in expanding prod%ction, people engaged in b%ilding rail@ays0 5 e t irst !or spec%lation o! man%!act%rers and merc ants at !irst !o%nd grati!ication in t is !ield, and as early as in t e s%mmer o! 18220 $tock @as !%lly %nder@ritten, i.e., so !ar as t ere @as money to co8er t e initial payments0 ?s !or t e rest, time @o%ld s o@S A%t @ en !%rt er payments @ere d%e I M%estion 1=+*, ;0 70 1828N+>, indicates t at t e capital in8ested in rail@ays in 1826-2> amo%nted to V>+ million I reco%rse ad to be taken to credit, and in most cases t e basic enterprises o! t e !irm ad also to bleed0 ?nd in most cases t ese basic enterprises @ere already o8er-b%rdened0 5 e enticingly ig pro!its ad led to !ar more extensi8e operations t an H%sti!ied by t e a8ailable liD%id reso%rces0 .et t ere @as credit-easy to obtain and c eap0 5 e bank disco%nt rate stood lo@: 1` to <`T in 1822, less t an 3T %ntil 3ctober 182+, rising to +T !or a @ ile BFebr%ary 1826C, t en dropping again to 3[ T in 7ecember 18260 5 e Aank o! England ad an %n eard-o! s%pply o! gold in its 8a%lts0 ?ll inland D%otations @ere ig er t an e8er be!ore0 W y t en allo@ t is splendid opport%nity to escapeQ W y not go in !or all one @as @ort Q W y not send all one co%ld man%!act%re to !oreign markets @ ic pined !or Englis goodsQ ?nd @ y s o%ld not t e man%!act%rer imsel! pocket t e do%ble gain arising !rom selling yarn and !abrics in t e Far East, and t e ret%rn cargo in EnglandQ 5 %s arose t e system o! mass consignments to &ndia and ; ina against ad8ance payments, and t is soon de8eloped into a system o! consignments p%rely !or t e sake o! getting ad8ances, as described in greater detail in t e !ollo@ing notes, @ ic led ine8itably to o8er-!looding t e markets and a cras 0 5 e cras @as precipitated by t e crop !ail%re o! 18260 England, and partic%larly &reland, reD%ired enormo%s imports o! !oodst%!!s, notably corn and potatoes0 A%t t e co%ntries @ ic s%pplied t em co%ld be paid @it t e prod%cts o! Englis ind%stry only to a 8ery limited extent0 ,recio%s metals ad to be gi8en o%t0 :old @ort at least nine million @as sent abroad0 3! t is amo%nt no less t an se8en and a al! million came !rom t e treas%ry o! t e Aank o! England, @ ose !reedom o! action on t e money-market @as t ereby considerably impaired0 3t er banks, @ ose reser8es @ere deposited @it t e Aank o! England and @ere practically identical @it t ose o! t at Aank, @ere t %s also compelled to c%rtail accommodation o! money0 5 e rapid and easy !lo@ o! payments @as obstr%cted, !irst ere and t ere, t en generally0 5 e banking disco%nt rate, still 3 to 3ZT in Pan%ary 182>, rose to >T in ?pril, @ en t e !irst panic broke o%t0 5 e sit%ation eased some@ at in t e s%mmer B6ZT, 6TC, b%t @ en t e ne@ crop !ailed as @ell panic broke o%t a!res and e8en more 8iolently0 5 e o!!icial minim%m bank disco%nt rose in 3ctober to > and in -o8ember to 1=T# i.e., t e o8er@ elming mass o! bills o! exc ange @as disco%ntable only at o%trageo%s rates o! interest, or no longer disco%ntable at all0 5 e general cessation o! payments ca%sed t e !ail%re o! se8eral leading and 8ery many medi%m-siEed and small !irms0 5 e Aank itsel! @as in danger d%e to t e limitations imposed by t e art!%l Aank ?ct o! 28220 5 e go8ernment yielded to t e general clamo%r and s%spended t e Aank ?ct on 3ctober <+, t ereby eliminating t e abs%rd legal !etters imposed on t e Aank0 -o@ it co%ld t ro@ its s%pply o! banknotes into circ%lation @it o%t indrance0 5 e credit o! t ese bank-notes being in practice g%aranteed by t e credit o! t e nation, and t %s %nimpaired, t e money stringency @as t %s instantly and decisi8ely relie8ed0 -at%rally, D%ite a n%mber o! opelessly enmes ed large and small !irms !ailed ne8ert eless, b%t t e peak o! t e crisis @as o8ercome, t e banking disco%nt dropped to +T in 7ecember, and in t e co%rse o! 1828 a ne@ @a8e o! b%siness acti8ity began @ ic took t e edge o!! t e re8ol%tionary mo8ements on t e continent in 182*, and @ ic ina%g%rated in t e !i!ties an %nprecedented ind%strial prosperity, b%t t en ended again I in t e cras o! 18+>0 I '. 0.1 &0 ? doc%ment iss%ed by t e 6o%se o! 'ords in 1828 deals @it t e colossal depreciation o! go8ernment paper and bonds d%ring t e 182> crisis0 ?ccording to it t e depreciation o! 3ctober <3, 182>, compared @it t e le8el in Febr%ary o! t e same year, amo%nted to:

<><

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3n Englis go8ernment bonds V*3,8<2,<1> 3n dock and canal stock 3n rail@ay stock Total V1,3+8,<88 V1*,+>*,8<= :114,'30,;05

&&0 Wit re!erence to t e s@indle in East &ndian trade, in @ ic dra!ts @ere no longer dra@n beca%se commodities @ere being bo%g t, b%t rat er commodities @ere bo%g t to be able to make o%t disco%ntable dra!ts con8ertible into money, t e Manchester Guardian o! -o8ember <2, 182>, remarks: Mr0 ? in 'ondon instr%cts a Mr0 A to b%y !rom t e man%!act%rer ; in Manc ester commodities !or s ipment to a Mr0 7 in East &ndia0 A pays ; in six mont s" dra!ts to be made o%t by ; on A0 A sec%res imsel! by six mont s" dra!ts on ?0 ?s soon as t e goods are s ipped ? makes o%t six mont s" dra!ts on 7 against t e mailed bill o! lading0 K5 e s ipper and t e co-signee @ere t %s bot p%t in possession o! !%nds I mont s be!ore t ey act%ally paid !or t e goods# and, 8ery commonly, t ese bills @ere rene@ed at mat%rity, on pretence o! a!!ording time !or t e ret%rns in a "long trade"0 (n!ort%nately, losses by s%c a trade, instead o! leading to its contraction, led directly to its increase0 5 e poorer men became, t e greater need t ey ad to p%rc ase, in order to make %p, by ne@ ad8ances, t e capital t ey ad lost on t e past ad8ent%res0 ,%rc ases t %s became, not a D%estion o! s%pply and demand, b%t t e most important part o! t e !inance operations o! a !irm labo%ring %nder di!!ic%lties0 A%t t is is only one side o! t e pict%re0 W at took place in re!erence to t e export o! goods at &ndia, @ o ome, @as taking place in t e p%rc ase and s ipment o! prod%ce abroad0 6o%ses in ad credit to pass t eir bills, @ere p%rc asers o! s%gar, indigo, silk, or cotton I not beca%se t e prices ad8ised !rom 'ondon by t e last o8erland mail promised a pro!it on t e prices c%rrent in &ndia, b%t beca%se !ormer dra!ts %pon t e 'ondon o%se @o%ld soon !all d%e, and m%st be pro8ided !or0 W at @as so simple as to p%rc ase a cargo o! s%gar, pay !or it in bills %pon t e 'ondon o%se at ten mont s" date, transmit t e s ipping doc%ments by t e

<>3

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o8erland mail# and, in less t an t@o mont s, t e goods on t e ig seas, or per aps not yet passed t e mo%t o! t e 6oogly, @ere pa@ned in 'ombard $treet I p%tting t e 'ondon o%se in !%nds eig t mont s be!ore t e dra!ts against t ose goods !ell d%e0 ?nd all t is @ent on @it o%t interr%ption or di!!ic%lty, as long as bill-brokers ad ab%ndance o! money "at call,"# to ad8ance on bills o! lading and dock @arrants, and to disco%nt, @it o%t limit, t e bills o! &ndia o%ses dra@n %pon t e eminent !irms in Mincing 'ane0L /5 is !ra%d%lent proced%re remained in 8og%e so long as goods to and !rom &ndia ad to ro%nd t e ;ape in sailing 8essels0 A%t e8er since t ey are being s ipped in steamboats 8ia t e $%eE ;anal t is met od o! !abricating !ictitio%s capital as been depri8ed o! its basis I t e long !reig t 8oyage0 ?nd e8er since t e telegrap in!orms t e Englis b%sinessman abo%t t e &ndian market and t e &ndian merc ant abo%t t e Englis market, on t e same day t is met od as become totally impracticable0 I '.001 &&&0 5 e !ollo@ing is taken !rom t e D%oted )eport on ;ommercial 7istress, 182>-28: K&n t e last @eek o! ?pril 182>, t e Aank o! England ad8ised t e )oyal Aank o! 'i8erpool t at it @o%ld t erea!ter red%ce its disco%nt b%siness @it t e latter bank by one- al!0 5 e anno%ncement operated @it pec%liar ards ip on t is acco%nt, t at t e payments into 'i8erpool ad latterly been m%c more in bills t an in cas # and t e merc ants @ o generally bro%g t to t e Aank a large proportion o! cas @it @ ic to pay t eir acceptances, ad latterly been able to bring only bills @ ic t ey ad recei8ed !or t eir cotton and ot er prod%ce, and t at increased 8ery rapidly as t e di!!ic%lties increased0000 5 e acceptances 000 @ ic t e Aank ad to pay !or t e merc ants, @ere acceptances dra@n c ie!ly %pon t em !rom abroad, and t ey a8e been acc%stomed to meet t ose acceptances by @ ate8er payment t ey recei8ed !or t eir prod%ce0000 5 e bills t at t e merc ants bro%g t000 in lie% o! cas , @ ic t ey %s%ally bro%g t 000 @ere o! 8ario%s dates, and o! 8ario%s descriptions# a considerable n%mber o! t em

<>2

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@ere bankers" bills, o! t ree mont s" date, t e large b%lk being cotton bills0 5 ese bills o! exc ange, @ en bankers" bills, @ere accepted by 'ondon bankers, and by merc ants in e8ery trade t at @e co%ld mention I t e AraEilian, t e ?merican, t e ;anadian, t e West &ndian0000 5 e merc ants did not dra@ %pon eac ot er# b%t t e parties in t e interior, @ o ad p%rc ased prod%ce !rom t e merc ants, remitted to t e merc ants bills on 'ondon bankers, or bills on 8ario%s parties in 'ondon, or bills %pon anybody0 5 e anno%ncement o! t e Aank o! England ca%sed a red%ction o! t e mat%rity terms o! bills dra@n against sales o! !oreign prod%cts, !reD%ently extending to o8er t ree mont sL Bpp0 <6, <>C0 5 e period o! prosperity in England !rom 1822 to 182>, @as, as described abo8e, connected @it t e !irst great rail@ay s@indle0 5 e abo8e-named report makes t e !ollo@ing re!erence to t e e!!ect o! t is s@indle on b%siness in general: &n ?pril 182> Kalmost all mercantile o%ses ad beg%n to star8e t eir b%siness more or less 000 by taking part o! t eir commercial capital !or rail@aysL Bp02<C0 K'oans @ere made on rail@ay s ares at a ig rate o! interest, say, 8T, by pri8ate indi8id%als, by bankers and by !ire-o!!icesL Bp0 66C0 K'oans to so great an extent by commercial o%ses to rail@ays ind%ced t em to lean too m%c %pon banks by t e disco%nt o! paper, @ ereby to carry on t eir commercial operationsL Bp0 6>C0 BM%estion:C K$ o%ld yo% say t at t e rail@ay calls ad ad a great e!!ect in prod%cing t e press%re @ ic t ere @asL Bon t e money-marketC Kin ?pril and 3ctoberL B182>CQ I B?ns@er:C K& s o%ld say t at t ey ad ad ardly any e!!ect at all in prod%cing t e press%re in ?pril# & s o%ld imagine t at %p to ?pril, and %p, per aps, to t e s%mmer, t ey ad increased t e po@er o! bankers in some respects rat er t an diminis ed it# !or t e expendit%re ad not been nearly so rapid as t e calls#

<>+

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t e conseD%ence @as, t at most o! t e banks

ad

rat er a large amo%nt o! rail@ay money in t eir ands in t e beginning o! t e year0L B5 is is corroborated in n%mero%s statements made by bankers in ;0 70 1828-+>0C K&n t e s%mmer t at melted grad%ally a@ay, and on t e 31st o! 7ecember it @as materially less0 3ne ca%se 000 o! t e press%re in 3ctober @as t e grad%al dimin%tion o! t e rail@ay money in t e bankers" ands# bet@een t e <<nd o! ?pril and t e 31st o! 7ecember t e rail@ay balances in o%r ands @ere red%ced one- t ird# and t e rail@ay calls a8e also ad t is e!!ect t ro%g o%t t e Kingdom# t ey a8e been grad%ally draining t e deposits o! bankersL Bpp0 23, 22C0 $am%el :%rney B ead o! t e ill-!amed !irm o! 38erend, :%rney and ;o0C similarly says: K7%ring t e year 1826 000 t ere ad been a considerable demand !or capital, !or t e establis ment o! rail-@ays 000 b%t it did not increase t e 8al%e o! money0000 5 ere @as a condensation o! small s%ms into large masses, and t ose large masses @ere %sed in o%r market# so t at, %pon t e @ ole, t e e!!ect @as to t ro@ more money into t e money-market o! t e ;ity t an to take it o%tL /p0 1+*10 ?0 6odgson, 7irector o! t e 'i8erpool Point-$tock Aank, s o@s o@ m%c bills o! exc ange may constit%te a reser8e !or bankers: K&t as been o%r abit to keep at least nine-tent s o! all o%r deposits, and all money @e a8e o! ot er persons, in o%r bill case, in bills t at are !alling d%e !rom day to day 000 so m%c so, t at d%ring t e time o! t e r%n, t e bills !alling d%e @ere almost eD%al to t e amo%nt o! t e ran %pon %s day by dayL Bp0 +3C0 $pec%lati8e bills0 K+=*<0 W o @ere t ose bills Bagainst sold cottonC generally accepted byQL I B)0 :ardner, t e cotton man%!act%rer repeatedly mentioned in t is @ork:C K,rod%ce brokers: a person b%ys cotton, and places it

<>6

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in t e ands o! a broker, and dra@s %pon t at broker, and gets t e bills disco%nted0L I K+=*20 ?nd t ey are taken to t e banks at 'i8erpool, and disco%ntedQ I .es, and in ot er parts besides0000 & belie8e i! it ad not been !or t e accommodation t %s granted, and principally by t e 'i8erpool banks, cotton @o%ld ne8er a8e been so ig last year as it @as by 1Z d0 or <d0 a po%nd0L I K6==0 .o% a8e stated t at a 8ast amo%nt o! bills @ere p%t in circ%lation, dra@n by spec%lators %pon cotton brokers in 'i8erpool# does t at system extend to yo%r ad8ance on acceptances %pon colonial and !oreign prod%ce as @ell as on cottonQL B?0 6odgson, a 'i8erpool banker:C K&t re!ers to all kinds o! colonial prod%ce, b%t to cotton most especially0L I K6=10 7o yo%, as a banker, disenco%rage as !ar as yo% can t at description o! paperQ I We do not# @e consider it a 8ery legitimate description o! paper, @ en kept in moderation0 5 is description o! paper is !reD%ently rene@ed0L Swindling in the 0ast Dndian and Chinese Mar-et, ;<=@ 0 I ; arles 5%rner B ead o! one o! t e leading East &ndian o%ses in 'i8erpoolC: KWe are all a@are o! t e e8ents @ ic a8e taken place as regards t e Ma%riti%s trade, and ot er trades o! t at kind0 5 e brokers a8e been in t e abit 000 not only o! ad8ancing %pon goods a!ter t eir arri8al to meet t e bills dra@n against t ose goods, @ ic is per!ectly legitimate, and %pon t e bills o! lading 000 b%t 000 t ey a8e ad8anced %pon prod%ce be!ore it @as s ipped, and in some cases be!ore it @as man%!act%red0 -o@, to speak o! my o@n indi8id%al instance: & a8e bo%g t bills in ;alc%tta to t e extent o! six or se8en t o%sand po%nds in one partic%lar instance# t e proceeds o! t e bills @ent do@n to t e Ma%riti%s, to elp in t e gro@t o! s%gar# t ose bills came to England, and abo8e al! o! t em @ere protested# !or @ en t e s ipments o! s%gar came

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!or@ard, instead o! being eld to pay t ose bills, it ad been mortgaged to t ird parties 000 be!ore it @as s ipped, in !act almost be!ore it @as boiledL Bp0>8C0 K-o@ man%!act%rers are insisting %pon cas b%t it does not amo%nt to m%c , beca%se i! a b%yer as any credit in 'ondon, e can dra@ %pon t e o%se, and get t e bill disco%nted# e goes to 'ondon, @ ere disco%nts no@ are c eap# e gets t e bill disco%nted, and pays cas to t e man%!act%rer0000 &t takes t@el8e mont s, at least, !or t e s ipper o! goods to get is ret%rn !rom &ndia 000 a man @it ten or !i!teen t o%sand po%nds @o%ld go into t e &ndian trade# e @o%ld open a credit @it a o%se in 'ondon, to a considerable extent, gi8ing t at o%se one per cent# e, dra@ing %pon t e o%se in 'ondon, on t e %nderstanding t at t e proceeds o! t e goods t at go o%t are to be ret%rned to t e o%se in 'ondon, b%t it being per!ectly %nderstood by bot parties t at t e man in 'ondon is to be kept o%t o! a cas ad8ance# t at is to say, in ot er @ords, t e bills are to be rene@ed till t e proceeds come ome0 5 e bills @ere disco%nted at 'i8erpool, Manc ester 000 or in 'ondon 000 many o! t em lie in t e $cotc banksL Bp0 >*C0 I K>860 5 ere is one o%se @ ic !ailed in 'ondon t e ot er day, and in examining t eir a!!airs, a transaction o! t is sort @as pro8ed to a8e taken place# t ere is a o%se o! b%siness at Manc ester, and anot er at ;alc%tta# t ey opened a credit acco%nt @it a o%se in 'ondon to t e extent o! V<==,===# t at is to say, t e !riends o! t is o%se in Manc ester, @ o ad t e po@er o! t ere @as an consigned goods to t e East &ndia 6o%se !rom :lasgo@ and !rom Manc ester, V<==,===# at t e same time, dra@ing %pon t e o%se in 'ondon to t e extent o! %nderstanding t at t e corresponding o%se in

;alc%tta @ere to dra@ %pon t e 'ondon o%se to t e

<>8

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extent o! V<==,===# @it t e proceeds o! t ose bills sold in ;alc%tta, t ey @ere to b%y ot er bills, and remit t em to t e o%se in 'ondon, to take %p t e !irst bills dra@n !rom :lasgo@000 5 ere @o%ld a8e been V6==,=== o! bills created %pon t at transaction0L I K*>10 ?t present, i! a o%se in ;alc%tta p%rc ase a cargoL B!or EnglandC, Kand gi8e t eir o@n bills %pon t eir correspondent in 'ondon in payment, and t ey send t e bills o! lading ome to t is co%ntry, t ose bills o! lading 000 immediately become a8ailable to t em in 'ombard $treet !or ad8ances, and t ey a8e eig t mont s" %se o! t e money be!ore t eir correspondents are called %pon to pay0L &40 &n 1828 a secret committee o! t e 6o%se o! 'ords in8estigated t e ca%ses o! t e 182> crisis0 5 e e8idence gi8en to t e committee @as not p%blis ed, o@e8er, %ntil 18+> BMin%tes o! E8idence, taken be!ore t e $ecret ;ommittee o! t e 60 o! '0 appointed to inD%ire into t e ;a%ses o! 7istress, etc0, 18+># D%oted as ;070 1828N+>C0 6ere Mr0 'ister, 7irector o! t e (nion Aank o! 'i8erpool, testi!ied, among ot er t ings, to t e !ollo@ing: K<2220 &n t e spring o! 1822 t ere @as an %nd%e extension o! credit000 beca%se a man trans!erred property !rom b%siness into rail@ays and @as still anxio%s to carry on t e same extent o! b%siness0 6e probably !irst t o%g t t at e co%ld sell t e rail@ay s ares at a pro!it and replace t e money in is b%siness0 ,er aps e !o%nd t at co%ld not be done, and e t en got credit in is b%siness @ ere !ormerly e paid in cas 0 5 ere @as an extension o! credit !rom t at circ%mstance0L K<+==0 Were t ose bills 000 %pon @ ic t e banks ad s%stained a loss by olding t em, principally bills %pon corn or bills %pon cottonQL I K5 ey @ere bills %pon all kinds o! prod%ce, corn and cotton and s%gar, all !oreign prod%ce o! all descriptions0 5 ere @as scarcely any t ing per aps @it t e exception o! oil, t at did not go do@n0L I K<+=60 ? broker @ o accepts

<>*

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a bill @ill not accept it @it o%t a good margin as to t e 8al%e0L K<+1<0 5 ere are t@o kinds o! bills dra@n against prod%ce# t e !irst is t e original bill dra@n abroad %pon t e merc ant, @ o imports it0000 5 e bills @ ic are dra@n against prod%ce !reD%ently !all d%e be!ore t e prod%ce arri8es0 5 e merc ant, t ere!ore, @ en it arri8es, i! e as not s%!!icient capital, as to pledge t at prod%ce @it t e broker till e as time to sell t at prod%ce0 5 en a ne@ species o! bill is immediately dra@n by t e merc ant in 'i8erpool %pon t e broker, on t e sec%rity o! t at prod%ce0000 5 en it is t e b%siness o! t e banker to ascertain !rom t e broker @ et er e as t e prod%ce, and to @ at extent e as ad8anced %pon it0 &t is is b%siness to see t at t e broker as property to protect imsel! i! e makes a loss0L K<+160 We also recei8e bills !rom abroad0000 ? man b%ys a bill abroad on England, and sends it to a o%se in England# @e cannot tell @ et er t at bill is dra@n pr%dently or impr%dently, @ et er it is dra@n !or prod%ce or !or @ind0L K<+330 .o% said t at almost e8ery kind o! !oreign prod%ce @as sold at a great loss0 7o yo% t ink t at t at @as in conseD%ence o! %nd%e spec%lation in t at prod%ceQ I &t arose !rom a 8ery large import, and t ere not being an eD%al cons%mption to take it o!!0 &t appears t at cons%mption !ell o!! a great deal0L I K<+320 &n 3ctober prod%ce @as almost %nsaleable0L 6o@ a general sauve 3ui peut de8elops at t e eig t o! a crisis is re8ealed in t e same report by a !irst-rate expert, t e esteemed cra!ty M%aker, $am%el :%rney, o! 38erend, :%rney and ;o0: K1<6< 000 W en a panic exists a man does not ask imsel! @ at e can get !or is bank-notes, or @ et er e s all lose one or t@o per cent by selling is exc eD%er bills, or t ree per cent0 &! e is %nder t e

<8=

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in!l%ence o! alarm e does not care !or t e pro!it or loss, b%t makes imsel! sa!e and allo@s t e rest o! t e @orld to do as t ey please0L 40 ;oncerning t e m%t%al satiation o! t e t@o markets Mr0 ?lexander, a merc ant in t e East &ndia trade, testi!ies be!ore t e ;ommittee o! t e, 'o@er 6o%se on t e Aank ?ct o! 18+> BD%oted as A0;0 18+>C: K233=0 ?t t e present moment, i! & lay o%t 6s0 in Manc ester, & get +s0 back in &ndia# i! & lay o%t 6s0 in &ndia, & get +s0 back in 'ondon0L $o t at t e &ndian market is, t ere!ore, dr%gged by England, and t e Englis by &ndia0 5 is @as, indeed, t e case in t e s%mmer o! 18+>, barely ten years a!ter t e bitter experience o! 182>S

Chapter 2". -ccu ulation of 1one!-Capital. 5ts 5nfluence on the 5nterest Rate
K&n England t ere takes place a steady acc%m%lation o! additional @ealt , @ ic as a tendency %ltimately to ass%me t e !orm o! money0 -o@ next in %rgency, per aps, to t e desire to acD%ire money, is t e @is to part @it it again !or some species o! in8estment t at s all yield eit er interest or pro!it# !or money itsel!, as money, yields neit er0 (nless, t ere!ore, conc%rrently @it t is ceaseless in!l%x o! s%rpl%s-capital, t ere is a grad%al and s%!!icient extension o! t e !ield !or its employment, @e m%st be s%bHect to periodical acc%m%lations o! money seeking in8estment, o! more or less 8ol%me, according to t e mo8ement o! e8ents0 For a long series o! years, t e grand absorbent o! t e s%rpl%s @ealt o! England @as o%r p%blic debt0000 ?s soon as in 1816 t e debt reac ed its maxim%m, and operated no longer as an absorbent, a s%m o! at least se8en-and-t@enty million per ann%m @as necessarily dri8en to seek ot er c annels o! in8estment0 W at @as more, 8ario%s ret%rn payments o! capital @ere made0000 Enterprises @ ic entail a large capital and create an opening !rom time to time !or t e excess o! %nemployed capital 000 are absol%tely necessary, at least in o%r co%ntry, so as to take care o! t e periodical acc%m%lations o! t e s%per!l%o%s @ealt o! society, @ ic is %nable to !ind room in t e %s%al !ields o! application0L B4he Currency 4heory 9eviewed, 'ondon, 182+, pp0 3<-320C 3! 182+ t e same @ork says: KWit in a 8ery recent period prices a8e spr%ng %p@ards !rom t e lo@est point o! depression0000

<8<

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;onsols to%c par0000 5 e b%llion in t e 8a%lts o! t e Aank o! England treas%re as 000 exceeded in amo%nt t e since its eld by t at establis ment

instit%tion0 $ ares o! e8ery description range at prices on t e a8erage @ olly %nprecedented, and interest as declined to rates @ ic are all b%t nominal0 &! t ese be not e8idences t at anot er ea8y acc%m%lation o! %nemployed @ealt exists at t is o%r in England, t at anot er period o! spec%lati8e excitement is at and0L BDbid0, p0 360C K?lt o%g 000 t e import o! b%llion is no s%re sign o! gain %pon t e !oreign trade, yet, in t e absence o! any explanatory ca%se, it doesprima facie represent a portion o! it0L BP0 :0 6%bbard, 4he Currency and the Country, 'ondon, 1823, pp0 2=-2110C K$%ppose 000 t at at a period o! steady trade, !air prices 000 and !%ll, b%t not red%ndant circ%lation, a de!icient ar8est s o%ld gi8e occasion !or an import o! corn, and an export o! gold to t e 8al%e o! !i8e million0 5 e circ%lationL /meaning, as @e s all presently see, idle money-capital rat er t an means o! circ%lation I '.001 K@o%ld o! co%rse be red%ced by t e same amo%nt0 ?n eD%al D%antity o! t e circ%lation mig t still be eld by indi8id%als, b%t t e deposits o! merc ants at t eir bankers, t e balances o! bankers @it t eir moneybroker, and t e reser8e in t eir till, @ill all be diminis ed, and t e immediate res%lt o! t is red%ction in t e amo%nt o! %nemployed capital @ill be a rise in t e rate o! interest0 & @ill ass%me !rom 2 per cent to 60 5rade being in a so%nd state, con!idence @ill not be s aken, b%t credit @ill be more ig ly 8al%ed0L B Dbid0, p0 2<0C KA%t imagine 000 t at all prices !all0000 5 e s%per!l%o%s c%rrency ret%rns to t e bankers in increased deposits-t e ab%ndance o! %nemployed capital lo@ers t e rate o! interest to a minim%m, and t is state o! t ings lasts %ntil eit er a ret%rn o! ig er

<83

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prices or a more acti8e trade call t e dormant c%rrency into ser8ice, or %ntil it is absorbed by in8estments in !oreign stocks or !oreign goodsL Bp0 68C0 5 e !ollo@ing extracts are also taken !rom t e parliamentary )eport on ;ommercial 7istress, 182>-280 I 3@ing to t e crop !ail%re and !amine o! 1826-2> large-scale imports o! !oodst%!!s became necessary0 K5 ese circ%mstances ca%sed t e imports o! t e co%ntry to be 8ery largely in excess o8er 000 exports 000 a considerable drain %pon t e banks, and an increased application to t e disco%nt brokers 000 !or t e disco%nt o! bills0000 5 ey began to scr%tinise t e bills 000 5 e !acilities o! o%ses t en began to be 8ery serio%sly c%rtailed, and t e @eak o%ses began to !ail0 5 ose o%ses @ ic 000 relied %pon t eir credit000 @ent do@n0 5 is increased t e alarm t at ad been pre8io%sly !elt# and t e bankers and ot ers !inding t at t ey @o%ld not rely @it t e same degree o! con!idence t at t ey ad pre8io%sly done %pon t%rning t eir bills and ot er money sec%rities into bank-notes, !or t e p%rpose o! meeting t eir engagements, still !%rt er c%rtailed t eir !acilities, and in many cases re!%sed t em altoget er# t ey locked %p t eir bank-notes, in many instances to meet t eir o@n engagements# t ey @ere a!raid o! parting @it t em0000 5 e alarm and con!%sion @ere increased daily# and %nless 'ord Po n )%ssell 0000 ad iss%ed t e letter to t e Aank 000 %ni8ersal bankr%ptcy @o%ld a8e been t e iss%eL Bpp0 >2->+C0 )%ssell"s letter s%spended t e Aank ?ct0 I 5 e pre8io%sly mentioned ; arles 5%rner testi!ies: K$ome o%ses ad large means, b%t not a8ailable0 5 e @ ole o! t eir capital @as locked %p in estates in t e Ma%riti%s, or indigo !actories, or s%gar !actories0 6a8ing inc%rred liabilities to t e extent o! V+==,=== or V6==,=== t ey ad no a8ailable assets to pay t eir bills, and e8ent%ally it pro8ed t at to pay t eir bills

<82

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t ey @ere entirely dependent %pon t eir creditL Bp0 81C0 5 e a!orementioned $0 :%rney said /16621: K?t present B1828C t ere is a limitation o! transaction and a great s%perab%ndance o! money0L I K1>630 & do not t ink it @as o@ing to t e @ant o! capital# it @as o@ing to t e alarm t at existed t at t e rate o! interest got so ig 0L &n 182> England paid at least V* million gold to !oreign co%ntries !or imported !oodst%!!s0 3! t is amo%nt V>Z million came !rom t e Aank o! England and 1Z million !rom ot er so%rces Bp0 <2+C0 I Morris, :o8ernor o! t e Aank o! England: K5 e p%blic stocks in t e co%ntry and canal and rail@ay s ares ad already by t e <3rd o! 3ctober 182> been depreciated in t e aggregate to t e amo%nt o! V112,>+<,<<+L Bp0 31<C0 ?gain Morris, @ en D%estioned by 'ord :0 Aentinck: K?re yo% not a@are t at all property in8ested in stocks and prod%ce o! e8ery description @as depreciated in t e same @ay# t at ra@ cotton, ra@ silk and %nman%!act%red @ool @ere sent to t e continent at t e same depreciated price000 and t at s%gar, co!!ee and tea @ere sacri!iced as at !orced salesQ I &t @as 000 ine8itable t at t e co%ntry s o%ld make a considerable sacri!ice !or t e p%rpose o! meeting t e e!!l%x o! b%llion @ ic ad taken place in conseD%ence o! t e large importation o! !ood0L I /38281 K7o not yo% t ink it @o%ld a8e been better to trenc %pon t e V8,===,=== lying in t e co!!ers o! t e Aank t an to a8e endea8o%red to get t e gold back again at s%c a sacri!iceQ I $o, D do not./ J -o@ to t e commentaries on s%c eroism0 7israeli D%estions Mr0 W0 ;otton, a 7irector and !ormer :o8ernor o! t e Aank o! England: KW at @as t e rate o! di8idend paid to t e Aank proprietors in 1822Q I &t @as > per cent !or t e year0L I KW at is t e di8idend 000 !or 182>Q I -ine per cent0L I K7oes t e Aank pay t e income tax !or its

<8+

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proprietors in t is yearQ I &t does0L I K7id it do so in 1822Q I &t did not0L

1

I K5 en t is Aank ?ctL Bo!

1822C K as @orked 8ery @ell !or t e proprietorsQ000 5 e res%lt is, t at since t e passing o! t e ?ct, t e di8idend to t e proprietors as been raised !rom > per cent to * per cent, and t e income tax, t at pre8io%sly to t e ?ct @as paid by t e proprietors, is no@ paid by t e AankQ I Dt is so./ B-os0 23+6-610C Mr0 ,ease, a co%ntry banker, ad t e !ollo@ing to say concerning oarding in banks d%ring t e crisis o! 182>: K26=+0 ?s t e Aank @as obliged still to raise its rate o! interest, e8ery one seemed appre ensi8e# co%ntry bankers increased t e amo%nt o! b%llion in t eir ands, and increased t eir reser8e o! notes, and many o! %s @ o @ere in t e abit o! keeping, per aps, a !e@ %ndred po%nds o! gold and bank-notes, immediately laid %p t o%sands in o%r desks and dra@ers, as t ere @as an %ncertainty abo%t disco%nts, and abo%t o%r bills being c%rrent in t e market, a general oarding ens%ed0L ? member o! t e ;ommittee remarks: K26*10 5 en, @ ate8er may a8e been t e ca%se d%ring t e last 1< years, t e res%lt as been rat er in !a8o%r o! t e Pe@ and money-dealer, t an t e prod%cti8e classes generally0L 6o@ m%c a money-dealer takes ad8antage o! times o! crisis is re8ealed by 5ooke: K&n t e ard@are districts o! War@icks ire and $ta!!ords ire, a great many orders !or goods @ere declined to be accepted in 182>, beca%se t e rate o! interest @ ic t e man%!act%rer ad to pay !or disco%nting is bills more t an absorbed all is pro!itL B-o0 +2+1C0 'et %s no@ take anot er parliamentary report cited earlier: )eport o! $elect ;ommittee on Aank ?cts, comm%nicated !rom t e ;ommons to t e 'ords, 18+> BD%oted !%rt er as A0 ;0 18+>C0 &n it Mr0 -orman, 7irector o! t e Aank o! England and a leading !ig%re among t e c ampions o! t e ;%rrency ,rinciple, is interrogated as !ollo@s:

<86

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K363+0 .o% stated, t at yo% consider t at t e rate o! interest depends, not %pon t e amo%nt o! notes, b%t %pon t e s%pply and demand o! capital0 Will yo% state @ at yo% incl%de in "capital," besides notes and coinQ I & belie8e t at t e ordinary de!inition o! "capital" is commodities or ser8ices %sed in prod%ction0L I K36360 7o yo% mean to incl%de all commodities in t e @ord "capital" @ en yo% speak o! t e rate o! interestQ I ?ll commodities %sed in prod%ction0L I K363>0 .o% incl%de all t at in t e @ord "capital," @ en yo% speak o! @ at reg%lates t e rate o! interestQ I .es0 $%pposing a cotton man%!act%rer to @ant cotton !or is !actory, t e @ay in @ ic e goes to @ork to obtain it is, probably, by getting an ad8ance !rom is banker, and @it t e notes so obtained e goes to 'i8erpool, and makes a p%rc ase0 W at e really @ants is t e cotton# e does not @ant t e notes or t e gold, except as a means o! getting t e cotton0 3r e may @ant t e means o! paying is @orkmen# t en again, e borro@s t e notes, and e pays t e @ages o! t e @orkmen @it t e notes# and t e @orkmen, again, reD%ire !ood and lodging, and t e money is t e means o! paying !or t ose0L I K36380 A%t interest is paid !or t e moneyQ I &t is, in t e !irst instance# b%t take anot er case0 $%pposing e b%ys t e cotton on credit, @it o%t going to t e bank !or an ad8ance, t en t e di!!erence bet@een t e ready-money price and t e credit price at t e time at @ ic e is to pay !or it is t e meas%re o! t e interest0 &nterest @o%ld exist i! t ere @as no money at all0L 5 is sel!-complacent r%bbis is D%ite !itting !or t is pillar o! t e ;%rrency ,rinciple0 First, t e brilliant disco8ery t at bank-notes or gold are means o! b%ying somet ing, and t at t ey are not borro@ed !or t eir o@n sake0 ?nd t is is ad8anced to explain t at t e rate o! interest is reg%lated I b%t by @ atQ Ay t e demand and s%pply o! commodities, @ ic ereto!ore @as kno@n to reg%late only t e market-prices o! commodities0 6o@e8er, 8ery di!!erent rates o! interest are compatible @it t e same market-prices o! commodities0 I A%t no@ t is c%nning0 6e is con!ronted @it t e correct remark: KA%t interest is paid !or t e money,L @ ic , o! co%rse, contains t e implication: KW at as interest recei8ed by t e banker, @ o does not deal in

<8>

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commodities at all, to do @it t ese commoditiesQ ?nd do not man%!act%rers recei8e money at t e same rate o! interest, alt o%g t ey in8est it in @idely di!!erent markets, ence in markets @it @idely di!!erent conditions o! demand and s%pply !or t e commodities %sed in prod%ctionQL ?ll t at t is celebrated geni%s as to say in reply to t ese D%estions is t at i! t e man%!act%rer b%ys cotton on credit Kt e di!!erence bet@een t e ready-money price and t e credit price at t e time at @ ic e is to pay !or it is t e meas%re o! t e interest0L M%ite t e contrary0 5 e pre8ailing rate o! interest @ ose reg%lation t e great intellect -orman @as asked to explain is t e meas%re o! t e di!!erence bet@een t e cas price and t e credit price %ntil payment is d%e0 First t e cotton is to be sold at its cas price, and t is is determined by t e market-price, itsel! reg%lated by t e state o! s%pply and demand0 $ay t e price V1,===0 5 is concl%des t e transaction bet@een t e man%!act%rer and t e cotton broker so !ar as b%ying and selling is concerned0 -o@ comes a second transaction0 5 is is one bet@een lender and borro@er0 5 e 8al%e o! V1,=== is ad8anced to t e man%!act%rer in cotton, and e as to repay it in money, say, in t ree mont s0 ?nd t ree mont s" interest !or V1===, determined by t e market rate o! interest, makes %p t e extra c arge o8er and abo8e t e cas price0 5 e price o! cotton is determined by s%pply and demand0 A%t t e price o! t e ad8anced 8al%e o! cotton, o! V1,=== ad8anced !or t ree mont s, is determined by t e rate o! interest0 ?nd t is !act, t at cotton is t %s trans!ormed into money-capital, pro8es to Mr0 -orman t at interest @o%ld exist e8en i! t ere ad been no money0 &! t ere @ere no money at all, t ere @o%ld certainly be no general rate o! interest0 5 ere is, to begin @it , a 8%lgar conception o! capital as Kcommodities %sed in prod%ction0L &n so !ar as t ese commodities ser8e as capital, t eir 8al%e as capital, as distinct !rom t eir 8al%e as commodities, is expressed in t e pro!it @ ic is deri8ed !rom t eir prod%cti8e or mercantile employment0 ?nd t e rate o! pro!it %nder all circ%mstances as somet ing to do @it t e marketprice o! t e p%rc ased commodities and @it t eir s%pply and demand, b%t is determined by entirely di!!erent circ%mstances0 ?nd t ere is no do%bt t at t e interest rate is generally limited by t e rate o! pro!it0 A%t Mr0 -orman s o%ld tell %s H%st o@ t is limit is determined0 ?nd it is determined by t e s%pply and demand o! money-capital as distinguished !rom t e ot er !orms o! capital0 &t co%ld be !%rt er asked: 6o@ are demand and s%pply o! money-capital determinedQ &t is do%btlessly tr%e t at a tacit connection exists bet@een t e s%pply o! material capital and t e s%pply o! money-capital# and, like@ise, t at t e demand o! ind%strial capitalists !or money-capital is determined by conditions o! act%al prod%ction0 &nstead o! enlig tening %s on t is point, -orman o!!ers %s t e sage opinion t at t e demand !or money-capital is not identical @it t e demand !or money as s%c # and t is sagacity alone, beca%se e, 38erstone, and t e ot er ;%rrency prop ets, constantly a8e pricks o! conscience since t ey are stri8ing to make capital o%t o! means o! circ%lation as s%c t ro%g t e arti!icial inter8ention o! legislation, and to raise t e interest rate0 -o@ to 'ord 38erstone, alias $am%el Pones 'oyd, as e is asked to explain @ y e takes 1=T !or is KmoneyL beca%se KcapitalL is so scarce in is co%ntry0 K36+30 5 e !l%ct%ations in t e rate o! interest arise !rom one o! t@o ca%ses: an alteration in t e 8al%e o! capitalL BexcellentS 4al%e o! capital, generally speaking, signi!ies precisely t e rate o! interestS ? c ange in t e rate o! interest is t %s made to spring !rom a c ange in t e rate o! interest0 K4al%e o! capital,L as @e a8e s o@n else@ ere, is ne8er concei8ed ot er@ise in t eory0 3r else, i! 'ord 38erstone means t e rate o! pro!it by t e p rase K8al%e o! capitalL, t en t e pro!o%nd t inker ret%rns to t e notion t at t e interest rate is reg%lated by t e rate o! pro!itSC

<88

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Kor an alteration in t e amo%nt o! money in t e co%ntry0 ?ll great !l%ct%ations o! interest, great eit er in t eir d%ration or in t e extent o! t e !l%ct%ation, may be distinctly traced to alterations in t e 8al%e o! capital0 5@o more striking practical ill%strations o! t at !act cannot be !%rnis ed t an t e rise in t e rate o! interest in 182> and d%ring t e last t@o years B18++-+6C# t e minor !l%ct%ations in t e rate o! interest, @ ic arise !rom an alteration in t e D%antity o! money, are small bot in extent and in d%ration0 5 ey are !reD%ent, and t e more rapid and !reD%ent t ey are, t e more e!!ect%al t ey are !or accomplis ing t eir destined p%rposeL, @ ic is to enric bankers like 38erstone0 Friend $am%el :%rney expresses it 8ery nai8ely be!ore t e ;ommittee o! 'ords, ;0 70 1828 /18+>1: K13<20 7o yo% t ink t at t e great !l%ct%ations in t e rate o! interest @ ic a8e taken place in t e last year are ad8antageo%s or not to bankers or dealers in moneyQ I & t ink t ey are ad8antageo%s to dealers in money0 ?ll !l%ct%ations in trade are ad8antageo%s to t e kno@ing man0L K13<+0 May not t e banker s%!!er e8ent%ally !rom t e ig rates o! interest, by impo8eris ing is best c%stomersQ I -o# & do not t ink it as t at e!!ect perceptibly0L I Loil. ce 3ue parler veut dire. /5 is is @ at ad to be said0 I 0d01 We s all e8ent%ally ret%rn to t e in!l%ence o! t e D%antity o! a8ailable money on t e rate o! interest0 A%t it is to be noted rig t ere t at 38erstone again makes a 3uid pro 3uo. 5 e demand !or money-capital in 182> Bbe!ore 3ctober t ere @as no anxiety o8er money stringency, or t e KD%antity o! money,L as e called itC increased !or 8ario%s reasons, s%c as rising prices !or corn and cotton, lack o! b%yers o! s%gar d%e to o8er-prod%ction, rail@ay spec%lation and t e cras , o8ercro@ding o! !oreign markets @it cotton goods, and t e !orced export to, and import !rom, &ndia !or t e p%rpose o! spec%lation in bills o! exc ange, @ ic @as described abo8e0 ?ll t ese t ings, o8er-prod%ction in ind%stry and %nderprod%ction in agric%lt%re I in ot er @ords, greatly di!!ering ca%ses I ga8e rise to an increased demand !or money-capital, i.e., !or credit and money0 5 e increased demand !or money-capital ad its origin in t e co%rse o! t e prod%cti8e process itsel!0 A%t @ ate8er may a8e been t e ca%se, it @as t e demand !or money1capital @ ic made t e interest rate, t e 8al%e o! money-capital, climb0 &! 38erstone means to say t at t e 8al%e o! money-capital rose because it rose, t en it is ta%tology0 A%t i!, by K8al%e o! capital,L e means a rise in t e rate o! pro!it as t e ca%se o! t e rise in t e rate o! interest, @e s all immediately see

<8*

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t at t is is @rong0 5 e demand !or money-capital, and conseD%ently t e K8al%e o! capital,L may rise e8en t o%g t e pro!it may decrease# as soon as t e relati8e s%pply o! money-capital s rinks, its K8al%eL increases0 W at 38erstone @is ed to pro8e is t at t e crisis o! 182>, and t e attendant ig interest rate, ad not ing to do @it t e KD%antity o! money,L i.e.,@it t e reg%lations o! t e Aank ?ct o! 1822 @ ic e ad inspired# alt o%g it @as, indeed, connected @it t em, inasm%c as t e !ear o! ex a%sting t e bank reser8e I a creation o! 38erstone I contrib%ted a money panic to t e crisis o! 182>-280 A%t t is is not t e iss%e ere0 5 ere @as a deart o! money-capital, ca%sed by t e excessi8e 8ol%me o! operations compared to t e a8ailable means and precipitated by t e dist%rbance in t e reprod%ction process d%e to a crop !ail%re, o8er-in8estment in rail@ays, o8er-prod%ction, partic%larly o! cotton goods, s@indling operations in trade @it &ndia and ; ina, spec%lation, s%per!l%o%s s%gar imports, etc0 W at t e people, @ o ad bo%g t corn at 1<= s illings per D%arter, lacked @ en it !ell to 6= s illings, @ere t e 6= s illings @ ic t ey ad o8erpaid and t e corresponding credit !or t at amo%nt in 'ombard $treet ad8ances on t e corn0 &t @as by no means a lack o! bank-notes t at pre8ented t em !rom con8erting t eir corn into money at its old price o! 1<= s illings0 5 e same applied to t ose @ o ad imported an excess o! s%gar, @ ic became almost %nsaleable0 &t applied like@ise to t e gentlemen @ o ad tied %p t eir !loating capital in rail@ays and relied on credit to replace it in t eir KlegitimateL b%siness0 5o 38erstone all t is signi!ies a Kmoral sense o! t e en anced 8al%e o! is money0L A%t t is en anced 8al%e o! money-capital corresponded directly on t e ot er and to t e depreciated money-8al%e o! real capital Bcommodity-capital and prod%cti8e capitalC0 5 e 8al%e o! capital in t e one !orm rose beca%se t e 8al%e o! capital in t e ot er !ell0 38erstone, o@e8er, seeks to identi!y t ese t@o 8al%es o! di!!erent sorts o! capital in a single 8al%e o! capital in general, and e tries to do so by opposing bot o! t em to a scarcity o! t e medi%m o! circ%lation, o! a8ailable money0 A%t t e same amo%nt o! money-capital may be loaned @it 8ery di!!erent D%antities o! t e circ%lation medi%m0 5ake is example o! 182>0 5 e o!!icial bank-rate stood at 3 to 3ZT in Pan%ary# 2 to 2ZT in Febr%ary0 &n Marc it @as generally 2T0 ?pril BpanicC 2 to >ZT0 May + to +ZT, P%ne, on t e @ ole, +T0 P%ly +T0 ?%g%st + to +ZT0 $eptember +T @it tri!ling 8ariations o! +[, +Z, 6T0 3ctober +, +Z, >T0 -o8ember >-1=T0 7ecember > to +T0 I &n t is case t e interest rose beca%se pro!its decreased and t e money-8al%es o! commodities !ell enormo%sly0 &!, t ere!ore, 38erstone says ere t at t e rate o! interest rose in 182> beca%se t e 8al%e o! capital rose, e cannot mean anyt ing by 8al%e o! capital b%t t e 8al%e o! money-capital, and t e 8al%e o! money-capital is t e rate o! interest, and not ing else0 A%t later e s o@ed t e clo8en oo! and identi!ied t e 8al%e o! capital @it t e rate o! pro!it0 ?s !or t e ig rate o! interest paid in 18+6, 38erstone @as indeed ignorant o! t e !act t at t is @as partially a symptom t at t e credit Hobbers @ere coming to t e !ore, @ o paid interest not !rom t eir pro!it, b%t @it t e capital o! ot ers# e maintained H%st a !e@ mont s be!ore t e crisis o! 18+> t at Kb%siness is D%ite so%nd0L 6e testi!ied !%rt ermore: /A0;0 18+>1 K3><<0 5 at idea o! t e pro!its o! trade being destroyed by a rise in t e rate o! interest is most erroneo%s0 &n t e !irst place, a rise in t e rate o! interest is seldom o! any long d%ration# in t e second place, i! it is o! long d%ration, and o! great extent, it is really a rise in t e 8al%e o! capital, and @ y does

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8al%e o! capital riseQ Aeca%se t e rate o! pro!it is increased0L 6ere, t en, @e learn, at last, @ at t e meaning o! K8al%e o! capitalL is0 F%rt ermore, t e rate o! pro!it may be ig !or a lengt y period, and yet t e pro!it o! enterprise may !all and t e rate o! interest rise to a point @ ere it s@allo@s t e greater portion o! t e pro!it0 K3><20 5 e rise in t e rate o! interest as been in conseD%ence o! t e great increase in t e trade o! t e co%ntry, and t e great rise in t e rate o! pro!its# and to complain o! t e rise in t e rate o! interest as being destr%cti8e o! t e t@o t ings, @ ic a8e been its o@n ca%se, is a sort o! logical abs%rdity, @ ic one does not kno@ o@ to deal @it 0L 5 is is H%st as logical as i! e @ere to say: 5 e rise in t e rate o! pro!it as been in conseD%ence o! t e rise in commodity-prices by spec%lation, and to complain t at t e rise in prices destroys its o@n ca%se, namely, spec%lation, is a logical abs%rdity, etc0 5 at anyt ing can %ltimately destroy its o@n ca%se is a logical abs%rdity only !or t e %s%rer enamo%red o! t e ig interest rate0 5 e greatness o! t e )omans @as t e ca%se o! t eir conD%ests, and t eir conD%ests destroyed t eir greatness0 Wealt is t e ca%se o! l%x%ry and l%x%ry as a destr%cti8e e!!ect on @ealt 0 5 e @iseacreS 5 e idiocy o! t e present-day bo%rgeois @orld cannot be better described t an by t e respect, @ ic t e KlogicL o! t e millionaire I t e d%ng ill aristocrat I inspired in all England0 F%rt ermore, i! a ig rate o! pro!it and an expansion o! b%siness may be ca%ses o! a ig interest rate, a ig rate o! interest is by no means t ere!ore a ca%se o! ig pro!it0 5 e D%estion is precisely @ et er s%c a ig interest Bas @as act%ally disco8ered d%ring t e crisisC contin%ed or, @ at is more, reac ed its climax a!ter t e ig rate o! pro!it ad long gone t e @ay o! all !les 0 K3>180 Wit regard to a great rise in t e rate o! disco%nt, t at is a circ%mstance entirely arising !rom t e increased 8al%e o! capital, and t e ca%se o! t at increased 8al%e o! capital & t ink any person may disco8er @it per!ect clearness0 & a8e already all%ded to t e !act t at d%ring t e 13 years t is ?ct as been in operation, t e trade o! t is co%ntry as increased !rom V2+,===,=== to V1<=,===,===0 'et any person re!lect %pon all t e e8ents @ ic are in8ol8ed in t at s ort statement# let im consider t e enormo%s demand %pon capital !or t e p%rpose o! carrying on s%c a gigantic increase o! trade, and let im consider at t e same time t at t e nat%ral so%rce !rom @ ic t at great demand s o%ld be s%pplied, namely, t e ann%al sa8ings o! t is co%ntry, as !or t e last t ree or

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!o%r years been cons%med in t e %npro!itable expendit%re o! @ar0 & con!ess t at my s%rprise is, t at t e rate o! interest is not m%c ig er t an it is# or, in ot er @ords, my s%rprise is, t at t e press%re !or capital to carry on t ese gigantic operations, is not !ar more stringent t an yo% a8e !o%nd it to be0L W at an amaEing H%mble o! @ords by o%r logician o! %s%ryS 6ere e comes again @it is increased 8al%e o! capitalS 6e seems to t ink t at t is enormo%s expansion o! t e reprod%ction process, ence acc%m%lation o! real capital, took place on one side, and t at on t e ot er t ere existed a KcapitalL, !or @ ic t ere arose an Kenormo%s demandL, in order to accomplis t is gigantic increase o! commerceS Was not t is enormo%s increase o! prod%ction an increase o! capital itsel!, and i! it created a demand, did it not also create t e s%pply, and, sim%ltaneo%sly, an increased s%pply o! money-capitalQ &! t e interest rate rose 8ery ig , t en merely beca%se t e demand !or money-capital increased still more rapidly t an its s%pply, @ ic implies, in ot er @ords, t at @it t e expansion o! ind%strial prod%ction its operation on a credit basis expanded as @ell0 5 at is to say, t e act%al ind%strial expansion ca%sed an increased demand !or Kaccommodation,L and t e latter demand is e8idently @ at o%r banker means by t e Kenormo%s demand !or capital0L &t @as s%rely not t e expansion o! t is demand !or capital alone, @ ic raised t e export b%siness !rom V2+ to V1<= million0 ?nd !%rt ermore, @ at does 38erstone mean @ en e says t at t e co%ntry"s ann%al sa8ings s@allo@ed by t e ;rimean War !orm t e nat%ral so%rce o! s%pply !or t is big demandQ in t e !irst place, o@ did England ac ie8e acc%m%lation in 1>*<-181+, @ ic @as a !ar di!!erent @ar !rom t e little ;rimean oneQ &n t e second place, i! t e nat%ral so%rce @as dry, !rom @ at so%rce did capital !lo@ at allQ &t is @ell kno@n t at England did not reD%est loans !rom !oreign co%ntries0 .et i! t ere is an arti!icial so%rce besides t e nat%ral one, it @o%ld a8e been best !or a nation to %tilise t e nat%ral so%rce in @ar and t e arti!icial one in b%siness0 A%t i! only t e old money-capital @as a8ailable, co%ld it do%ble its e!!ecti8eness t ro%g a ig rate o! interestQ Mr0 38erstone e8idently t inks t at t e co%ntry"s ann%al sa8ings B@ ic , o@e8er, @ere s%pposed to a8e been cons%med in t is caseC are con8erted only into money-capital0 A%t i! no real acc%m%lation, i.e., expansion o! prod%ction and a%gmentation o! t e means o! prod%ction, ad taken place, @ at good @o%ld t ere be !rom t e acc%m%lation o! debtor"s money claims on t is prod%ctionQ 5 e increase in t e K8al%e o! capitalL springing !rom a ig rate o! pro!it is identi!ied by 38erstone @it an increase ca%sed by a greater demand !or money-capital0 5 is demand may climb !or reasons D%ite independent o! t e rate o! pro!it0 6e imsel! cites t e example o! its rise in 182> as a res%lt o! t e depreciation o! real capital0 7epending on @ at s%its is p%rpose, e ascribes t e 8al%e o! capital to real capital or money-capital0 5 e dis onesty o! o%r banking lord, and is narro@-minded banker"s point o! 8ie@ @it its didactic !la8o%ring are !%rt er re8ealed in t e !ollo@ing: B3><80 M%estion:C K.o% a8e stated t at t e rate o! disco%nt is o! no material moment yo% t ink to t e merc ant# @ill yo% be kind eno%g to state @ at yo% consider t e ordinary rate o! pro!itQL Mr0 38erstone declares t at it is KimpossibleL to ans@er t is D%estion0

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K3><*0 $%pposing t e a8erage rate o! pro!it to be, say, !rom > to 1=T, a 8ariation o! !rom < to > or 8T in t e rate o! disco%nt m%st materially a!!ect t e rate o! pro!it, m%st it notQ K B5 is D%estion itsel! l%mps toget er t e rate o! pro!it o! enterprise @it t e rate o! pro!it, and0 passes o8er t e !act t at t e rate o! pro!it is t e common so%rce o! interest and pro!it o! enterprise0 5 e interest rate may lea8e t e rate o! pro!it %nto%c ed, b%t not t e pro!it o! enterprise0 38erstone replied:C K&n t e !irst place parties @ill not pay a rate o! disco%nt @ ic serio%sly interr%pts t eir pro!its# t ey @ill discontin%e t eir b%siness rat er t an do t at0L B.es, i! t ey can do so @it o%t r%ining t emsel8es0 $o long as t eir pro!it is ig , t ey pay t e disco%nt beca%se t ey @is to, and @ en it is lo@, beca%se t ey a8e to0C KW at is t e meaning o! disco%ntQ W y does a person disco%nt a billQ 000 Aeca%se e @ants to obtain t e command o! a greater D%antity o! capital0L B(alte1l.R beca%se e @ants to anticipate t e ret%rn in money o! is tied-%p capital and to pre8ent is b%siness !rom stopping# beca%se e m%st meet payments d%e0 6e demands more capital only @ en b%siness is good, or @ en e spec%lates on anot er"s capital, t o%g b%siness may be bad0 5 e disco%nt is by no means simply a de8ice to expand b%siness0C K?nd @ y does e @ant to obtain t e command o! a greater D%antity o! capitalQ Aeca%se e @ants to employ t at capital# and @ y does e @ant to employ t at capitalQ Aeca%se it is pro!itable to im to do so# it @o%ld not be pro!itable to im to do so i! t e disco%nt destroyed is pro!it0L 5 is sm%g logician ass%mes t at bills o! exc ange are disco%nted only !or t e p%rpose o! expanding b%siness, and t at b%siness is expanded beca%se it is pro!itable0 5 e !irst ass%mption is @rong0 5 e ordinary b%sinessman disco%nts, in order to anticipate t e money-!orm o! is capital and t ereby to keep is process o! reprod%ction in !lo@# not in order to expand is b%siness or sec%re additional capital, b%t in order to balance t e credit e gi8es by t e credit e recei8es0 ?nd i! e @ants to expand is b%siness on credit, disco%nting bills @ill do im little good beca%se it is merely con8ersion o! t e money-capital @ ic e already as in is ands !rom one !orm into anot er# e @ill rat er take a direct loan !or a longer period0 5 e credit s@indler @ill get is accommodation bills disco%nted to expand is b%siness acti8ity, to co8er one sD%alid b%siness deal by anot er# not to make pro!its b%t to obtain possession o! anot er"s capital0 ?!ter Mr0 38erstone as t %s identi!ied disco%nting @it borro@ing additional capital Binstead o! @it con8erting bills representing capital into ard cas C, e beats an instant retreat as soon as t e scre@s are applied to im0 B3>3=0 M%estion:C KMerc ants being engaged in b%siness, m%st t ey not !or a certain period carry on

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t eir operations in despite o! any temporary increase in t e rate o! disco%ntQL I B38erstone:C K5 ere is no do%bt t at in any partic%lar transaction, i! a person can get is command o! capital at a lo@ rate o! interest rat er t an at a ig rate o! interest, taken in t at limited 8ie@ o! t e matter, t at is con8enient to im0L A%t it is a 8ery %nlimited point o! 8ie@, on t e ot er and, @ ic enables Mr0 38erstone D%ite s%ddenly to %nderstand only is, banker"s capital, as Kcapital,L and to ass%me t at t e man @ o disco%nts a bill o! exc ange @it im is a man @it o%t capital, H%st beca%se is capital exists in t e !orm o! commodities, or beca%se t e money-!orm o! is capital is a bill o! exc ange, @ ic Mr0 38erstone con8erts into anot er money-!orm0 3>3<0 KWit re!erence to t e ?ct o! 1822, can yo% state @ at as been abo%t t e a8erage rate o! interest in proportion to t e amo%nt o! b%llion in t e Aank# @o%ld it be a !act t at @ en t e amo%nt o! b%llion as been abo%t V*,===,=== or V1=,===,=== t e rate o! interest as been 6 or > per cent, and t at @ en it as been V16,===,===, t e rate o! interest as been, say, !rom 3 to 2 per centQL B5 e examiner @is es to press im to explain t e rate o! interest, so !ar as it is in!l%enced by t e amo%nt o! b%llion in t e Aank, on t e basis o! t e rate o! interest, so !ar as it is in!l%enced by t e 8al%e o! capital0C K& do not appre end t at t at is so000 b%t i! it is, t en & t ink @e m%st take still more stringent meas%res t an t ose adopted by t e ?ct o! 1822, beca%se i! it be tr%e t at t e greater t e store o! b%llion, t e lo@er t e rate o! interest, @e o%g t to set to @ork, according to t at 8ie@ o! t e matter, to increase t e store o! b%llion to an inde!inite amo%nt, and t en @e s o%ld get t e interest do@n to not ing0L 5 e examiner, ;ayley, %nmo8ed by t is poor Hoke, contin%es: K3>330 &! t at be so, s%pposing t at V+,===,=== o! b%llion @as to be restored to t e Aank, in t e co%rse o! t e next six mont s t e b%llion t en @o%ld amo%nt, say, to V16,===,===, and s%pposing t at t e rate o! interest @as t %s to !all to 3 or 2 per cent, o@ co%ld

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it be stated t at t at !all in t e rate o! interest arose !rom a great decrease o! t e trade o! t e co%ntryQ I & said t at t e recent rise in t e rate o! interest, not t at t e !all in t e rate o! interest, @as closely connected @it t e great increase in t e trade o! t e co%ntry0L A%t @ at ;ayley says is t is: &! a rise o! interest rate toget er @it a contraction o! t e gold reser8e, is an indication o! an expansion in b%siness, t en a !all o! t e interest rate toget er @it an expansion o! t e gold reser8e, m%st be an indication o! a contraction o! b%siness0 38erstone as no ans@er to t is0 B3>360 M%estion:C K& obser8ed yo%L Bin t e text al@ays K.o%r 'ords ipLC Kto say t at money @as t e instr%ment !or obtaining capital0L B,recisely t is is t e mistake, to concei8e money as an instr%ment# it is a !orm o! capital0C K(nder a drain o! b%llion Bo! t e Aank o! EnglandC is not t e great strain, on t e contrary, !or capitalists to obtain moneyQL I B38erstone:C K-o, it is not t e capitalists, it is t ose @ o are not capitalists, @ o @ant to obtain money and @ y do t ey @ant to obtain moneyQ 000 Aeca%se t ro%g t e money t ey obtain t e command o! t e capital o! t e capitalist to carry on t e b%siness o! t e persons @ o are not capitalists0L 6ere e declares point-blank t at man%!act%rers and merc ants are not capitalists, and t at t e capitalist"s capital is only money-capital0 K3>3>0 ?re not t e parties @ o dra@ bills o! exc ange capitalistsQ I 5 e parties @ o dra@ bills o! exc ange may be, and may not be, capitalists0L 6ere e is st%ck0 6e is t en asked @ et er merc ants" bills o! exc ange represent commodities @ ic a8e been sold or s ipped0 6e denies t at t ese bills represent t e 8al%e o! commodities in t e same @ay t at a bank-note represents gold0 B3>2=, 3>210C 5 is is some@ at insolent0 K3>2<0 &s it not t e merc ant"s obHect to get moneyQ I -o# getting money is not t e obHect in dra@ing t e bill# getting money is t e obHect in disco%nting t e bill0L 7ra@ing bills o! exc ange is con8erting commodities into a !orm o! credit-money, H%st as disco%nting bills o! exc ange is con8erting t is credit-money into anot er, namely bank-notes0 ?t any rate, Mr0 38erstone admits ere t at t e p%rpose o! disco%nting is to obtain money0 ? @ ile ago e said t at disco%nting @as a @ay not o! con8erting capital !rom one !orm into anot er, b%t o! obtaining additional capital0

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K3>230 W at is t e great desire o! t e mercantile comm%nity %nder press%re o! panic, s%c as yo% state to a8e occ%rred in 18<+, 183> and 183*# is t eir obHect to get possession o! capital or t e legal tenderQ I 5 eir obHect is to get t e command o! capital to s%pport t eir b%siness0L 5 eir p%rpose is to obtain means o! payment !or d%e bills o! exc ange on t emsel8es, on acco%nt o! t e pre8ailing lack o! credit, so t at t ey @ill not a8e to let t eir commodities go belo@ price0 &! t ey a8e no capital at all t emsel8es, t ey recei8e it along @it t e means o! payment, beca%se t ey recei8e 8al%e @it o%t an eD%i8alent0 5 e %rge to obtain money as s%c consists al@ays in t e @is to con8ert 8al%e !rom t e !orm o! commodities or creditor"s claims into t e !orm o! money0 6ence, e8en aside !rom t e crises, t e great di!!erence bet@een borro@ing capital and disco%nt, t e latter being a mere con8ersion o! money claims !rom one !orm into anot er, or into real money0 /& take t e liberty at t is point in my capacity o! editor to interpolate a !e@ remarks0 Wit respect to -orman, as @ell as 'oyd-38erstone, t e banker is al@ays t e one @ o Kad8ances capitalL to ot ers, and is c%stomers are t ose @ o demand KcapitalL !rom im0 5 %s, 38erstone says t at people a8e bills o! exc ange disco%nted t ro%g im, Kbeca%se t ey @is to obtain t e command o!capitalL B3><*C, and t at it is pleasant !or s%c people i! t ey can Kget command of capital at a lo@ rate o! interestL B3>3=C0 KMoney is t e instr%ment !or obtaining capitalL B3>36C, and d%ring a panic t e great desire o! t e mercantile comm%nity is to Kget t e command o! capitalL B3>23C0 For all o! 'oyd-38erstone"s con!%sion o8er @ at capital is, it is at least clear t at e designates @ at t e banker gi8es to is client as capital, as a capital @ ic t e client did not !ormerly possess, b%t @ ic @as ad8anced to im to s%pplement @ at e already possessed0 5 e banker as become so acc%stomed to act as distrib%tor Bt ro%g loansC o! t e social capital a8ailable in money-!orm t at e considers e8ery !%nction @ ereby e ands o%t money, as loaning0 ?ll t e money e pays o%t appears to im as a loan0 &! t e money is directly loaned, t is is literally tr%e0 &! it is in8ested in t e bill-disco%nting b%siness, it is in !act ad8anced by imsel! %ntil t e bill becomes d%e0 5 e notion t %s gro@s on im t at all t e payments e makes are ad8ances# !%rt ermore, t at t ey are ad8ances not merely in t e sense t at e8ery in8estment o! money @it t e obHect o! deri8ing interest or pro!it, is economically considered an ad8ance o! money @ ic t e o@ner o! money concerned, in is capacity o! pri8ate indi8id%al, makes to imsel! in is capacity as entreprene%r, b%t ad8ances in t e de!inite sense t at t e banker lends is client a s%m o! money @ ic a%gments t e capital already at t e latter"s disposal0 &t is t is conception, @ ic , trans!erred !rom t e banker"s o!!ice to political economy, as created t e con!%sing contro8ersy, @ et er t at @ ic t e banker places at is client"s disposal in ard cas is capital or mere money, a medi%m o! circ%lation, or c%rrency0 5o decide t is I !%ndamentally simple I contro8ersy, @e m%st p%t o%rsel8es in t e place o! a bank client0 &t all depends on @ at t is c%stomer reD%ests and recei8es0 &! t e bank allo@s its client a loan simply on is personal credit, @it o%t any sec%rity on is part, t en t e matter is clear0 6e t en certainly recei8es an ad8ance o! de!inite 8al%e as a s%pplement to t e capital e as already in8ested0 6e recei8es it in t e !orm o! money# ence, not merely money, b%t also money- capital. &!, on t e ot er and, e recei8es t e ad8ance against sec%rities, etc0, t en it is an ad8ance in t e sense o! money paid to im on condition t at e pay it back0 A%t it is not an ad8ance o! capital0 For t e sec%rities also represent capital, and a larger amo%nt at t at t an t e ad8ance0 5 e recipient t ere!ore recei8es less capital-8al%e t an e deposits as sec%rity# t is represents !or im

<*6

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no acD%isition o! additional capital0 6e does not enter into t e transaction beca%se e needs capital I e as t at in is sec%rities I b%t beca%se e needs money0 6ere @e, t ere!ore, a8e an ad8ance o! money, not o! capital0 &! t e loan is granted by disco%nting bills, t en e8en t e form o! an ad8ance disappears0 5 en it is p%rely a matter o! b%ying and selling0 5 e bill passes by endorsement into t e possession o! t e bank, @ ile t e money passes into t e possession o! t e client0 5 ere is no D%estion o! any ret%rn payment on is part0 &! t e client b%ys ard cas @it a bill o! exc ange or some similar instr%ment o! credit, it is no more and no less an ad8ance t an @ere e to b%y cas money @it is ot er commodities, s%c as cotton, iron, or corn0 $till less can t is be called an ad8ance o! capital. E8ery p%rc ase and sale bet@een one merc ant and anot er is a trans!er o! capital0 A%t an ad8ance o! capital occ%rs only @ en t e trans!er o! capital is not reciprocal, b%t %nilateral and !or a period o! time0 ?n ad8ance o! capital t ro%g disco%nt can, t ere!ore, only occ%r @ en a bill is a spec%lati8e one, @ ic does not represent any sold commodities, and no banker @ill take s%c a bill i! e is a@are o! its nat%re0 &n t e reg%lar disco%nting b%siness t e bank client does not, t ere!ore, recei8e an ad8ance, eit er o! capital or o! money0 W at e recei8es is money !or sold commodities0 5 e cases in @ ic t e c%stomer demands and recei8es capital !rom a bank are t %s clearly disting%is ed !rom t ose, in @ ic e merely recei8es an ad8ance o! money, or b%ys money !rom t e bank0 ?nd since least o! all Mr0 'oyd-38erstone e8er ad8anced is !%nds @it o%t collateral except on t e rarest occasions B e @as t e banker o! my !irm in Manc esterC, it is like@ise e8ident t at is lyric descriptions o! t e great D%antities o! capital loaned by genero%s bankers to man%!act%rers in need o! capital are gross in8entions0 Ay t e @ay, in ; apter JJJ&& Marx says essentially t e same t ing: K5 e demand !or means o! payment is a mere demand !or convertibility into money, so !ar as merc ants and prod%cers a8e good sec%rities to o!!er# it is a demand !or money1capital @ ene8er t ere is no collateral, so t at an ad8ance o! means o! payment gi8es t em not only t e form of money b%t also t e e3uivalent t ey lack, @ ate8er its !orm, @it @ ic to make payment0L I ?nd again in ; apter JJJ&&&: K(nder a de8eloped system o! credit, @it t e money concentrated in t e ands o! bankers, it is t ey, at least nominally,@ o ad8ance it0 5 is ad8ance re!ers only to money in circ%lation0 &t is an ad8ance o! circulation, not an ad8ance o! capitals @ ic it circ%lates0L Mr0 ; apman, @ o s o%ld kno@, like@ise corroborates t is conception o! t e disco%nting b%siness: A0 ;0 18+>: K5 e banker as t e bill, t e banker as bought the bill./E8id0 M%estion +13*0 We s all, o@e8er, ret%rn to t is s%bHect in ; apter JJ4&&&0 I '. 0.1 K3>220 Will yo% be good eno%g to describe @ at yo% act%ally mean by t e term fcapitalGQL I B38erstone:C K;apital consists o! 8ario%s commodities, by means o! @ ic trade is carried on# t ere is !ixed capital and t ere is circ%lating capital0 .o%r s ips, yo%r docks, yo%r @ ar8es 000 are !ixed capital# yo%r pro8isions, yo%r clot es, etc0, are circ%lating capital0L K3>2+0 &s t e co%ntry oppressed %nder a drain o! b%llionQ I -ot in t e rational sense o! t e @ord0L B5 en comes t e old )icardian t eory o! money0C

<*>

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K&n t e nat%ral state o! t ings t e money o! t e @orld is distrib%ted amongst t e di!!erent co%ntries o! t e @orld in certain proportions, t ose proportions being s%c t at %nder t at distrib%tion Bo! moneyC t e interco%rse bet@een any one co%ntry and all t e ot er co%ntries o! t e @orld Hointly @ill be an interco%rse o! barter# b%t dist%rbing circ%mstances @ill arise to a!!ect t at distrib%tion, and @ en t ose arise, a certain portion o! t e money o! any gi8en co%ntry passes to ot er co%ntries0L I K3>260 .o%r 'ords ip no@ %ses t e term fmoney0G & %nderstood yo% be!ore to say t at it @as a loss o! capital0 I 5 at @ at @as a loss o! capitalQL I K3>2>0 5 e export o! b%llionQ I -o, & did not say so0 &! yo% treat b%llion as capital, no do%bt it is a loss o! capital# it is parting @it a certain proportion o! t ose precio%s metals @ ic constit%te t e money o! t e @orld0L I K3>280 & %nderstood .o%r 'ords ip to say t at an alteration in t e rate o! disco%nt @as a mere sign o! an alteration in t e 8al%e o! capitalQ I & did0L I K3>2*0 ?nd t at t e rate o! disco%nt generally alters @it t e state o! t e store o! b%llion in t e Aank o! EnglandQ I .es, b%t & a8e already stated t at t e !l%ct%ations in t e rate o! interest, @ ic arise !rom an alteration in t e D%antity o! moneyL B@ at t ere!ore means existing goldC Kin a co%ntry, are 8ery small0L K3>+=0 5 en, does .o%r 'ords ip mean t at t ere is a less capital t an t ere @as, @ en t ere is a more contin%o%s yet temporary increase in t e rate o! disco%nt t an %s%alQ I 'ess, in one sense o! t e @ord0 5 e proportion bet@een capital and t e demand !or it is altered# it may be by an increased demand, not by a dimin%tion o! t e D%antity o! capital0L BA%t a moment ago it @as capital R money or gold, and a little be!ore t at e ad explained t e rise in interest rate by a ig rate o! pro!it, d%e to an expansion rat er t an a contraction o! b%siness or capital0C e ere is t e D%antity o! act%ally

<*8

; apter JJ4&

K3>+10 W at is t e capital @ ic

yo% partic%larly

all%de toQ I 5 at depends entirely %pon @ at t e capital is @ ic eac person @ants0 &t is t e capital @ ic t e co%ntry as at its command !or cond%cting its b%siness, and @ en t at b%siness is do%bled, t ere m%st be a great increase in t e demand !or t e capital @it @ ic it is to be carried on0L B5 is s re@d banker do%bles !irst t e b%siness acti8ity and t en t e demand !or capital @it @ ic it is to be do%bled0 ?ll e sees is is client, @ o asks Mr0 'oyd !or more capital by @ ic to do%ble t e 8ol%me o! is b%siness0C K;apital is like any ot er commodityL Bb%t according to Mr0 'oyd capital is not ing b%t t e totality o! commoditiesC, Kit @ill 8ary in its priceL B ence, commodities c ange t eir price t@ice, one time as commodities and t e second as capitalC, Kaccording to t e s%pply and demand0L K3>+<0 5 e c anges in t e rate o! disco%nt are generally connected @it t e c anges in t e amo%nt o! gold @ ic t ere is in t e co!!ers o! t e Aank0 &s it t at capital to @ ic .o%r 'ords ip re!ersQ I -o0L I K3>+30 ;an .o%r 'ords ip point to any instance in @ ic t ere as been a large store o! capital in t e Aank o! England connected @it a ig rate o! disco%ntQ I 5 e Aank o! England is not a place !or t e deposit o! capital, it is a place !or t e deposit o! money0L I K3>+20 .o%r 'ords ip as stated t at t e rate o! interest depends %pon t e amo%nt o! capital# @ill yo% be kind eno%g to state @ at capital yo% mean, and @ et er yo% can point to any instance in @ ic t ere as been a large store o! b%llion in t e Aank and at t e same time a ig rate o! interestQ I &t is 8ery probable Ba aSC t at t e acc%m%lation o! b%llion in t e Aank may be coincident @it a lo@ rate o! interest, beca%se a period in @ ic diminis ed demand !or capitalL t ere is a

<**

; apter JJ4&

Bnamely, money-capital# t e period to @ ic re!erence is made ere, 1822 and 182+, @as a period o! prosperityC Kis a period, d%ring @ ic , o! co%rse, t e means or instr%ment t ro%g @ ic yo% command capital may acc%m%late0L I K3>++0 5 en yo% t ink t at t ere is no connection bet@een t e rate o! disco%nt and t e amo%nt o! b%llion in t e co!!ers o! t e AankQ I 5 ere may be a connection, b%t it is not a connection o! principleL B is Aank ?ct o! 1822, o@e8er, made it a principle o! t e Aank o! England to reg%late t e interest rate by t e D%antity o! b%llion in its possessionC, Kt ere may be a coincidence o! time0L I K3>+80 7o & rig tly %nderstand yo% to say, t at t e di!!ic%lty o! merc ants in t is co%ntry, %nder a state o! press%re, in conseD%ence o! a ig rate o! disco%nt, is in getting capital, and not in getting moneyQ I .o% are p%tting t@o t ings toget er @ ic & do not Hoin in t at !orm# t eir di!!ic%lty is in getting capital, and t eir di!!ic%lty also is in getting money0000 5 e di!!ic%lty o! getting money and t e di!!ic%lty o! getting capital is t e same di!!ic%lty taken in t@o s%ccessi8e stages o! its progress0L

6ere t e !is is ca%g t in t e net again0 5 e !irst di!!ic%lty is to disco%nt a bill o! exc ange,
or to obtain a loan against t e sec%rity o! commodities0 &t is t e di!!ic%lty o! con8erting capital, or a commercial token o! capital into money0 ?nd t is di!!ic%lty is mani!ested, among ot er t ings, in a ig rate o! interest0 A%t as soon as t e money is obtained, @ at is t e second di!!ic%ltyQ 7oes anyone e8er !ind any di!!ic%lty in getting rid o! is money @ en it is merely a matter o! payingQ ?nd i! it is a matter o! b%ying, as anyone e8er ad any di!!ic%lty in p%rc asing d%ring times o! crisisQ ?nd, !or t e sake o! arg%ment, s o%ld t is re!er to a speci!ic deart in corn, cotton, etc0, t is di!!ic%lty co%ld only appear in t e price o! t ese commodities, not in t e 8al%e o! money-capital, i0e0, not in t e rate o! interest# and t is di!!ic%lty is o8ercome, in t e !inal analysis, by t e !act t at o%r man no@ as t e money to b%y t em0 K3>6=0 A%t a ig er rate o! disco%nt is an increased di!!ic%lty o! getting moneyQ I &t is an increased di!!ic%lty o! getting money, b%t it is not beca%se yo% @ant to a8e t e money# it is only t e !ormL Band t is !orm brings pro!it into t e banker"s pocketC Kin @ ic t e increased di!!ic%lty o! getting capital presents

3==

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itsel! according to t e complicated relations o! a ci8ilised state0L K3>630 B38erstone"s reply:C 5 e banker is t e gobet@een @ o recei8es deposits on t e one side, and on t e ot er applies t ose deposits, entr%sting t em, in the form of capital, to t e ands o! persons, @ o, etc0L ?t last @e a8e @ at e means by capital0 6e con8erts money into capital by Kentr%stingL it, less e%p emistically, by loaning it at interest0 ?!ter Mr0 38erstone as stated t at a c ange in t e rate o! disco%nt is not essentially connected @it a c ange in D%antity o! t e gold reser8e in a bank, or in t e D%antity o! a8ailable money, b%t t at t ere is at best only a coincidence in time, e repeats: K38=+0 W en t e money in t e co%ntry is diminis ed by a drain, its 8al%e increases, and t e Aank o! England m%st con!orm to t at alteration in t e 8al%e o! moneyL B ence, t e 8al%e o! money as capitalP in ot er @ords, t e rate o! interest, !or t e 8al%e o! money as money, compared @it commodities, remains t e sameC, K@ ic is meant by t e tec nical term o! raising t e rate o! interest0L K381*0 & ne8er con!o%nd t ose t@o0L Meaning money and capital, and !or t e simple reason t at e ne8er di!!erentiated bet@een t em0 K38320 5 e 8ery large s%m, @ ic ad to be paidL B!or corn in 182>C, K@ ic @as in point of fact capital, !or t e s%pply o! t e necessary pro8isions o! t e co%ntry0L K38210 5 e 8ariations in t e rate o! disco%nt a8e no do%bt a 8ery close relation to t e state o! t e reser8e K Bo! t e Aank o! EnglandC, Kbeca%se t e state o! t e reser8e is t e indicator o! t e increase or t e decrease o! t e D%antity o! money in t e co%ntry# and in proportion as t e money in t e co%ntry increases or decreases, t e 8al%e o! t at money @ill increase or decrease, and t e bank-rate o! disco%nt @ill con!orm to t at c ange0L 5 %s, 38erstone admits ere @ at e emp atically denied in -o0 3>++0

3=1

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K382<0 5 ere is an intimate connection bet@een t em0L Meaning t e D%antity o! b%llion in t e iss%e department, on t e one and, and t e reser8e o! notes in t e banking department, on t e ot er0 6ere e explains t e c ange in t e rate o! interest by t e c ange in t e D%antity o! money0 A%t t is statement is @rong0 5 e reser8e may s rink beca%se t e circ%lating money in t e co%ntry increases0 5 is is t e case @ en t e p%blic takes more notes and t e oard o! metal does not decrease0 A%t in s%c case t e interest rate rises, beca%se t en t e banking capital o! t e Aank o! England is limited by t e ?ct o! 18220 A%t e dare not mention t is, beca%se d%e to t is la@ t e t@o departments a8e not ing to do @it one anot er0 K38+*0 ? ig rate o! pro!it @ill al@ays create a great demand !or capital# a great demand !or capital @ill raise t e 8al%e o! it0L 6ere, at last, @e a8e t e connection bet@een a ig rate o! pro!it and a demand !or capital as 38erstone concei8es it0 -o@, a ig rate o! pro!it pre8ailed in, !or example, 1822-2+ in t e cotton ind%stry, beca%se ra@ cotton @as c eap, and remained so, @ ereas t e demand !or cotton goods @as strong0 5 e 8al%e o! capital Band in an earlier statement 38erstone calls capital t at @ ic e8eryone needs in is b%sinessC, in t is case t ere!ore t e 8al%e o! ra@ cotton, @as not increased !or t e man%!act%rer0 5 e ig rate o! pro!it may a8e ind%ced some cotton man%!act%rer to obtain money on credit !or t e p%rpose o! expanding is b%siness0 5 ereby is demand rose !or money-capital, b%t !or not ing else0 K388*0 A%llion may or may not be money, H%st as paper may or may not be a bank-note0L K38*60 7o & correctly %nderstand .o%r 'ords ip t at yo% gi8e %p t e arg%ment, @ ic yo% %sed in 182=, t at t e !l%ct%ations in t e notes o%t o! t e Aank o! England o%g t to con!orm to t e !l%ct%ations in t e amo%nt o! b%llionQ I & gi8e it %p so !ar as t is000 t at no@ @it t e means o! in!ormation @ ic @e possess, t e notes o%t o! t e Aank o! England m%st a8e added to t em t e notes @ ic are in t e banking reser8e o! t e Aank o! England0L 5 is is s%perlati8e0 5 e arbitrary pro8ision t at t e Aank may make o%t as many paper notes as it as gold in t e treas%ry and 12 million more, implies, o! co%rse, t at its iss%e o! notes !l%ct%ates @it t e !l%ct%ations o! t e gold reser8e0 A%t since t e present Kmeans o! in!ormation @ ic @e possessL clearly s o@ed t at t e mass o! notes, @ ic t e Aank can t %s man%!act%re Band @ ic t e iss%e department trans!ers to t e banking departmentC I t at t is circ%lation bet@een t e t@o departments o! t e Aank o! England, !l%ct%ating @it t e !l%ct%ations o! t e gold reser8e, does not determine t e !l%ct%ations in t e circ%lation o! bank-notes o%tside t e Aank o! England, t en t e latter I t e real circ%lation I becomes a matter o! indi!!erence to t e bank administration, and t e circ%lation bet@een t e t@o departments o! t e Aank, @ ose di!!erence !rom t e real circ%lation is mirrored in t e reser8e, alone becomes decisi8e0 5o t e o%tside @orld t is internal circ%lation is signi!icant only beca%se t e reser8e indicates o@ close t e Aank is approac ing t e

3=<

; apter JJ4&

legal maxim%m o! its note iss%e, and o@ m%c its clients can still recei8e !rom t e banking department0 5 e !ollo@ing is a brilliant example o! 38erstone"s mala fidesI K2<230 7oes t e D%antity o! capital, do yo% t ink, oscillate !rom mont to mont to s%c a degree as to alter its 8al%e in t e @ay ex ibited o! late years in t e oscillations in t e rate o! disco%ntQ I 5 e relation bet@een t e demand and t e s%pply o! capital may %ndo%btedly !l%ct%ate e8en @it in s ort periods0000 &! France tomorro@ p%t o%t a notice t at s e @is es to borro@ a 8ery large loan, t ere is no do%bt t at it @o%ld immediately ca%se a great alteration in the value of money, t at is to say, in the value of capital, in t is co%ntry0L K2<2+0 &! France anno%nces, t at s e @ants s%ddenly, !or any p%rpose, 3= million"s @ort o! commodities t ere @ill be a great demand !or capital, to %se t e more scienti!ic and t e simpler term0L K2<260 5 e capital, @ ic France @o%ld @is to b%y @it er loan, is one t ing, and t e money @it @ ic s e b%ys it is another, is it t e money, @ ic alters in 8al%e, or notQ I We seem to be re8i8ing t e old D%estion, @ ic & t ink is more !it !or t e c amber o! a st%dent t an !or t is committee room0L ?nd @it t is e retires, b%t not into t e c amber o! a st%dent0 <

Chapter 2$. The Role of Credit in Capitalist Production

5 e general remarks, @ ic t e credit system so !ar elicited !rom %s, @ere t e !ollo@ing: &0 &ts necessary de8elopment to e!!ect t e eD%alisation o! t e rate o! pro!it, or t e mo8ements o! t is eD%alisation, %pon @ ic t e entire capitalist prod%ction rests0 &&0 )ed%ction o! t e costs o! circ%lation0 1C 3ne o! t e principal costs o! circ%lation is money itsel!, being 8al%e in itsel!0 &t is economised t ro%g credit in t ree @ays0 ?0 Ay dropping a@ay entirely in a great many transactions0 A0 Ay t e accelerated circ%lation o! t e circ%lating medi%m0 i8 5 is corresponds in part @it @ at is to be said %nder <C0 3n t e one and, t e acceleration is tec nical# i.e., @it t e same magnit%de and n%mber o! act%al t%rno8ers o! commodities !or cons%mption, a smaller D%antity o! money or money tokens per!orms t e same ser8ice0 5 is is bo%nd %p @it t e tec niD%e o! banking0 3n t e ot er and, credit accelerates t e 8elocity o! t e metamorp oses o! commodities and t ereby t e 8elocity o! money circ%lation0 ;0 $%bstit%tion o! paper !or gold money0 <C ?cceleration, by means o! credit, o! t e indi8id%al p ases o! circ%lation or o! t e metamorp osis o! commodities, later t e metamorp osis o! capital, and @it it an acceleration o! t e process o! reprod%ction in general0 B3n t e ot er and, credit elps to keep t e acts o! b%ying and selling longer apart and ser8es t ereby as a basis !or spec%lation0C ;ontraction o! reser8e !%nds, @ ic may be 8ie@ed in t@o @ays: as a red%ction o! t e circ%lating medi%m, on t e one and, and, on t e ot er, as a red%ction o! t at part o! capital @ ic m%st al@ays exist in t e !orm o! money0 8 &&&0 Formation o! stock companies0 5 ereby: 1C ?n enormo%s expansion o! t e scale o! prod%ction and o! enterprises, t at @as impossible !or indi8id%al capitals0 ?t t e same time, enterprises t at @ere !ormerly go8ernment enterprises, become p%blic0 <C 5 e capital, @ ic in itsel! rests on a social mode o! prod%ction and pres%pposes a social concentration o! means o! prod%ction and labo%r-po@er, is ere directly endo@ed @it t e !orm o! social capital Bcapital o! directly associated indi8id%alsC as distinct !rom pri8ate capital, and its %ndertakings ass%me t e !orm o! social %ndertakings as distinct !rom pri8ate %ndertakings0 &t is t e abolition o! capital as pri8ate property @it in t e !rame@ork o! capitalist prod%ction itsel!0 3C 5rans!ormation o! t e act%ally !%nctioning capitalist into a mere manager, administrator o! ot er people"s capital, and o! t e o@ner o! capital into a mere o@ner, a mere money-capitalist0 E8en i! t e di8idends @ ic t ey recei8e incl%de t e interest and t e pro!it o! enterprise, i.e., t e total pro!it B!or t e salary o! t e manager is, or s o%ld be, simply t e @age o! a speci!ic type o! skilled labo%r, @ ose price is reg%lated in t e labo%r-market like t at o! any ot er labo%rC, t is total pro!it is ence!ort recei8ed only in t e !orm o! interest, i.e., as mere compensation !or o@ning capital t at no@ is entirely di8orced !rom t e !%nction in t e act%al process o! reprod%ction, H%st as t is !%nction in t e person o! t e manager is di8orced !rom o@ners ip o! capital0 ,ro!it t %s appears Bno longer only t at portion o! it, t e interest, @ ic deri8es its H%sti!ication !rom t e pro!it o! t e borro@erC as a mere appropriation o! t e s%rpl%s-labo%r o! ot ers, arising !rom t e con8ersion o! means o! prod%ction into capital, i.e., !rom t eir alienation

3=2

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8is-O-8is t e act%al prod%cer, !rom t eir antit esis as anot er"s property to e8ery indi8id%al act%ally at @ork in prod%ction, !rom manager do@n to t e last day-labo%rer0 &n stock companies t e !%nction is di8orced !rom capital o@ners ip, ence also labo%r is entirely di8orced !rom o@ners ip o! means o! prod%ction and s%rpl%s-labo%r0 5 is res%lt o! t e %ltimate de8elopment o! capitalist prod%ction is a necessary transitional p ase to@ards t e recon8ersion o! capital into t e property o! prod%cers, alt o%g no longer as t e pri8ate property o! t e indi8id%al prod%cers, b%t rat er as t e property o! associated prod%cers, as o%trig t social property0 3n t e ot er and, t e stock company is a transition to@ard t e con8ersion o! all !%nctions in t e reprod%ction process @ ic still remain linked @it capitalist property, into mere !%nctions o! associated prod%cers, into social !%nctions0 Ae!ore @e go any !%rt er, t ere is still t e !ollo@ing economically important !act to be noted: $ince pro!it ere ass%mes t e p%re !orm o! interest, %ndertakings o! t is sort are still possible i! t ey yield bare interest, and t is is one o! t e ca%ses, stemming t e !all o! t e general rate o! pro!it, since s%c %ndertakings, in @ ic t e ratio o! constant capital to t e 8ariable is so enormo%s, do not necessarily enter into t e eD%alisation o! t e general rate o! pro!it0 /$ince Marx @rote t e abo8e, ne@ !orms o! ind%strial enterprises a8e de8eloped, as @e kno@, representing t e second and t ird degree o! stock companies0 5 e daily gro@ing speed @it @ ic prod%ction may be enlarged in all !ields o! large-scale ind%stry today, is o!!set by t e e8ergreater slo@ness @it @ ic t e market !or t ese increased prod%cts expands0 W at t e !ormer t%rns o%t in mont s, can scarcely be absorbed by t e latter in years0 ?dd to t is t e protecti8e tari!! policy, by @ ic e8ery ind%strial co%ntry s %ts itsel! o!! !rom all ot ers, partic%larly !rom England, and also arti!icially increases domestic prod%ction capacity0 5 e res%lts are a general c ronic o8er-prod%ction, depressed prices, !alling and e8en @ olly disappearing pro!its# in s ort, t e old boasted !reedom o! competition as reac ed t e end o! its tet er and m%st itsel! anno%nce its ob8io%s, scandalo%s bankr%ptcy0 ?nd in e8ery co%ntry t is is taking place t ro%g t e big ind%strialists o! a certain branc Hoining in a cartel !or t e reg%lation o! prod%ction0 ? committee !ixes t e D%antity to be prod%ced by eac establis ment and is t e !inal a%t ority !or distrib%ting t e incoming orders0 3ccasionally e8en international cartels @ere establis ed, as bet@een t e Englis and :erman iron ind%stries0 A%t e8en t is !orm o! association in prod%ction did not s%!!ice0 5 e antagonism o! interests bet@een t e indi8id%al !irms broke t ro%g it only too o!ten, restoring competition0 5 is led in some branc es, @ ere t e scale o! prod%ction permitted, to t e concentration o! t e entire prod%ction o! t at branc o! ind%stry in one big Hoint-stock company %nder single management0 5 is as been repeatedly e!!ected in ?merica# in E%rope t e biggest example so !ar is t e (nited ?lkali 5r%st, @ ic as bro%g t all Aritis alkali prod%ction into t e ands o! a single b%siness !irm0 5 e !ormer o@ners o! t e more t an t irty indi8id%al plants a8e recei8ed s ares !or t e appraised 8al%e o! t eir entire establis ments, totalling abo%t V+ million, @ ic represent t e !ixed capital o! t e tr%st0 5 e tec nical management remains in t e same ands as be!ore, b%t b%siness control is concentrated in t e ands o! t e general management0 5 e !loating capital, totalling abo%t V1 million, @as o!!ered to t e p%blic !or s%bscription0 5 e total capital is, t ere!ore, V6 million0 5 %s, in t is branc , @ ic !orms t e basis o! t e @ ole c emical ind%stry, competition as been replaced by monopoly in England, and t e road as been pa8ed, most grati!yingly, !or !%t%re expropriation by t e @ ole o! society, t e nation0 I '.0.1 5 is is t e abolition o! t e capitalist mode o! prod%ction @it in t e capitalist mode o! prod%ction itsel!, and ence a sel!-dissol8ing contradiction, @ ic prima facie represents a mere p ase o! transition to a ne@ !orm o! prod%ction0 &t mani!ests itsel! as s%c a contradiction in its e!!ects0 &t establis es a monopoly in certain sp eres and t ereby reD%ires state inter!erence0 &t reprod%ces a ne@ !inancial aristocracy, a ne@ 8ariety o! parasites in t e s ape o! promoters, spec%lators and simply nominal directors# a @ ole system o! s@indling and c eating by means o! corporation promotion, stock iss%ance, and stock spec%lation0 &t is pri8ate prod%ction @it o%t t e control o! pri8ate property0

3=+

; apter JJ4&&

&40 ?side !rom t e stock-company b%siness, @ ic represents t e abolition o! capitalist pri8ate ind%stry on t e basis o! t e capitalist system itsel! and destroys pri8ate ind%stry as it expands and in8ades ne@ sp eres o! prod%ction, credit o!!ers to t e indi8id%al capitalist# or to one @ o is regarded a capitalist, absol%te control @it in certain limits o8er t e capital and property o! ot ers, and t ereby o8er t e labo%r o! ot ers0 8i 5 e control o8er social capital, not t e indi8id%al capital o! is o@n, gi8es im control o! social labo%r0 5 e capital itsel!, @ ic a man really o@ns or is s%pposed to o@n in t e opinion o! t e p%blic, becomes p%rely a basis !or t e s%perstr%ct%re o! credit0 5 is is partic%larly tr%e o! @ olesale commerce, t ro%g @ ic t e greatest portion o! t e social prod%ct passes0 ?ll standards o! meas%rement, all exc%ses more or less still H%sti!ied %nder capitalist prod%ction, disappear ere0 W at t e spec%lating @ olesale merc ant risks is social property, not his own. ED%ally sordid becomes t e p rase relating t e origin o! capital to sa8ings, !or @ at e demands is t at others s o%ld sa8e !or im0 /P%st as all France recently sa8ed %p one and a al! billion !rancs !or t e ,anama ;anal s@indlers0 &n !act, a description o! t e entire ,anama s@indle is ere correctly anticipated, !%lly t@enty years be!ore it occ%rred0 I '.0.1 5 e ot er p rase concerning abstention is sD%arely re!%ted by is l%x%ry, @ ic is no@ itsel! a means o! credit0 ;onceptions @ ic a8e some meaning on a less de8eloped stage o! capitalist prod%ction, become D%ite meaningless ere0 $%ccess and !ail%re bot lead ere to a centralisation o! capital, and t %s to expropriation on t e most enormo%s scale0 Expropriation extends ere !rom t e direct prod%cers to t e smaller and t e medi%m-siEed capitalists t emsel8es0 &t is t e point o! depart%re !or t e capitalist mode o! prod%ction# its accomplis ment is t e goal o! t is prod%ction0 &n t e last instance, it aims at t e expropriation o! t e means o! prod%ction !rom all indi8id%als0 Wit t e de8elopment o! social prod%ction t e means o! prod%ction cease to be means o! pri8ate prod%ction and prod%cts o! pri8ate prod%ction, and can t erea!ter be only means o! prod%ction in t e ands o! associated prod%cers, i.e., t e latter"s social property, m%c as t ey are t eir social prod%cts0 6o@e8er, t is expropriation appears @it in t e capitalist system in a contradictory !orm, as appropriation o! social property by a !e@# and credit lends t e latter more and more t e aspect o! p%re ad8ent%rers0 $ince property ere exists in t e !orm o! stock, its mo8ement and trans!er become p%rely a res%lt o! gambling on t e stock exc ange, @ ere t e little !is are s@allo@ed by t e s arks and t e lambs by t e stock-exc ange @ol8es0 5 ere is antagonism against t e old !orm in t e stock companies, in @ ic social means o! prod%ction appear as pri8ate property# b%t t e con8ersion to t e !orm o! stock still remains ensnared in t e trammels o! capitalism# ence, instead o! o8ercoming t e antit esis bet@een t e c aracter o! @ealt as social and as pri8ate @ealt , t e stock companies merely de8elop it in a ne@ !orm0 5 e co-operati8e !actories o! t e labo%rers t emsel8es represent @it in t e old !orm t e !irst spro%ts o! t e ne@, alt o%g t ey nat%rally reprod%ce, and m%st reprod%ce, e8ery@ ere in t eir act%al organisation all t e s ortcomings o! t e pre8ailing system0 A%t t e antit esis bet@een capital and labo%r is o8ercome @it in t em, i! at !irst only by @ay o! making t e associated labo%rers into t eir o@n capitalist, i.e., by enabling t em to %se t e means o! prod%ction !or t e employment o! t eir o@n labo%r0 5 ey s o@ o@ a ne@ mode o! prod%ction nat%rally gro@s o%t o! an old one, @ en t e de8elopment o! t e material !orces o! prod%ction and o! t e corresponding !orms o! social prod%ction a8e reac ed a partic%lar stage0 Wit o%t t e !actory system arising o%t o! t e capitalist mode o! prod%ction t ere co%ld a8e been no co-operati8e !actories0 -or co%ld t ese a8e de8eloped @it o%t t e credit system arising o%t o! t e same mode o! prod%ction0 5 e credit system is not only t e principal basis !or t e grad%al trans!ormation o! capitalist pri8ate enterprises into capitalist stock companies, b%t eD%ally o!!ers t e means !or t e grad%al extension o! co-operati8e enterprises on a more or less national scale0 5 e capitalist stock companies, as m%c as t e co-operati8e !actories, s o%ld be considered as transitional !orms !rom t e capitalist mode o! prod%ction to t e associated one, @it t e only distinction t at t e antagonism is resol8ed negati8ely in t e one and positi8ely in t e ot er0

3=6

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$o !ar @e a8e considered t e de8elopment o! t e credit system I and t e implicit latent abolition o! capitalist property I mainly @it re!erence to ind%strial capital0 &n t e !ollo@ing c apters @e s all consider credit @it re!erence to interest-bearing capital as s%c , and to its e!!ect on t is capital, and t e !orm it t ereby ass%mes# and t ere are generally a !e@ more speci!ically economic remarks still to be made0 A%t !irst t is: 5 e credit system appears as t e main le8er o! o8er-prod%ction and o8er-spec%lation in commerce solely beca%se t e reprod%ction process, @ ic is elastic by nat%re, is ere !orced to its extreme limits, and is so !orced beca%se a large part o! t e social capital is employed by people @ o do not o@n it and @ o conseD%ently tackle t ings D%ite di!!erently t an t e o@ner, @ o anxio%sly @eig s t e limitations o! is pri8ate capital in so !ar as e andles it imsel!0 5 is simply demonstrates t e !act t at t e sel!-expansion o! capital based on t e contradictory nat%re o! capitalist prod%ction permits an act%al !ree de8elopment only %p to a certain point, so t at in !act it constit%tes an immanent !etter and barrier to prod%ction, @ ic are contin%ally broken t ro%g by t e credit system0 8ii 6ence, t e credit system accelerates t e material de8elopment o! t e prod%cti8e !orces and t e establis ment o! t e @orld-market0 &t is t e istorical mission o! t e capitalist system o! prod%ction to raise t ese material !o%ndations o! t e ne@ mode o! prod%ction to a certain degree o! per!ection0 ?t t e same time credit accelerates t e 8iolent er%ptions o! t is contradiction I crises I and t ereby t e elements o! disintegration o! t e old mode o! prod%ction0 5 e t@o c aracteristics immanent in t e credit system are, on t e one and, to de8elop t e incenti8e o! capitalist prod%ction, enric ment t ro%g exploitation o! t e labo%r o! ot ers, to t e p%rest and most colossal !orm o! gambling and s@indling, and to red%ce more and more t e n%mber o! t e !e@ @ o exploit t e social @ealt # on t e ot er and, to constit%te t e !orm o! transition to a ne@ mode o! prod%ction0 &t is t is ambig%o%s nat%re, @ ic endo@s t e principal spokesmen o! credit !rom 'a@ to &saac ,Freire @it t e pleasant c aracter mixt%re o! s@indler and prop et0

Chapter 2&. 1ediu

of Circulation and Capital<

Vie4s of Too%e and #ullarton

5 e distinction bet@een c%rrency and capital, as 5ooke, Wilson, and ot ers dra@ it, @ ereby t e di!!erences bet@een medi%m o! circ%lation as money, as money-capital generally, and as interestbearing capital Bmoneyed capital in t e Englis senseC are t ro@n toget er pell-mell, comes do@n to t@o t ings08iii ;%rrency circ%lates on t e one and as coin BmoneyC, so !ar as it promotes t e e penditure of revenue, ence t e tra!!ic bet@een t e indi8id%al cons%mers and t e retail merc ants, to @ ic category belong all merc ants @ o sell to t e cons%mers I to t e indi8id%al cons%mers as distinct !rom prod%cti8e cons%mers or prod%cers0 6ere money circ%lates in t e !%nction o! coin, alt o%g it contin%ally replaces capital. ? certain portion o! money in a partic%lar co%ntry is contin%ally de8oted to t is !%nction, alt o%g t is portion consists o! perpet%ally c anging indi8id%al coins0 &n so !ar as money promotes t e transfer of capital, o@e8er, eit er as a means o! p%rc ase Bmedi%m o! circ%lationC or as a means o! payment, it is capital. &t is, t ere!ore, neit er its !%nction as a means o! p%rc ase, nor t at as a means o! payment, @ ic disting%is es it !rom coin, !or it may also act as a means o! p%rc ase bet@een one dealer and anot er so !ar as t ey b%y !rom one anot er in ard cas , and also as a means o! payment bet@een dealer and cons%mer so !ar as credit is gi8en and t e re8en%e cons%med be!ore it is paid0 5 e di!!erence is, t ere!ore, t at in t e second case t is money not only replaces t e capital !or one side, t e seller, b%t is expended, ad8anced, by t e ot er side, t e b%yer, as capital0 5 e di!!erence, t en, is in !act t at bet@een the money1form of revenue and the money1form of capital, b%t not t at bet@een c%rrency and capital, !or a certain D%antity o! money circulates in t e transactions bet@een dealers as @ell as in t e transactions bet@een cons%mers and dealers0 &t is, t ere!ore, eD%ally currency in both !%nctions0 5ooke"s conception introd%ces con!%sion into t is D%estion in 8ario%s @ays: 1C Ay con!%sing t e !%nctional distinctions# <C Ay introd%cing t e D%estion o! t e D%antity o! money circ%lating toget er in bot !%nctions# 3C Ay introd%cing t e D%estion o! t e relati8e proportions o! t e D%antities o! c%rrency circ%lating in t e t@o !%nctions and t %s in t e t@o sp eres o! t e process o! reprod%ction0 ?d 1C ;on!%sing t e !%nctional distinctions t at money in one !orm is c%rrency, and capital in t e ot er0 &n so !ar as money ser8es in one or anot er !%nction, be it to realise re8en%e or trans!er capital, it !%nctions in b%ying and selling, or in paying, as a means o! p%rc ase or a means o! payment, and, in t e @ider sense o! t e @ord, as c%rrency0 5 e !%rt er p%rpose @ ic it as in t e calc%lations o! its spender or recipient, o! being capital or re8en%e !or im, alters absol%tely not ing, and t is is do%bly demonstrated0 ?lt o%g t e kinds o! money circ%lating in t e t@o sp eres are di!!erent, t e same piece o! money, !or instance a !i8e-po%nd note, passes !rom one sp ere into t e ot er and alternately per!orms bot !%nctions# @ ic is ine8itable, i! only beca%se t e retail merc ant can gi8e is capital t e !orm o! money only in t e s ape o! t e coin @ ic e recei8es !rom is c%stomers0 &t may be ass%med t at t e act%al small c ange as its circ%lation centre o! gra8ity in t e domain o! retail trade# t e retail dealer needs it contin%ally to make c ange and recei8es it back contin%ally in payment !rom is c%stomers0 A%t e also recei8es money, i.e., coin, in t at metal @ ic ser8es as a standard o! 8al%e, ence in England one-po%nd coins, or e8en bank-notes, partic%larly notes o! small denominations, s%c as !i8e- and ten-po%nd notes0 5 ese gold coins and notes, @it @ ate8er small c ange e as to spare, are deposited by t e retail dealer e8ery day, or e8ery @eek, in is bank, and e pays !or is p%rc ases by dra@ing

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c eD%es on is bank deposit0 A%t t e same gold coins and ank-notes are H%st as steadily @it dra@n !rom t e bank, directly or indirectly B!or instance, small c ange by man%!act%rers !or t e payment o! @agesC, as t e money-!orm o! its re8en%e by t e entire p%blic in its capacity o! cons%mer, and !lo@ contin%ally back to t e retail dealers, !or @ om t ey t %s again realise a portion o! t eir capital, b%t at t e same time also a portion o! t eir re8en%e0 5 is last circ%mstance is important, and is @ olly o8erlooked by 5ooke0 3nly @ ere money is expended as moneycapital, early in t e reprod%ction process BAook &&, ,art 1C, does capital-8al%e exist p%rely as s%c 0 For t e prod%ced commodities contain not merely capital, b%t also s%rpl%s-8al%e# t ey are not only capital in t emsel8es, b%t already capital realised as capital, capital @it t e so%rce o! re8en%e incorporated in it0 W at t e retail dealer gi8es a@ay !or t e money ret%rning to im, is commodities, t ere!ore, is !or im capital pl%s pro!it, capital pl%s re8en%e0 F%rt ermore, in ret%rning to t e retailer, circ%lating money restores t e money-!orm o! is capital0 5o red%ce t e di!!erence bet@een circ%lation as circ%lation o! re8en%e and circ%lation o! capital into a di!!erence bet@een c%rrency and capital is, t ere!ore, altoget er @rong0 5 is mode o! expression is in 5ooke"s case d%e to is simply ass%ming t e standpoint o! a banker iss%ing is o@n bank-notes0 5 ose o! is notes @ ic are contin%ally in t e p%blic"s ands Be8en i! consisting o! e8er di!!erent notesC and ser8ing as c%rrency cost im not ing, sa8e t e cost o! t e paper and t e printing0 5 ey are circ%lating certi!icates o! indebtedness Bbills o! exc angeC made o%t in is o@n name, b%t t ey bring im money and t %s ser8e as a means o! expanding is capital0 5 ey di!!er !rom is capital, o@e8er, @ et er it be is o@n or borro@ed0 5 at is @ y t ere is a special distinction !or im bet@een c%rrency and capital, @ ic , o@e8er, as not ing to do @it t e de!inition o! t ese terms as s%c , least o! all @it t at made by 5ooke0 5 e distinct attrib%te I @ et er it ser8es as t e money-!orm o! re8en%e or o! capital I c anges not ing in t e c aracter o! money as a medi%m o! circ%lation# it retains t is c aracter no matter @ ic o! t e t@o !%nctions it per!orms0 5r%e, money ser8es more as an act%al medi%m o! circ%lation Bcoin, means o! p%rc aseC @ en acting as t e money-!orm o! re8en%e, d%e to t e dispersion o! p%rc ases and sales, and beca%se t e maHority o! disb%rsers o! re8en%e, t e labo%rers, can b%y relati8ely little on credit# @ ereas in t e tra!!ic o! t e b%siness @orld, @ ere t e medi%m o! circ%lation is t e money-!orm o! capital, money ser8es mainly as a means o! payment, partly on acco%nt o! t e concentration, and partly on acco%nt o! t e pre8ailing credit system0 A%t t e distinction bet@een money as a means o! payment and money as a means o! p%rc ase Bmeans o! circ%lationC is a distinction t at re!ers to t e money itsel!0 &t is not a distinction bet@een money and capital0 More copper and sil8er circ%late in t e retail b%siness, and more gold in t e @ olesale b%siness0 .et t e distinction bet@een sil8er and copper on t e one and, and gold on t e ot er, is not t e distinction bet@een circ%lation and capital0 ?d <C &ntrod%cing t e D%estion o! t e D%antity o! money circ%lating toget er in bot !%nctions: $o !ar as money circ%lates, be it as a means o! p%rc ase or as a means o! payment I no matter in @ ic o! t e t@o sp eres and independently o! its !%nction o! realising re8en%e or capital I t e D%antity o! its circ%lating mass comes %nder t e la@s de8eloped pre8io%sly in disc%ssing t e simple circ%lation o! commodities B4ol0 &, ; 0 &&&, <, bC0 5 e 8elocity o! circ%lation, ence t e n%mber o! repetitions o! t e same !%nction as means o! p%rc ase and means o! payment by t e same pieces o! money in a gi8en term, t e mass o! sim%ltaneo%s p%rc ases and sales, or payments, t e s%m o! t e prices o! t e circ%lating commodities, and !inally t e balances o! payments to be settled in t e same period, determine in eit er case t e mass o! circ%lating money, o! c%rrency0 W et er money so employed represents capital or re8en%e !or t e payer or recei8er, is immaterial, and in no @ay alters t e matter0 &ts mass is simply determined by its !%nction as a medi%m o! p%rc ase and payment0 ?d 3C 3n t e D%estion o! t e relati8e proportions o! t e amo%nts o! c%rrency circ%lating in bot !%nctions and t %s in bot sp eres o! t e reprod%ction process0 Aot sp eres o! circ%lation are

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connected internally, !or, on t e one and, t e mass o! re8en%es to be spent expresses t e 8ol%me o! cons%mption, and, on t e ot er, t e magnit%de o! t e masses o! capital circ%lating in prod%ction and commerce expresses t e 8ol%me and 8elocity o! t e reprod%ction process0 -e8ert eless, t e same circ%mstances a8e a di!!erent e!!ect, @orking e8en in opposite directions, %pon t e D%antities o! money circ%lating in bot !%nctions or sp eres, or on t e amo%nt o! c%rrency, as t e Englis p%t it in banking parlance0 ?nd t is gi8es ne@ ca%se !or 5ooke"s 8%lgar distinction bet@een capital and c%rrency0 5 e !act t at t e gentlemen o! t e ;%rrency 5 eory con!%se t@o di!!erent t ings is no reason to present t em as t@o di!!erent concepts0 &n times o! prosperity, intense expansion, acceleration and 8igo%r o! t e reprod%ction process, labo%rers are !%lly employed0 :enerally, t ere is also a rise in @ages @ ic makes %p in some meas%re !or t eir !all belo@ a8erage d%ring ot er periods o! t e b%siness cycle0 ?t t e same time, t e re8en%es o! t e capitalists gro@ considerably0 ;ons%mption increases generally0 ;ommodityprices also rise reg%larly, at least in t e 8ario%s 8ital branc es o! b%siness0 ;onseD%ently, t e D%antity o! circ%lating money gro@s at least @it in de!inite limits, since t e greater 8elocity o! circ%lation, in t%rn, sets %p certain barriers to t e gro@t o! t e amo%nt o! c%rrency0 $ince t at portion o! t e social re8en%e @ ic consists o! @ages is originally ad8anced by t e ind%strial capitalist in t e !orm o! 8ariable capital, and al@ays in money-!orm, it reD%ires more money !or its circ%lation in times o! prosperity0 A%t @e m%st not co%nt t is t@ice I !irst as money reD%ired !or t e circ%lation o! 8ariable capital, and t en as money reD%ired !or t e circ%lation o! t e labo%rers" re8en%e0 5 e money paid to t e labo%rers as @ages is spent in retail trade and ret%rns abo%t once a @eek to t e banks as t e retailers" deposits, a!ter negotiating miscellaneo%s intermediary transactions in smaller cycles0 &n times o! prosperity t e re!l%x o! money proceeds smoot ly !or t e ind%strial capitalists, and t %s t e need !or money accommodation does not increase beca%se more @ages a8e to be paid and more money is reD%ired !or t e circ%lation o! t eir 8ariable capital0 5 e total res%lt is t at t e mass o! circ%lating media ser8ing t e expendit%re o! re8en%e gro@s decidedly in periods o! prosperity0 ?s concerns t e circ%lation reD%ired !or t e trans!er o! capital, ence reD%ired excl%si8ely bet@een capitalists, a period o! brisk b%siness is sim%ltaneo%sly a period o! t e most elastic and easy credit0 5 e 8elocity o! circ%lation bet@een capitalist and capitalist is reg%lated directly by credit, and t e mass o! circ%lating medi%m reD%ired to settle payments, and e8en in cas p%rc ases, decreases accordingly0 &t may increase in absol%te terms, b%t decreases relati8ely %nder all circ%mstances compared to t e expansion o! t e reprod%ction process0 3n t e one and, greater mass payments are settled @it o%t t e mediation o! money# on t e ot er, o@ing to t e 8igo%r o! t e process, t ere is a D%icker mo8ement o! t e same amo%nts o! money, bot as means o! p%rc ase and o! payment0 5 e same D%antity o! money promotes t e re!l%x o! a greater n%mber o! indi8id%al capitals0 3n t e @ ole, t e c%rrency o! money in s%c periods appears !%ll, alt o%g its 7epartment && Btrans!er o! capitalC is, at least relati8ely, contracted, @ ile its 7epartment & Bexpendit%re o! re8en%eC expands in absol%te terms0 5 e re!l%xes express t e recon8ersion o! commodity-capital into money, M I ; I M", as @e a8e seen in t e disc%ssion o! t e reprod%ction process, Aook &&, ,art &0 ;redit renders t e re!l%x in money-!orm independent o! t e time o! act%al re!l%x bot !or t e ind%strial capitalist and t e merc ant0 Aot o! t em sell on credit# t eir commodities are t %s alienated be!ore t ey are recon8erted into money !or t em, ence be!ore t ey !lo@ back to t em in money-!orm0 3n t e ot er and, t ey b%y on credit, and in t is @ay t e 8al%e o! t eir commodities is recon8erted, be it into prod%cti8e capital or commodity-capital, e8en be!ore t is 8al%e as really been trans!ormed into money, i.e., be!ore t e commodity-price is d%e and paid !or0 &n s%c times o! prosperity t e re!l%x passes o!! smoot ly and easily0 5 e retailer sec%rely pays t e @ olesaler, t e @ olesaler pays t e man%!act%rer, t e man%!act%rer pays t e importer o! ra@ materials, etc0 5 e appearance

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o! rapid and reliable re!l%xes al@ays keeps %p !or a longer period a!ter t ey are o8er0 &n reality by 8irt%e o! t e credit t at is %nder @ay, since credit re!l%xes take t e place o! t e real ones0 5 e banks scent danger as soon as t eir clients deposit more bills o! exc ange t an money0 $ee t e testimony o! t e 'i8erpool bank director, p0 3*80 /,resent edition: ; 0 JJ40 I 0d.1 5o insert @ at & a8e noted earlier: K&n periods o! predominant credit, t e 8elocity o! t e circ%lation o! money increases !aster t an commodity-prices, @ ereas in times o! declining credit commodity-prices drop slo@er t an t e 8elocity o! circ%lation0L B %ur Hriti- der politischen :e-onomie, 18+*, $0 83, 820C 5 e re8erse is tr%e in a period o! crisis0 ;irc%lation -o0 & contracts, prices !all, similarly @ages# t e n%mber o! employed labo%rers is red%ced, t e mass o! transactions decreases0 3n t e contrary, t e need !or money accommodation increases in circ%lation -o0 && @it t e contraction o! credit0 We s all examine t is point in greater detail immediately0 5 ere is no do%bt t at @it t e decrease o! credit @ ic goes and in and @it stagnation in t e reprod%ction process, t e circ%lation mass reD%ired !or -o0 &, t e expendit%re o! re8en%e, contracts, @ ile t at reD%ired !or -o0 &&, t e trans!er o! capital, expands0 A%t to @ at extent t is statement coincides @it @ at is maintained by F%llarton and ot ers still remains to e analysed: K? demand !or capital on loan and a demand !or additional circ%lation are D%ite distinct t ings, and not o!ten !o%nd associated0L BF%llarton, 10 c0, p0 8<, title o! ; apter +0C ix &n t e !irst place it is e8ident t at in t e !irst o! t e t@o cases mentioned abo8e, d%ring times o! prosperity, @ en t e mass o! t e circ%lating medi%m m%st increase, t e demand !or it increases0 A%t it is like@ise e8ident t at, @ en a man%!act%rer dra@s more or less o! is deposit o%t o! a bank in gold or bank-notes beca%se e as to expend more capital in t e !orm o! money, is demand !or capital does not t ereby increase0 W at increases is merely is demand !or t is partic%lar !orm in @ ic e expends is capital0 5 e demand re!ers only to t e tec nical !orm, in @ ic e t ro@s is capital into circ%lation0 P%st as in t e case o! a di!!erent de8elopment o! t e credit system, t e same 8ariable capital, !or example, or t e same D%antity o! @ages, reD%ires a greater mass o! means o! circ%lation in one co%ntry t an in anot er# in England more t an in $cotland, !or instance, and in :ermany more t an in England0 'ike@ise in agric%lt%re, t e same capital acti8e in t e reprod%ction process reD%ires di!!erent D%antities o! money in di!!erent seasons !or t e per!ormance o! its !%nction0 A%t t e contrast dra@n by F%llarton is not correct0 &t is by no means t e strong demand !or loans as e says, @ ic disting%is es t e period o! depression !rom t at o! prosperity, b%t t e ease @it @ ic t is demand is satis!ied in periods o! prosperity, and t e di!!ic%lties @ ic it meets in periods o! depression0 &t is precisely t e enormo%s de8elopment o! t e credit system d%ring a prosperity period, ence also t e enormo%s increase in t e demand !or loan capital and t e readiness @it @ ic t e s%pply meets it in s%c periods, @ ic brings abo%t a s ortage o! credit d%ring a period o! depression0 &t is not, t ere!ore, t e di!!erence in 8ol%me o! demand !or loans @ ic c aracterises bot periods0 ?s @e a8e pre8io%sly remarked, bot periods are primarily disting%is ed by t e !act t at t e demand !or c%rrency bet@een cons%mers and dealers predominates in periods o! prosperity, and t e demand !or c%rrency bet@een capitalists predominates in periods o! depression0 7%ring a depression t e !ormer decreases, and t e latter increases0 W at strikes F%llarton and ot ers as decisi8ely important is t e p enomenon t at in s%c periods @ en sec%rities in possession o! t e Aank o! England are on t e increase, its circ%lation o! notes decreases, and 8ice 8ersa0 5 e le8el o! t e sec%rities, o@e8er, expresses t e 8ol%me o! t e

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pec%niary accommodation, t e 8ol%me o! disco%nted bills o! exc ange and o! ad8ances made against marketable collateral0 5 %s F%llarton says in t e abo8e passage t at t e sec%rities in t e ands o! t e Aank o! England !l%ct%ate mostly in an opposite direction to its circ%lation, and t is corroborates t e 8ie@ long eld by pri8ate banks t at no bank can increase its iss%e o! bank-notes beyond a certain point determined by t e needs o! its p%blic# b%t i! a bank @ants to make ad8ances beyond t is limit, it m%st make t em o%t o! its capital, ence it m%st eit er realise on sec%rities or %tilise deposits @ ic it @o%ld ot er@ise a8e in8ested in sec%rities0 5 is, o@e8er, re8eals also @ at F%llarton means by capital0 W at does capital signi!y ereQ 5 at t e Aank can no longer make ad8ances @it its o@n bank-notes, or promissory notes, @ ic , o! co%rse, cost it not ing0 A%t @ at does it make ad8ances @it in t at caseQ Wit t e s%ms realised !rom t e sale o! sec%rities eld in reser8e, i.e., go8ernment bonds, stocks, and ot er interestbearing paper0 ?nd @ at does it get in payment !or t e sale o! s%c paperQ Money-gold or banknotes, so !ar as t e latter are legal tender, s%c as t ose o! t e Aank o! England0 W at t e bank ad8ances, t ere!ore, is %nder all circ%mstances money0 5 is money, o@e8er, no@ constit%tes a part o! its capital0 &! it ad8ances gold, t is is %nderstandable0 &! it ad8ances notes, t en t ese notes represent capital, beca%se it as gi8en %p some act%al 8al%e !or t em, s%c as interest-bearing paper0 &n t e case o! pri8ate banks t e notes sec%red by t em t ro%g t e sale o! sec%rities cannot be anyt ing else, in t e main, b%t Aank o! England notes or t eir o@n notes, since ot ers @o%ld ardly be taken in payment !or sec%rities0 &! it is t e Aank o! England itsel!, t en its o@n notes, @ ic it recei8es in ret%rn, cost it capital, t at is, interest-bearing paper0 Aesides, it t ereby @it dra@s its o@n notes !rom circ%lation0 $ o%ld it reiss%e t ese notes, or iss%e ne@ notes in t eir stead to t e same amo%nt, t ey no@ represent capital0 ?nd t ey do so eD%ally @ell, @ en %sed !or ad8ances to capitalists, or @ en %sed later, @ en t e demand !or s%c pec%niary accommodation decreases, !or rein8estment in sec%rities0 &n all t ese cases t e term capital is employed only !rom t e banker"s point o! 8ie@, and means t at t e banker is compelled to loan more t an is mere credit0 ?s is kno@n, t e Aank o! England makes all its ad8ances in its o@n notes0 -o@, i! despite t is, as a r%le, t e bank-note circ%lation o! t e Aank decreases in proportion as t e disco%nted bills o! exc ange and collateral in its ands, and t %s its ad8ances increase I @ at becomes o! t e notes t ro@n into circ%lationQ 6o@ do t ey ret%rn to t e AankQ 5o begin @it , i! t e demand !or money accommodation arises !rom an %n!a8o%rable national balance o! payments and t ereby implies a drain o! gold, t e matter is 8ery simple0 5 e bills o! exc ange are disco%nted in bank-notes0 5 e bank-notes are exc anged !or gold by t e Aank itsel!, in its iss%e department, and t is gold is exported0 &t is as t o%g t e Aank paid o%t gold directly, @it o%t t e mediation o! notes, on disco%nting bills0 $%c an increased demand, @ ic may in certain cases be V> to V1= million, nat%rally does not add a single !i8e-po%nd note to t e co%ntry"s domestic circ%lation0 &! it is no@ said t at t e Aank ad8ances capital, and not c%rrency, t is means t@o t ings0 First, t at it does not ad8ance credit, b%t act%al 8al%es, a part o! its o@n capital or o! capital deposited @it it0 $econdly, t at it does not ad8ance money !or inland, b%t !or international circ%lation, t at it ad8ances @orld-money# and !or t is p%rpose money m%st al@ays exist in its !orm o! a oard, in its metallic state# in t e !orm in @ ic it is not merely a !orm o! 8al%e, b%t 8al%e itsel!, @ ose money-!orm it is0 ?lt o%g t is gold no@ represents capital, bot !or t e Aank and t e exporting gold-dealer, i.e., banking or commercial capital, t e demand !or it is not !or capital, b%t !or t e absol%te !orm o! money-capital0 5 is demand arises precisely at t e moment @ en !oreign markets are o8ercro@ded @it %nsaleable Englis commodity-capital0 W at is @anted, t ere!ore, is capital, not as capital, b%t capital as money, in t e !orm in @ ic money ser8es as a %ni8ersal @orld-market commodity# and t is is its original !orm o! precio%s metal0 5 e drain o! gold is not, t ere!ore, as F%llarton, 5ooke, etc0, claim, Ka mere D%estion o! capital0L )at er, it is a KD%estion o! money,L e8en i! in a speci!ic !%nction0 5 e !act t at it is not a D%estion o! inland circ%lation as t e ad8ocates o! t e ;%rrency 5 eory maintain, does not pro8e

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at all, as F%llarton and ot ers t ink, t at it is merely a D%estion o! capital0 &t is a D%estion o! money in t e !orm in @ ic money is an international means o! payment0 KW et er t at capitalL Bt e p%rc ase price !or t e million o! D%arters o! !oreign @ eat a!ter a crop !ail%re in t e ome co%ntryC Kis transmitted in merc andise or in specie, is a point @ ic in no @ay a!!ects t e nat%re o! t e transaction0L BF%llarton, 10 c0, p0 1310C A%t it signi!icantly a!!ects t e D%estion, @ et er t ere is a drain o! gold, or not0 ;apital is trans!erred in t e !orm o! precio%s metal, beca%se it eit er cannot be trans!erred at all, or only at a great loss in t e s ape o! commodities0 5 e !ear @ ic t e modern banking system as o! gold drain exceeds anyt ing e8er imagined by t e monetary system, @ ic considers precio%s metals as t e only tr%e @ealt 0 5ake, !or instance, t e !ollo@ing e8idence o! t e :o8ernor o! t e Aank o! England, Morris, be!ore t e ,arliamentary ;ommittee on t e crisis o! 182>-28: B38260 M%estion:C KW en & spoke o! t e depreciation o! stocks and !ixed capital, are yo% not a@are t at all property in8ested in stocks and prod%ce o! e8ery description @as depreciated in t e same @ay# t at ra@ cotton, ra@ silk, and %nman%!act%red @ool @ere sent to t e continent at t e same depreciated price, and t at s%gar, co!!ee and tea @ere sacri!iced as at !orced salesQ I &t @as ine8itable t at t e co%ntry s o%ld make a considerable sacrifice !or t e p%rpose o! meeting t e efflu of bullion @ ic ad taken place in conseD%ence o! t e large importation o! !ood0L I K38280 7o not yo% t ink it @o%ld a8e been better to trenc %pon t e V8 million lying in t e co!!ers o! t e Aank, t an to a8e endea8o%red to get t e gold back again at s%c a sacri!iceQ I $o, D do not./ J &t is gold @ ic ere stands !or t e only tr%e @ealt 0 F%llarton D%otes t e disco8ery by 5ooke t at K@it only one or t@o exceptions, and t ose admitting o! satis!actory explanation, e8ery remarkable !all o! exc ange, !ollo@ed by a drain o! gold, t at occ%rred d%ring t e last al!-cent%ry, as as been

coincident t ro%g o%t @it a comparati8ely lo@ state

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o! t e circ%lating medi%m, and 8ice 8ersa0L BF%llarton, p0 1<10C 5 is disco8ery pro8es t at s%c drains o! gold occ%r generally a!ter a period o! animation and spec%lation, as Kt e signal o! a collapse already commenced an indication o! o8erstocked markets, o! a cessation o! t e !oreign demand !or o%r prod%ctions, o! delayed ret%rns, and, as t e necessary seD%el o! all t ese, o! commercial discredit, man%!actories s %t %p, artisans star8ing, and a general stagnation o! ind%stry and enterpriseL Bp0 1<*C0 5 is, nat%rally, is at once t e best re!%tation o! t e claim o! t e ad8ocates o! t e ;%rrency 5 eory, t at Ka !%ll circ%lation dri8es o%t b%llion and a lo@ circ%lation attracts it0L 3n t e contrary, @ ile t e Aank o! England generally carries a strong gold reser8e d%ring a period o! prosperity, t is oard is generally !ormed d%ring t e slack period, @ ic !ollo@s a!ter a storm0 ?ll t is sagacity concerning t e drain o! gold, t en, amo%nts to saying t at t e demand !or international media o! circ%lation and payment di!!ers !rom t e demand !or internal media o! circ%lation and payment Band it goes @it o%t saying, t ere!ore, t at Kt e existence o! a drain does not necessarily imply any dimin%tion o! t e internal demand !or circ%lation,L as F%llarton as it on page 11< o! is @orkC and t at t e export o! precio%s metal and its being t ro@n into international circ%lation is not t e same as t ro@ing notes or specie into internal circ%lation0 ?s !or t e rest, & a8e s o@n on a pre8io%s occasion /Englis edition: 4ol0 10 I 0d01 t at t e mo8ements o! a oard concentrated as a reser8e !%nd !or international payments a8e as s%c not ing to do @it t e mo8ements o! money as a medi%m o! circ%lation0 ?t any rate, t e D%estion0 is complicated by t e !act t at t e di!!erent !%nctions o! a oard, @ ic & a8e de8eloped !rom t e nat%re o! money I s%c as its !%nction as a reser8e !%nd o! means o! payment to co8er d%e bills in domestic b%siness# t e !%nction o! a reser8e !%nd o! c%rrency# and !inally, t e !%nction o! a reser8e !%nd o! @orld-money I are ere attrib%ted to one sole reser8e !%nd0 &t also !ollo@s !rom t is t at %nder certain circ%mstances a drain o! gold !rom t e Aank to t e ome market may combine @it a drain abroad0 5 e D%estion is !%rt er complicated o@e8er by t e !act t at t is oard is arbitrarily b%rdened @it t e additional !%nction o! ser8ing as a !%nd g%aranteeing t e con8ertibility o! bank-notes in co%ntries, in @ ic t e credit system and credit-money are de8eloped0 ?nd in addition to all t is comes 1C t e concentration o! t e national reser8e !%nd in one single central bank, and <C its red%ction to t e smallest possible minim%m0 6ence, also, F%llarton"s complaint Bp0123C: K3ne cannot contemplate t e per!ect silence and !acility @it @ ic 8ariations o! t e exc ange %s%ally pass o!! in continental co%ntries, compared @it t e state o! !e8eris disD%iet and alarm al@ays prod%ced

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in England @ ene8er t e treas%re at t e Aank seems to be at all approac ing to ex a%stion, @it o%t being str%ck @it t e great ad8antage in t is respect @ ic a metallic c%rrency possesses0L 6o@e8er, i! @e no@ lea8e aside t e drain o! gold, o@ can a bank t at iss%es notes, like t e Aank o! England, increase t e amo%nt o! money accommodation granted by it @it o%t increasing its iss%e o! bank-notesQ $o !ar as t e bank itsel! is concerned, all t e notes o%tside its @alls, @ et er circ%lating or in pri8ate oards, are in circ%lation, i.e., are o%t o! its ands0 6ence, i! t e bank extends its disco%nting and money-lending b%siness, its ad8ances on sec%rities, all t e bank-notes iss%ed by it !or t at p%rpose m%st ret%rn, !or ot er@ise t ey @o%ld increase t e 8ol%me o! circ%lation, somet ing @ ic is not s%pposed to appen0 5 is ret%rn may take place in t@o @ays0 'irst: 5 e bank pays ? notes against sec%rities# ? %ses t em to pay !or bills o! exc ange d%e to A, and A deposits notes once more in t e bank0 5 is brings to a close t e circ%lation o! t ese notes, b%t t e loan remains0 K5 e loan remains, and t e c%rrency, i! not @anted, !inds its @ay back to t e iss%er0L BF%llarton, p0 *>0C 5 e notes, @ ic t e bank ad8anced to ?, a8e no@ ret%rned to it# b%t it is t e creditor o! ?, or @ oe8er may a8e been t e dra@er o! t e bill disco%nted by ?, and t e debtor o! A !or t e amo%nt o! 8al%e expressed in t ese notes, and A t %s disposes o! a corresponding portion o! t e capital o! t e bank0 Secondly: ? pays to A, and A imsel!, or ;, to @ om e pays t e notes, %ses t ese notes to pay bills d%e to t e bank, directly or indirectly0 &n t at case t e bank is paid in its o@n notes0 5 is concl%des t e transaction Bpending ?"s ret%rn payment to t e bankC0 5o @ at extent, no@, s all t e bank"s ad8ance to ? be regarded as an ad8ance o! capital, or as a mere ad8ance o! means o! paymentQ x /5 is depends on t e nat%re o! t e loan itsel!0 5 ree cases m%st be disting%is ed0 'irst case0 I ? recei8es !rom t e bank amo%nts loaned on is o@n personal credit, @it o%t gi8ing any sec%rity !or t em0 &n t is case e does not merely recei8e means o! payment, b%t also %nD%estionably a ne@ capital, @ ic e may employ in is b%siness and realise as an additional capital %ntil t e mat%rity date0 Second case0 I ? as gi8en to t e bank sec%rities, national bonds, or stocks as collateral, and recei8ed !or t em, say, %p to t@o-t irds o! t eir momentary 8al%e as a cas loan0 &n t is case e as recei8ed t e means o! payment e needed, b%t no additional capital, !or e entr%sted to t e bank a larger capital-8al%e t an e recei8ed !rom it0 A%t t is larger capital-8al%e @as, on t e one and, %na8ailable !or is momentary needs Bmeans o! paymentC, beca%se in8ested in a partic%lar interest-bearing !orm# on t e ot er and, ? ad is o@n reasons !or not @anting to con8ert t is capital-8al%e directly into means o! payment by selling it0 6is sec%rities ser8ed, among ot er t ings, as a reser8e capital, and e set t em in motion as s%c 0 5 e transaction bet@een ? and t e bank, t ere!ore, consists in a temporary m%t%al trans!er o! capital, so t at ? does not recei8e any additional capital BD%ite t e contrarySC alt o%g e recei8es t e desired means o! payment0 For t e bank, on t e ot er and, t is transaction constit%tes a temporary lodgement o! money-capital in t e !orm o! a loan, a con8ersion o! money-capital !rom one !orm into anot er, and t is con8ersion is precisely t e essential !%nction o! t e banking b%siness0 4hird case0 I ? ad t e bank disco%nt a bill o! exc ange and recei8ed its 8al%e in cas a!ter t e ded%ction o! disco%nt0 &n t is case e sold a non-con8ertible money-capital to t e bank !or t e

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amo%nt o! 8al%e in con8ertible !orm0 6e sold is still r%nning bill !or cas money0 5 e bill is no@ t e property o! t e bank0 &t does not alter t e matter t at ? as last endorser o! t e bill is responsible !or it to t e bank in de!a%lt o! payment0 6e s ares t is responsibility @it t e ot er endorsers and @it t e dra@er o! t e bill, all o! @ om are d%ly responsible to im0 &n t is case, t ere!ore, @e do not a8e a loan, b%t only an ordinary p%rc ase and sale0 For t is reason, ? as not ing to pay back to t e bank0 &t reimb%rses itsel! by cas ing t e bill @ en it becomes d%e0 6ere, too, a trans!er o! capital as taken place bet@een ? and t e bank, and in exactly t e same manner as in t e sale and p%rc ase o! any ot er commodity, and !or t is 8ery reason ? did not recei8e any additional capital0 W at e needed and recei8ed @ere means o! payment, and e recei8ed t em by a8ing t e bank con8ert one !orm o! is money-capital I is bill I into anot er I money0 &t is t ere!ore only in t e !irst case t at t ere is any D%estion o! a real ad8ance o! capital# in t e second and t ird cases, t e matter can be so regarded only in t e sense t at e8ery in8estment o! capital implies an Kad8ance o! capital0L &n t is sense t e bank ad8ances money-capital to ?# b%t !or ? it is money1capital at best in t e sense t at it is a portion o! is capital in general0 ?nd e reD%ires it and %ses it not speci!ically as capital, b%t rat er as speci!ically a means o! payment0 3t er@ise, e8ery ordinary sale o! commodities by @ ic means o! payment are sec%red mig t be considered as recei8ing an ad8ance o! capital0 I '. 0.1 &n t e case o! pri8ate banks @ ic iss%e t eir o@n notes @e a8e t is di!!erence, t at i! t eir notes remain neit er in local circ%lation, nor ret%rn to t em in t e !orm o! deposits, or in payment !or d%e bills o! exc ange, t ey !all into t e ands o! persons @ o compel t e pri8ate bank to cas t ese notes in gold or in notes o! t e Aank o! England0 &n t is e8ent, t ere!ore, its loan in !act represents an ad8ance o! notes o! t e Aank o! England, or, @ at amo%nts to t e same t ing !or t e pri8ate bank, o! gold, ence a portion o! its bank capital0 5 e same olds good in case t e Aank o! England itsel!, or some ot er bank, @ ic as a !ixed legal maxim%m !or its iss%e o! notes, m%st sell sec%rities to @it dra@ its o@n notes !rom circ%lation and t en iss%e t em once more in t e s ape o! ad8ances# in t at case, t e bank"s o@n notes represent a portion o! its mobilised bank capital0 E8en i! t e circ%lation @ere p%rely metallic, it @o%ld be possible 1C !or a drain o! gold /Marx e8idently re!ers ere to a drain o! gold t at @o%ld, at least partially, go abroad I '. 0.1 to empty t e treas%ry, and <C since gold @o%ld be c ie!ly @anted by t e bank to make payments Bin settlement o! erst@ ile transactionsC, t e ad8ance against collateral co%ld gro@ considerably, b%t @o%ld !lo@ back to it in t e !orm o! deposits or in payment o! d%e bills o! exc ange# so t at, on one side, t e total treas%re o! t e bank @o%ld decrease @it an increase o! t e sec%rities in its ands, @ ile on t e ot er, it @o%ld no@ be olding t e same amo%nt, @ ic it possessed !ormerly as o@ner, as debtor o! its depositors, and !inally t e total D%antity o! c%rrency @o%ld decrease0 3%r ass%mption so !ar as been t at t e loans are made in notes, so t at t ey carry @it t em at least a !leeting, e8en i! instantly disappearing, increase in t e iss%e o! notes0 A%t t is is not necessary0 &nstead o! a paper note, t e bank may open a credit acco%nt !or ?, in @ ic case t is ?, t e bank"s debtor, becomes its imaginary depositor0 6e pays is creditors @it c eD%es on t e bank, and t e recipient o! t ese c eD%es passes t em on to is o@n banker, @ o exc anges t em !or t e c eD%es o%tstanding against im in t e clearing o%se0 &n t is case no mediation o! notes takes place at all, and t e entire transaction is con!ined to t e !act t at t e bank settles its o@n debt @it a c eD%e dra@n on itsel!, and its act%al recompense consists in its claim on ?0 &n t is case t e bank as loaned a portion o! its o@n bank capital, beca%se its o@n debt claims, to ?0 &n so !ar as t is demand !or pec%niary accommodation is a demand !or capital, it is so only !or money-capital0 &t is capital only !rom t e standpoint o! t e banker, namely gold Bin t e case o! gold exports abroadC or notes o! t e -ational Aank, @ ic a pri8ate bank can obtain only by p%rc ase against an eD%i8alent, and @ ic , t ere!ore, represent capital !or it0 3r, again, it is a case o! interest-bearing papers, go8ernment bonds, stocks, etc0, @ ic m%st be sold in order to obtain

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gold or bank-notes0 $%c papers, o@e8er, i! in go8ernment bonds, are capital only !or t e b%yer, !or @ om t ey represent t e p%rc ase price, t e capital e in8ested in t em0 &n t emsel8es t ey are not capital, b%t merely debt claims0 &! mortgages, t ey are mere titles on !%t%re gro%nd-rent0 ?nd i! t ey are s ares o! stock, t ey are mere titles o! o@ners ip, @ ic entitle t e older to a s are in !%t%re s%rpl%s-8al%e0 ?ll o! t ese are not real capital0 5 ey do not !orm constit%ent parts o! capital, nor are t ey 8al%es in t emsel8es0 Ay @ay o! similar transactions money belonging to t e bank may be trans!ormed into deposits, so t at t e bank becomes t e debtor instead o! o@ner o! t is money, and olds it %nder a di!!erent title o! o@ners ip0 6o@e8er important t is may be to t e bank, it alters not ing in t e mass o! reser8e capital, or e8en o! money-capital a8ailable in a partic%lar co%ntry0 ;apital, t ere!ore, represents ere only money-capital, and, i! not a8ailable in t e act%al !orm o! money, it represents a mere title on capital0 5 is is 8ery important, since a scarcity o!, and pressing demand !or, ban-ing capital is con!o%nded @it a decrease o! actual capital, @ ic con8ersely is in s%c cases rat er ab%ndant in t e !orm o! means o! prod%ction and prod%cts, and s@amps t e markets0 &t is, t ere!ore, easy to explain o@ t e mass o! sec%rities eld by a bank as collateral increases, ence o@ t e gro@ing demand !or pec%niary accommodation can be satis!ied by t e bank, @ ile t e total mass o! c%rrency remains t e same or decreases0 5 is total mass is eld in c eck d%ring s%c periods o! money stringency in t@o @ays: 1C by a drain o! gold# <C by a demand !or money in its capacity as a mere means o! payment, @ en t e iss%ed bank-notes ret%rn immediately# or @ en t e transactions take place @it o%t t e mediation o! notes by means o! book credit# @ en, t ere!ore, payments are made simply t ro%g a credit transaction, t e settlement o! t ese payments being t e sole p%rpose o! t e operation0 &t is a pec%liarity o! money, @ en it ser8es merely to settle acco%nts Band in times o! crises loans are taken %p to pay, rat er t an to b%y# to @ind %p pre8io%s transactions, not to initiate ne@ onesC, t at its circ%lation is no more t an !leeting, e8en @ ere balances are not settled by mere credit operations, @it o%t t e mediation o! money, so t at, @ en t ere is a strong demand !or pec%niary accommodation, an enormo%s D%antity o! s%c transactions can take place @it o%t expanding t e circ%lation0 A%t t e mere !act t at t e circ%lation o! t e Aank o! England remains stable or e8en decreases sim%ltaneo%sly @it an extensi8e accommodation o! money on its part, does not prima facie pro8e, as F%llarton, 5ooke and ot ers ass%me Bo@ing to t eir erroneo%s notion t at pec%niary accommodation is identical @it recei8ing capital on loan as additional capitalC, t at t e circ%lation o! money Bo! bank-notesC in its !%nction as a means o! payment is not increased and extended0 $ince t e circ%lation o! notes as means o! p%rc ase decreases d%ring a b%siness depression, @ en s%c extensi8e accommodation is necessary, t eir circ%lation as means o! payment may increase, and t e aggregate amo%nt o! t e circ%lation, t e s%m o! notes !%nctioning as means o! p%rc ase and payment, may remain stable or may e8en decrease0 5 e circ%lation as a means o! payment o! bank-notes immediately ret%rning to t e bank t at iss%es t em is simply not circ%lation in t e eyes o! t ose economists0 $ o%ld circ%lation as a means o! payment increase at a ig er rate t an it decreases as a means o! p%rc ase, t e aggregate circ%lation @o%ld increase, alt o%g t e money ser8ing as a means o! p%rc ase @o%ld decrease considerably in D%antity0 ?nd t is act%ally occ%rs in certain periods o! crisis, namely, @ en credit collapses completely and @ en not only commodities and sec%rities are %nsaleable b%t bills o! exc ange are %ndisco%ntable and not ing co%nts any more b%t money payment, or, as t e merc ant p%ts it, cas 0 $ince F%llarton et al. do not %nderstand t at t e circ%lation o! notes as means o! payment is t e c aracteristic !eat%re o! s%c periods o! money s ortage, t ey treat t is p enomenon as accidental0 KWit respect again to t ose examples o! eager may competition !or t e possession o! bank-notes, @ ic c aracterise seasons o! panic and @ ic

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sometimes, as at t e close o! 18<+, lead to a s%dden, t o%g only temporary, enlargement o! t e iss%es, e8en @ ile t e e!!l%x o! b%llion is still going on, t ese, & appre end, are not to be regarded as among t e nat%ral or necessary concomitants o! a lo@ exc ange# t e demand in s%c cases is not !or circ%lationL Bread circ%lation as a means o! p%rc aseC, Kb%t !or oarding, a demand on t e part o! alarmed bankers and capitalists @ ic arises generally in t e last act o! t e crisisL B ence, !or a reser8e o! means o! paymentC, Ka!ter a long contin%ation o! t e drain, and is t e prec%rsor o! its termination0L BF%llarton, p0 13=0C &n t e disc%ssion o! money as a means o! payment B4ol0 &, ; 0 &&&, 3, bC @e a8e already explained, in @ at manner, @ en t e c ain o! payments is s%ddenly interr%pted, money t%rns !rom its ideal !orm into a material and, at t e same time, absol%te !orm o! 8al%e 8is-O-8is t e commodities0 5 is @as ill%strated by some examples B!ootnotes 1== and 1=1C0 5 is interr%ption itsel! is partly an e!!ect, partly a ca%se o! t e instability o! credit and o! t e circ%mstances accompanying it, s%c as o8erstocking o! markets, depreciation o! commodities, interr%ption o! prod%ction, etc0 &t is e8ident, o@e8er, t at F%llarton trans!orms t e distinction bet@een money as a means o! p%rc ase and money as a means o! payment into a !alse distinction bet@een c%rrency and capital0 5 is is again d%e to t e narro@-minded banker"s conception o! circ%lation0 &t mig t yet be asked: @ ic is it, capital or money in its speci!ic !%nction as a means o! payment t at is in s ort s%pply in s%c periods o! stringencyQ ?nd t is is a @ell-kno@n contro8ersy0 &n t e !irst place, so !ar as t e stringency is marked by a drain o! gold, it is e8idently international means o! payment t at are demanded0 A%t money in its speci!ic capacity o! international means o! payment is gold in its metallic act%ality, as a 8al%able s%bstance in itsel!, as a D%antity o! 8al%e0 &t is at t e same time capital, not capital as commodity-capital, b%t as money-capital, capital not in t e !orm o! commodities b%t in t e !orm o! money Band, at t at, o! money in t e eminent sense o! t e @ord, in @ ic it exists as %ni8ersal @orld-market commodityC0 &t is not a contradiction ere bet@een a demand !or money as a means o! payment and a demand !or capital0 5 e contradiction is rat er bet@een capital in its money-!orm and capital in its commodity-!orm# and t e !orm @ ic is ere demanded and in @ ic alone it can !%nction, is its money-!orm0 ?side !rom t is demand !or gold Bor sil8erC it cannot be said t at t ere is any deart @ ate8er o! capital in s%c periods o! crisis0 (nder extraordinary circ%mstances, s%c as rise in t e price o! corn, or a cotton !amine, etc0, t is may be t e case# b%t t ese p enomena are not necessary or reg%lar accompaniments o! s%c periods# and t e existence o! s%c a lack o! capital cannot be ass%med be!ore and @it o%t !%rt er ado !rom t e mere !act t at t ere is a ea8y demand !or pec%niary accommodation0 3n t e contrary0 5 e markets are o8erstocked, s@amped @it commodity-capital0 6ence, it is not, in any case, a lack o! commodity1capital @ ic ca%ses t e stringency0 We s all ret%rn to t is D%estion later0

Chapter 2*. Co ponent Parts of (an% Capital

&t is no@ necessary to examine t e component parts o! bank capital in greater detail0 We a8e H%st seen t at F%llarton and ot ers trans!orm t e distinction bet@een money as a medi%m o! circ%lation and money as a means o! payment I also %ni8ersal money in so !ar as it concerns a drain o! gold I into a distinction bet@een c%rrency and capital0 5 e pec%liar role played by capital in t is instance is t e reason @ y bankers" economics teac es t at money is indeed capital par e cellence as insistently as enlig tened economics ta%g t t at money is not capital0 &n s%bseD%ent analyses, @e s all demonstrate t at money-capital is being con!%sed ere @it moneyed capital in t e sense o! interest-bearing capital, @ ile in t e !ormer sense, money-capital is al@ays merely a transient !orm o! capital I in contradistinction to t e ot er !orms o! capital, namely, commodity-capital and prod%cti8e capital0 Aank capital consists o! 1C cas money, gold or notes# <C sec%rities0 5 e latter can be s%bdi8ided into t@o parts: commercial paper or bills o! exc ange, @ ic r%n !or a period, become d%e !rom time to time, and @ ose disco%nting constit%tes t e essential b%siness o! t e banker# and p%blic sec%rities, s%c as go8ernment bonds, treas%ry notes, stocks o! all kinds, in s ort, interest-bearing paper @ ic is o@e8er signi!icantly di!!erent !rom bills o! exc ange0 Mortgages may also be incl%ded ere0 5 e capital composed o! t ese tangible component parts can again be di8ided into t e banker"s in8ested capital and into deposits, @ ic constit%te is banking capital, or borro@ed capital0 &n t e case o! banks @ ic iss%e notes, t ese m%st be incl%ded0 We s all lea8e t e deposits and notes o%t o! consideration !or t e present0 &t is e8ident at any rate t at t e act%al component parts o! t e banker"s capital Bmoney, bills o! exc ange, deposit c%rrencyC remain %na!!ected @ et er t e 8ario%s elements represent t e banker"s o@n capital or deposits, i.e., t e capital o! ot er people0 5 e same di8ision @o%ld remain, @ et er e @ere to carry on is b%siness @it only is o@n capital or only @it deposited capital0 5 e !orm o! interest-bearing capital is responsible !or t e !act t at e8ery de!inite and reg%lar money re8en%e appears as interest on some capital, @ et er it arises !rom some capital or not0 5 e money income is !irst con8erted into interest, and !rom t e interest one can determine t e capital !rom @ ic it arises0 &n like manner, in t e case o! interest-bearing capital, e8ery s%m o! 8al%e appears as capital as long as it is not expended as re8en%e# t at is, it appears as principal in contrast to possible or act%al interest @ ic it may yield0 5 e matter is simple0 'et t e a8erage rate o! interest be +T ann%ally0 ? s%m o! V+== @o%ld t en yield V<+ ann%ally i! con8erted into interest-bearing capital0 E8ery !ixed ann%al income o! V<+ may t en be considered as interest on a capital o! V+==0 5 is, o@e8er, is and remains a p%rely ill%sory conception, except in t e case @ ere t e so%rce o! t e V<+, @ et er it be a mere title o! o@ners ip or claim, or an act%al element o! prod%ction s%c as real estate, is directly trans!erable or ass%mes a !orm in @ ic it becomes trans!erable0 'et %s take t e national debt and @ages as ill%strations0 5 e state as to ann%ally pay its creditors a certain amo%nt o! interest !or t e capital borro@ed !rom t em0 &n t is case, t e creditor cannot recall is in8estment !rom is debtor, b%t can only sell is claim, or is title o! o@ners ip0 5 e capital itsel! as been cons%med, i.e., expended by t e state0 &t no longer exists0 W at t e creditor o! t e state possesses is 1C t e state"s promissory note, amo%nting to, say, V1==# <C t is promissory note gi8es t e creditor a claim %pon t e ann%al re8en%e o! t e state, t at is, t e ann%al tax proceeds, !or a certain amo%nt, e.g., V+ or +T# 3C t e creditor can sell t is promissory note o! V1== at is discretion to some ot er person0 &! t e rate o!

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interest is +T, and t e sec%rity gi8en by t e state is good, t e o@ner ? can sell t is promissory note, as a r%le, to A !or V1==# !or it is t e same to A @ et er e lends V1== at +T ann%ally, or @ et er e sec%res !or imsel! by t e payment o! V1== an ann%al trib%te !rom t e state amo%nting to V+0 A%t in all t ese cases, t e capital, as @ ose o!!s oot BinterestC state payments are considered, is ill%sory, !ictitio%s capital0 -ot only t at t e amo%nt loaned to t e state no longer exists, b%t it @as ne8er intended t at it be expended as capital, and only by in8estment as capital co%ld it a8e been trans!ormed into a sel!-preser8ing 8al%e0 5o t e original creditor ?, t e s are o! ann%al taxes accr%ing to im represents interest on is capital, H%st as t e s are o! t e spendt ri!t"s !ort%ne accr%ing to t e %s%rer appears to t e latter, alt o%g in bot cases t e loaned amo%nt @as not in8ested as capital0 5 e possibility o! selling t e state"s promissory note represents !or ? t e potential means o! regaining is principal0 ?s !or A, is capital is in8ested, !rom is indi8id%al point o! 8ie@, as interest-bearing capital0 $o !ar as t e transaction is concerned, A as simply taken t e place o! ? by b%ying t e latter"s claim on t e state"s re8en%e0 -o matter o@ o!ten t is transaction is repeated, t e capital o! t e state debt remains p%rely !ictitio%s, and, as soon as t e promissory notes become %nsaleable, t e ill%sion o! t is capital disappears0 -e8ert eless, t is !ictitio%s capital as its o@n la@s o! motion, as @e s all presently see0 We s all no@ consider labo%r-po@er in contrast to t e capital o! t e national debt, @ ere a negati8e D%antity appears as capital I H%st as interest-bearing capital, in general, is t e !o%ntain ead o! all manner o! insane !orms, so t at debts, !or instance, can appear to t e banker as commodities0 Wages are concei8ed ere as interest, and t ere!ore labo%r-po@er as t e capital yielding t is interest0 For example, i! t e @age !or one year amo%nts to V+= and t e rate o! interest is +T, t e ann%al labo%r-po@er is eD%al to a capital o! V1,===0 5 e insanity o! t e capitalist mode o! conception reac es its climax ere, !or instead o! explaining t e expansion o! capital on t e basis o! t e exploitation o! labo%r-po@er, t e matter is re8ersed and t e prod%cti8ity o! labo%r po@er is explained by attrib%ting t is mystical D%ality o! interest-bearing capital to labo%r-po@er itsel!0 &n t e second al! o! t e 1>t cent%ry, t is %sed to be a !a8o%rite conception B!or example, o! ,ettyC, b%t it is %sed e8en no@adays in all serio%sness by some 8%lgar economists and more partic%larly by some :erman statisticians0 xi (n!ort%nately t@o disagreeably !r%strating !acts mar t is t o%g tless conception0 &n t e !irst place, t e labo%rer m%st @ork in order to obtain t is interest0 &n t e second place, e cannot trans!orm t e capital-8al%e o! is labo%r-po@er into cas by trans!erring it0 )at er, t e ann%al 8al%e o! is labo%r-po@er is eD%al to is a8erage ann%al @age, and @ at e as to gi8e t e b%yer in ret%rn t ro%g is labo%r is t is same 8al%e pl%s a s%rpl%s-8al%e, i.e., t e increment added by is labo%r0 &n a sla8e society, t e labo%rer as a capital-8al%e, namely, is p%rc ase price0 ?nd @ en e is ired o%t, t e irer m%st pay, in t e !irst place, t e interest on t is p%rc ase price, and, in addition, replace t e ann%al @ear and tear on t e capital0 5 e !ormation o! a !ictitio%s capital is called capitalisation0 E8ery periodic income is capitalised by calc%lating it on t e basis o! t e a8erage rate o! interest, as an income @ ic @o%ld be realised by a capital loaned at t is rate o! interest0 For example, i! t e ann%al income is V1== and t e rate o! interest +T, t en t e V1== @o%ld represent t e ann%al interest on V<,===, and t e V<,=== is regarded as t e capital-8al%e o! t e legal title o! o@ners ip on t e V1== ann%ally0 For t e person @ o b%ys t is title o! o@ners ip, t e ann%al income o! V1== represents indeed t e interest on is capital in8ested at +T0 ?ll connection @it t e act%al expansion process o! capital is t %s completely lost, and t e conception o! capital as somet ing @it a%tomatic sel!-expansion properties is t ereby strengt ened0 E8en @ en t e promissory note I t e sec%rity I does not represent a p%rely !ictitio%s capital, as it does in t e case o! state debts, t e capital-8al%e o! s%c paper is ne8ert eless @ olly ill%sory0 We a8e pre8io%sly seen in @ at manner t e credit system creates associated capital0 5 e paper ser8es as title o! o@ners ip @ ic represents t is capital0 5 e stocks o! rail@ays, mines,

3<=

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na8igation companies, and t e like, represent act%al capital, namely, t e capital in8ested and !%nctioning in s%c enterprises, or t e amo%nt o! money ad8anced by t e stock olders !or t e p%rpose o! being %sed as capital in s%c enterprises0 5 is does not precl%de t e possibility t at t ese may represent p%re s@indle0 A%t t is capital does not exist t@ice, once as t e capital-8al%e o! titles o! o@ners ip BstocksC on t e one and and on t e ot er and as t e act%al capital in8ested, or to be in8ested, in t ose enterprises0 &t exists only in t e latter !orm, and a s are o! stock is merely a title o! o@ners ip to a corresponding portion o! t e s%rpl%s-8al%e to be realised by it0 ? may sell t is title to A, and A may sell it to ;0 5 ese transactions do not alter anyt ing in t e nat%re o! t e problem0 ? or A t en as is title in t e !orm o! capital, b%t ; as trans!ormed is capital into a mere title o! o@ners ip to t e anticipated s%rpl%s-8al%e !rom t e stock capital0 5 e independent mo8ement o! t e 8al%e o! t ese titles o! o@ners ip, not only o! go8ernment bonds b%t also o! stocks, adds @eig t to t e ill%sion t at t ey constit%te real capital alongside o! t e capital or claim to @ ic t ey may a8e title0 For t ey become commodities, @ ose price as its o@n c aracteristic mo8ements and is establis ed in its o@n @ay0 5 eir market-8al%e is determined di!!erently !rom t eir nominal 8al%e, @it o%t any c ange in t e 8al%e Be8en t o%g t e expansion may c angeC o! t e act%al capital0 3n t e one and, t eir market-8al%e !l%ct%ates @it t e amo%nt and reliability o! t e proceeds to @ ic t ey a!!ord legal title0 &! t e nominal 8al%e o! a s are o! stock, t at is, t e in8ested s%m originally represented by t is s are, is V1==, and t e enterprise pays 1=T instead o! +T, t en its market-8al%e, e8eryt ing else remaining eD%al, rises to V<==, as long as t e rate o! interest is +T, !or @ en capitalised at +T, it no@ represents a !ictitio%s capital o! V<==0 W oe8er b%ys it !or V<== recei8es a re8en%e o! +T on t is in8estment o! capital0 5 e con8erse is tr%e @ en t e proceeds !rom t e enterprise diminis 0 5 e market-8al%e o! t is paper is in part spec%lati8e, since it is determined not only by t e act%al income, b%t also by t e anticipated income, @ ic is calc%lated in ad8ance0 A%t ass%ming t e expansion o! t e act%al capital as constant, or @ ere no capital exists, as in t e case o! state debts, t e ann%al income to be !ixed by la@ and ot er@ise s%!!iciently sec%red, t e price o! t ese sec%rities rises and !alls in8ersely as t e rate o! interest0 &! t e rate o! interest rises !rom +T to 1=T, t en sec%rities g%aranteeing an income o! V+ @ill no@ represent a capital o! only V+=0 ;on8ersely, i! t e rate o! interest !alls to <ZT# t e same sec%rities @ill represent a capital o! V<==0 5 eir 8al%e is al@ays merely capitalised income, t at is, t e income calc%lated on t e basis o! a !ictitio%s capital at t e pre8ailing rate o! interest0 5 ere!ore, @ en t e money-market is tig t t ese sec%rities @ill !all in price !or t@o reasons: !irst, beca%se t e rate o! interest rises, and secondly, beca%se t ey are t ro@n on t e market in large D%antities in order to con8ert t em into cas 0 5 is drop in price takes place regardless o! @ et er t e income t at t is paper g%arantees its o@ner is constant, as is t e case @it go8ernment bonds, or @ et er t e expansion o! t e act%al capital, @ ic it represents, as in ind%strial enterprises, is possibly a!!ected by dist%rbances in t e reprod%ction process0 &n t e latter e8ent, t ere is only still anot er depreciation added to t at mentioned abo8e0 ?s soon as t e storm is o8er, t is paper again rises to its !ormer le8el, in so !ar as it does not represent a b%siness !ail%re or s@indle0 &ts depreciation in times o! crisis ser8es as a potent means o! centralising !ort%nes0xii 5o t e extent t at t e depreciation or increase in 8al%e o! t is paper is independent o! t e mo8ement o! 8al%e o! t e act%al capital t at it represents, t e @ealt o! t e nation is H%st as great be!ore as a!ter its depreciation or increase in 8al%e0 K5 e p%blic stocks and canal and rail@ay s ares ad already by t e <3rd o! 3ctober, 182>, been depreciated in t e aggregate to t e amo%nt o! V112,>+<,<<+0L BMorris, :o8ernor o! t e Aank o!

3<1

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England, testimony in t e )eport on ;ommercial 7istress, 182>-28 /-o0 38==10C (nless t is depreciation re!lected an act%al stoppage o! prod%ction and o! tra!!ic on canals and rail@ays, or a s%spension o! already initiated enterprises, or sD%andering capital in positi8ely @ort less 8ent%res, t e nation did not gro@ one cent poorer by t e b%rsting o! t is soap b%bble o! nominal money-capital0 ?ll t is paper act%ally represents not ing more t an acc%m%lated claims, or legal titles, to !%t%re prod%ction @ ose money or capital 8al%e represents eit er no capital at all, as in t e case o! state debts, or is reg%lated independently o! t e 8al%e o! real capital @ ic it represents0 &n all co%ntries based on capitalist prod%ction, t ere exists in t is !orm an enormo%s D%antity o! so-called interest-bearing capital, or moneyed capital0 ?nd by acc%m%lation o! money-capital not ing more, in t e main, is connoted t an an acc%m%lation o! t ese claims on prod%ction, an acc%m%lation o! t e market-price, t e ill%sory capital-8al%e o! t ese claims0 ? part o! t e banker"s capital is no@ in8ested in t is so-called interest-bearing paper0 5 is is itsel! a portion o! t e reser8e capital, @ ic does not per!orm any !%nction in t e act%al b%siness o! banking0 5 e most important portion o! t is paper consists o! bills o! exc ange, t at is, promises to pay made by ind%strial capitalists or merc ants0 For t e money-lender t ese bills o! exc ange are interest-bearing, in ot er @ords, @ en e b%ys t em, e ded%cts interest !or t e time @ ic t ey still a8e to r%n0 5 is is called disco%nting0 &t depends on t e pre8ailing rate o! interest, o@ m%c o! a ded%ction is made !rom t e s%m represented by t e bill o! exc ange0 Finally, t e last part o! t e capital o! a banker consists o! is money reser8e in gold and notes0 5 e deposits, %nless tied %p by agreement !or a certain time, are al@ays at t e disposal o! t e depositors0 5 ey are in a state o! contin%al !l%ct%ation0 A%t @ ile one depositor dra@s on is acco%nt, anot er deposits, so t at t e general a8erage s%m total o! deposits !l%ct%ates little d%ring periods o! normal b%siness0 5 e reser8e !%nds o! t e banks, in co%ntries @it de8eloped capitalist prod%ction, al@ays express on t e a8erage t e D%antity o! money existing in t e !orm o! a oard, and a portion o! t is oard in t%rn consists o! paper, mere dra!ts %pon gold, @ ic a8e no 8al%e in t emsel8es0 5 e greater portion o! banker"s capital is, t ere!ore, p%rely !ictitio%s and consists o! claims Bbills o! exc angeC, go8ernment sec%rities B@ ic represent spent capitalC, and stocks Bdra!ts on !%t%re re8en%eC0 ?nd it s o%ld not be !orgotten t at t e money-8al%e o! t e capital represented by t is paper in t e sa!es o! t e banker is itsel! !ictitio%s, in so !ar as t e paper consists o! dra!ts on g%aranteed re8en%e Be.g., go8ernment sec%ritiesC, or titles o! o@ners ip to real capital B e.g., stocksC, and t at t is 8al%e is reg%lated di!!erently !rom t at o! t e real capital, @ ic t e paper represents at least in part# or, @ en it represents mere claims on re8en%e and no capital, t e claim on t e same re8en%e is expressed in contin%ally c anging !ictitio%s money-capital0 &n addition to t is, it m%st be noted t at t is !ictitio%s banker"s capital represents largely, not is o@n capital, b%t t at o! t e p%blic, @ ic makes deposits @it im, eit er interest-bearing or not0 7eposits are al@ays made in money, in gold or notes, or in dra!ts %pon t ese0 Wit t e exception o! t e reser8e !%nd, @ ic contracts or expands in accordance @it t e reD%irements o! act%al circ%lation, t ese deposits are in !act al@ays in t e ands o! t e ind%strial capitalists and merc ants, on t e one and, @ ose bills o! exc ange are t ereby disco%nted and @ o t %s recei8e ad8ances# on t e ot er and, t ey are in t e ands o! dealers in sec%rities Bexc ange brokersC, or in t e ands o! pri8ate parties @ o a8e sold t eir sec%rities, or in t e ands o! t e go8ernment Bin t e case o! treas%ry notes and ne@ loansC0 5 e deposits t emsel8es play a do%ble role0 3n t e one and, as @e a8e H%st mentioned, t ey are loaned o%t as interest-bearing capital and are, t ere!ore, not in t e sa!es o! t e banks, b%t !ig%re merely on t eir books as credits o! t e depositors0 3n t e ot er and, t ey !%nction merely as s%c book entries, in so !ar as t e m%t%al

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claims o! t e depositors are balanced by c eD%es on t eir deposits and can be @ritten o!! against eac ot er0 &n t is connection, it is immaterial @ et er t ese deposits are entr%sted to t e same banker, @ o can t %s balance t e 8ario%s acco%nts against eac ot er, or @ et er t is is done in di!!erent banks, @ ic m%t%ally exc ange c eD%es and pay only t e balances to one anot er0 Wit t e de8elopment o! interest-bearing capital and t e credit system, all capital seems to do%ble itsel!, and sometimes treble itsel!, by t e 8ario%s modes in @ ic t e same capital, or per aps e8en t e same claim on a debt, appears in di!!erent !orms in di!!erent ands0 xiii 5 e greater portion o! t is Kmoney-capitalL is p%rely !ictitio%s0 ?ll t e deposits, @it t e exception o! t e reser8e !%nd, are merely claims on t e banker, @ ic , o@e8er, ne8er exist as deposits0 5o t e extent t at t ey ser8e in clearing- o%se transactions, t ey per!orm t e !%nction o! capital !or t e bankers I a!ter t e latter a8e loaned t em o%t0 5 ey pay one anot er t eir m%t%al dra!ts %pon t e nonexisting deposits by balancing t eir m%t%al acco%nts0 ?dam $mit says @it regard to t e role played by capital in t e loaning o! money: KE8en in t e moneyed interest, o@e8er, t e money is, as it @ere, b%t t e deed o! assignment @ ic con8eys !rom one and to anot er t ose capitals @ ic t e o@ners do not care to employ t emsel8es0 5 ose capitals may be greater in almost any proportion t an t e amo%nt o! t e money, @ ic ser8es as t e instr%ment o! t eir con8eyance, t e same pieces o! money s%ccessi8ely ser8ing !or many di!!erent loans, as @ell as !or many di!!erent p%rc ases0 ?, !or example, lends to W V1,===, @it @ ic W immediately p%rc ases o! A V1,=== @ort o! goods0 A, a8ing no occasion !or t e money imsel!, lends t e identical pieces to J, @it @ ic J immediately p%rc ases o! ; anot er V1,=== @ort o! goods0 ;, in t e same manner, and !or t e same reason, lends t em to ., @ o again p%rc ases goods @it t em o! 70 &n t is manner t e same pieces, eit er o! coin or o! paper, may, in t e co%rse o! a !e@ days, ser8e as t e instr%ment o! t ree di!!erent loans, and o! t ree di!!erent p%rc ases, eac o! @ ic is, in 8al%e, eD%al to t e @ ole amo%nt o! t ose pieces0 W at t e t ree moneyed men, ?, A and ;, assign to t e t ree borro@ers, W, J and ., is t e po@er o! making t ose p%rc ases0 &n t is po@er consist bot t e 8al%e and t e %se o! t e loans0 5 e stock lent by t e t ree moneyed men is eD%al to t e 8al%e o! t e goods @ ic

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can be p%rc ased @it it, and is t ree times greater t an t at o! t e money @it @ ic t e p%rc ases are made0 5 ose loans, o@e8er, may be all per!ectly @ell sec%red, t e goods p%rc ased by t e di!!erent debtors being so employed, as, in d%e time, to bring back, @it a pro!it, an eD%al 8al%e eit er o! coin or o! paper0 ?nd as t e same pieces o! money can t %s ser8e as t e instr%ment o! di!!erent loans to t ree, or !or t e same reason, to t irty times t eir 8al%e, so t ey may like@ise s%ccessi8ely ser8e as t e instr%ment o! repayment0 B/+n Dn3uiry into the $ature and Causes o6 the "ealth of $ations, ?berdeen, 'ondon, 1828, p0FC?. J 0d01 Aook &&, ; ap0 &40C $ince t e same piece o! money can be %sed !or 8ario%s p%rc ases, corresponding to its 8elocity o! circ%lation, it can similarly be %sed !or 8ario%s loans, since t e p%rc ases take it !rom one person to anot er, and a loan is b%t a trans!er !rom one person to anot er @it o%t t e mediation o! a p%rc ase0 5o e8ery seller, money represents t e trans!ormed s ape o! is commodities0 -o@adays, @ en e8ery 8al%e is expressed as capital-8al%e, it represents in t e 8ario%s loans 8ario%s capitals in s%ccession0 5 is is simply anot er @ay o! expressing t e earlier statement t at it can s%ccessi8ely realise 8ario%s commodity-8al%es0 ?t t e same time it ser8es as a medi%m o! circ%lation, in order to trans!er t e real capitals !rom person to person0 &n t e case o! loans, it does not pass !rom person to person as a medi%m o! circ%lation0 ?s long as it remains in t e ands o! t e lender, it is in is ands not a medi%m o! circ%lation, b%t t e 8al%e existence o! is capital0 ?nd in t is !orm e trans!ers it @ en lending it to anot er0 &! ? ad lent t e money to A, and A to ;, @it o%t t e mediation o! p%rc ases, t e same money @o%ld not represent t ree capitals, b%t only one I a single capital-8al%e0 5 e n%mber o! capitals @ ic it act%ally represents depends on t e n%mber o! times t at it !%nctions as t e 8al%e-!orm o! 8ario%s commodity-capitals0 5 e same t ing t at ?dam $mit says abo%t loans in general also applies to deposits, @ ic are merely anot er name !or t e loans @ ic t e p%blic makes to t e bankers0 5 e same pieces o! money may ser8e as t e instr%ments !or any n%mber o! deposits0 K&t is %nD%estionably tr%e t at t e V1,=== @ ic yo% deposit at ? today may be reiss%ed tomorro@, and !orm a deposit at A0 5 e day a!ter t at, reiss%ed !rom A, it may !orm a deposit at ;000 and so on to in!init%de# and t at t e same V1,=== in money may, t %s, by a s%ccession o! trans!ers, m%ltiply itsel! into a s%m o! deposits absol%tely inde!inite0 &t is possible, t ere!ore, t at nine-tent s o! all t e deposits in t e (nited Kingdom may a8e no existence beyond t eir record in t e books o! t e bankers @ o are

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respecti8ely acco%ntable !or t em0000 5 %s in $cotland, !or instance, c%rrency as ne8er exceeded V3 million, t e deposits in t e banks are estimated at V<> million0 (nless a r%n on t e banks be made, t e same V1,=== @o%ld, i! sent back %pon its tra8els, cancel @it t e same !acility a s%m eD%ally inde!inite0 ?s t e same V1,===, @it @ ic yo% cancel yo%r debt to a tradesman today, may cancel is debt to t e merc ant tomorro@, t e merc ant"s debt to t e bank t e day !ollo@ing, and so on @it o%t end# so t e same V1,=== may pass !rom and to and, and bank to bank, and cancel any concei8able s%m o! deposits0L B 4he Currency 4heory 9eviewed, pp0 6<-630C P%st as e8eryt ing in t is credit system is do%bled and trebled and trans!ormed into a mere p antom o! t e imagination, so it is @it t e Kreser8e !%nd,L @ ere one @o%ld at last ope to grasp on to somet ing solid0 'et %s listen once more to Mr0 Morris, :o8ernor o! t e Aank o! England: K5 e reser8es o! t e pri8ate bankers are in t e ands o! t e Aank o! England in t e s ape o! deposits0000 ?n export o! gold acts excl%si8ely, in t e !irst instance, %pon t e reser8e o! t e Aank o! England# b%t it @o%ld also be acting %pon t e reser8es o! t e bankers, inasm%c as it is a @it dra@al o! a portion o! t e reser8es @ ic t ey a8e in t e Aank o! England0 &t @o%ld be acting %pon t e reser8es o! all t e bankers t ro%g o%t t e co%ntry0L B;ommercial 7istress, 182>28, -os0 363*, 362<0C (ltimately, t en, t e reser8e !%nds act%ally merge @it t e reser8e !%nd o! t e Aank o! England0xi8 6o@e8er, t is reser8e !%nd also as a do%ble existence0 5 e reser8e !%nd o! t e banking department is eD%al to t e s%rpl%s o! notes @ ic t e Aank is a%t orised to iss%e o8er and abo8e t e notes in circ%lation0 5 e legal maxim%m o! t e note iss%e is V12 million B!or @ ic no b%llion reser8e is reD%ired# it is t e approximate amo%nt o@ed by t e state to t e AankC pl%s t e amo%nt o! t e Aank"s s%pply o! precio%s metal0 &! t e s%pply o! precio%s metal in t e Aank amo%nts to V12 million, t e Aank can t %s iss%e V<8 million in notes, and i! V<= million o! t ese are in circ%lation, t e reser8e !%nd o! t e banking department is V8 million0 5 ese V8 million"s @ort o! notes are t en legally t e banker"s capital at t e disposal o! t e Aank, and at t e same time t e reser8e !%nd !or its deposits0 -o@, i! a drain o! gold takes place, @ ereby t e s%pply o! precio%s metal in t e Aank is red%ced by V6 million I reD%iring t e destr%ction o! an eD%i8alent n%mber o! notes I t e reser8e o! t e banking department @o%ld !all !rom V8 million to V< million0 3n t e one and, t e Aank @o%ld raise its rate o! interest considerably# on t e ot er and, t e

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; apter JJ&J

banks a8ing deposits @it it, and t e ot er depositors, @o%ld obser8e a large decrease in t e reser8e !%nd co8ering t eir o@n credits in t e Aank0 &n 18+>, t e !o%r largest stock banks o! 'ondon t reatened to call in t eir deposits, and t ereby bankr%pt t e banking department, %nless t e Aank o! England @o%ld sec%re a Kgo8ernment letterL s%spending t e Aank ?ct o! 18220 x8 &n t is @ay t e banking department co%ld !ail, as in 182>, @ ile any n%mber o! millions B e.g., 8 million in 182>C are eld in its iss%e department to g%arantee t e con8ertibility o! t e circ%lating notes0 A%t t is is again ill%sory0 K5 at large portion Bo! depositsC !or @ ic bankers t emsel8es t e a8e no immediate demand

passes into t e ands o! t e bill-brokers, @ o gi8e to t e banker in ret%rn commercial bills already disco%nted by t em !or persons in 'ondon and in di!!erent parts o! t e co%ntry as a sec%rity !or t e s%m ad8anced by t e banker0 5 e bill-broker is responsible to t e banker !or payment o! t is money at call# and s%c is t e magnit%de o! t ese transactions, t at Mr0 -ea8e, t e present :o8ernor o! t e Aank /o! England1, stated in e8idence, "We kno@ t at one broker ad + million, and @e @ere led to belie8e t at anot er ad bet@een 8 and 1= million# t ere @as one @it 2, anot er @it 3Z, and a t ird @it abo8e 80 & speak o! deposits @it t e brokers0"K B)eport o! ;ommittee on Aank ?cts, 18+>-+8, p0 +, $ection 80C K5 e 'ondon bill-brokers carried on t eir enormo%s transactions @it o%t any cas reser8e, relying on t e r%n o!! o! t eir bills !alling d%e, or in extremity, on t e po@er o! obtaining ad8ances !rom t e Aank o! England on t e sec%rity o! bills %nder disco%nt0L Dbid., p0 4&&&, $ection 1>0 K5@o bill-broking o%ses in 'ondon s%spended payment in 182># bot a!ter@ards res%med b%siness0 &n 18+>, bot s%spended again0 5 e liabilities o! one o%se in 182> @ere, in ro%nd o%se, in 18+>, @ere n%mbers, V<,683,===, @it a capital o! V18=,===# t e liabilities o! t e same V+,3==,===, t e capital probably not more t an one!o%rt o! @ at it @as in 182>0 5 e liabilities o! t e ot er !irm @ere bet@een V3,===,=== and V2,===,===

3<6

; apter JJ&J

at eac

period o! stoppage, @it

a capital not

exceeding V2+,===0L )Dbid., p0 JJ&, $ection +<0C

Chapter 3/. 1one!-Capital and Real Capital. 5.

5 e only di!!ic%lt D%estions, @ ic @e are no@ approac ing in connection @it t e credit system, are t e !ollo@ing: 'irst: 5 e acc%m%lation o! t e act%al money-capital0 5o @ at extent is it, and to @ at extent is it not, an indication o! an act%al acc%m%lation o! capital, i.e., o! reprod%ction on an extended scaleQ &s t e so-called plet ora o! capital I an expression %sed only @it re!erence to t e interest-bearing capital, i.e., moneyed capital I only a special @ay o! expressing ind%strial o8er-prod%ction, or does it constit%te a separate p enomenon alongside o! itQ 7oes t is plet ora, or excessi8e s%pply o! money-capital, coincide @it t e existence o! stagnating masses o! money Bb%llion, gold coin and bank-notesC, so t at t is s%perab%ndance o! act%al money is t e expression and external !orm o! t at plet ora o! loan capitalQ Secondly: 5o @ at extent does a scarcity o! money, i.e., a s ortage o! loan capital, express a s ortage o! real capital Bcommodity-capital and prod%cti8e capitalCQ 5o @ at extent does it coincide, on t e ot er and, @it a s ortage o! money as s%c , a s ortage o! t e medi%m o! circ%lationQ &n so !ar as @e a8e it erto considered t e pec%liar !orm o! acc%m%lation o! money-capital and o! money @ealt in general, it as resol8ed itsel! into an acc%m%lation o! claims o! o@ners ip %pon labo%r0 5 e acc%m%lation o! t e capital o! t e national debt as been re8ealed to mean merely an increase in a class o! state creditors, @ o a8e t e pri8ilege o! a !irm claim %pon a certain portion o! t e tax re8en%e0 x8i Ay means o! t ese !acts, @ ereby e8en an acc%m%lation o! debts may appear as an acc%m%lation o! capital, t e eig t o! distortion taking place in t e credit system becomes apparent0 5 ese promissory notes, @ ic are iss%ed !or t e originally loaned capital long since spent, t ese paper d%plicates o! cons%med capital, ser8e !or t eir o@ners as capital to t e extent t at t ey are saleable commodities and may, t ere!ore, be recon8erted into capital0 5itles o! o@ners ip to p%blic @orks, rail@ays, mines, etc0, are indeed, as @e a8e also seen, titles to real capital0 A%t t ey do not place t is capital at one"s disposal0 &t is not s%bHect to @it dra@al0 5 ey merely con8ey legal claims to a portion o! t e s%rpl%s-8al%e to be prod%ced by it0 A%t t ese titles like@ise become paper d%plicates o! t e real capital# it is as t o%g a bill o! lading @ere to acD%ire a 8al%e separate !rom t e cargo, bot concomitantly and sim%ltaneo%sly @it it0 5 ey come to nominally represent non-existent capital0 For t e real capital exists side by side @it t em and does not c ange ands as a res%lt o! t e trans!er o! t ese d%plicates !rom one person to anot er0 5 ey ass%me t e !orm o! interest-bearing capital, not only beca%se t ey g%arantee a certain income, b%t also beca%se, t ro%g t eir sale, t eir repayment as capital-8al%es can be obtained0 5o t e extent t at t e acc%m%lation o! t is paper expresses t e acc%m%lation o! rail@ays, mines, steams ips, etc0, to t at extent does it express t e extension o! t e act%al reprod%ction process I H%st as t e extension o!, !or example, a tax list on mo8able property indicates t e expansion o! t is property0 A%t as d%plicates @ ic are t emsel8es obHects o! transactions as commodities, and t %s able to circ%late as capital-8al%es, t ey are ill%sory, and t eir 8al%e may !all or rise D%ite independently o! t e mo8ement o! 8al%e o! t e real capital !or @ ic t ey are titles0 5 eir 8al%e, t at is, t eir D%otation on t e $tock Exc ange, necessarily as a tendency to rise @it a !all in t e rate o! interest I in so !ar as t is !all, independent o! t e c aracteristic mo8ements o! money-capital, is d%e merely to t e tendency !or t e rate o! pro!it to !all# t ere!ore, t is imaginary @ealt expands, i! !or t is reason alone, in t e co%rse o! capitalist

3<8

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prod%ction in accordance @it t e expressed 8al%e !or eac o! its aliD%ot parts o! speci!ic original nominal 8al%e0x8ii :ain and loss t ro%g !l%ct%ations in t e price o! t ese titles o! o@ners ip, and t eir centralisation in t e ands o! rail@ay kings, etc0, become, by t eir 8ery nat%re, more and more a matter o! gamble, @ ic appears to take t e place o! labo%r as t e original met od o! acD%iring capital @ealt and also replaces naked !orce0 5 is type o! imaginary money @ealt not only constit%tes a 8ery considerable part o! t e money @ealt o! pri8ate people, b%t also o! bankerGs capital, as @e a8e already indicated0 &n order to D%ickly settle t is D%estion, let %s point o%t t at one co%ld also mean by t e acc%m%lation o! money-capital t e acc%m%lation o! @ealt in t e ands o! bankers Bmoneylenders by pro!essionC, acting as middlemen bet@een pri8ate money-capitalists on t e one and, and t e state, comm%nities, and reprod%cing borro@ers on t e ot er0 For t e entire 8ast extension o! t e credit system, and all credit in general, is exploited by t em as t eir pri8ate capital0 5 ese !ello@s al@ays possess capital and incomes in money-!orm or in direct claims on money0 5 e acc%m%lation o! t e @ealt o! t is class may take place completely di!!erently t an act%al acc%m%lation, b%t it pro8es at any rate t at t is class pockets a good deal o! t e real acc%m%lation0 'et %s red%ce t e scope o! t e problem be!ore %s0 :o8ernment sec%rities, like stocks and ot er sec%rities o! all kinds, are sp eres o! in8estment !or loanable capital I capital intended !or bearing interest0 5 ey are !orms o! loaning s%c capital0 A%t t ey t emsel8es are not t e loan capital, @ ic is in8ested in t em0 3n t e ot er and, in so !ar as credit plays a direct role in t e reprod%ction process, @ at t e ind%strialist or merc ant needs @ en e @is es to a8e a bill disco%nted or a loan granted is neit er stocks nor go8ernment sec%rities0 W at e needs is money0 6e, t ere!ore, pledges or sells t ose sec%rities i! e cannot sec%re money in any ot er @ay0 &t is t e acc%m%lation o! this loan capital @it @ ic @e a8e to deal ere, and more partic%larly acc%m%lation o! loanable money-capital0 We are not concerned ere @it loans o! o%ses, mac ines, or ot er !ixed capital0 -or are @e concerned @it t e ad8ances ind%strialists and merc ants make to one anot er in commodities and @it in t e compass o! t e reprod%ction process# alt o%g @e m%st also in8estigate t is point be!ore and in more detail0 We are concerned excl%si8ely @it money loans, @ ic are made by bankers, as middlemen, to ind%strialists and merc ants0 'et %s t en, to begin @it , analyse commercial credit, t at is, t e credit @ ic t e capitalists engaged in reprod%ction gi8e to one anot er0 &t !orms t e basis o! t e credit system0 &t is represented by t e bill o! exc ange, a promissory note @it a de!inite term o! payment, i.e., a doc%ment o! de!erred payment0 E8eryone gi8es credit @it one and and recei8es credit @it t e ot er0 'et %s completely disregard, !or t e present, bankerGs credit, @ ic constit%tes an entirely di!!erent sp ere0 5o t e extent t at t ese bills o! exc ange circ%late among t e merc ants t emsel8es as means o! payment again, by endorsement !rom one to anot er I @it o%t, o@e8er, t e mediation o! disco%nting I it is merely a trans!er o! t e claim !rom ? to A and does not c ange t e pict%re in t e least0 &t merely replaces one person by anot er0 ?nd e8en in t is case, t e liD%idation can take place @it o%t t e inter8ention o! money0 $pinner ?, !or example, as to pay a bill to cotton broker A, and t e latter to importer ;0 -o@, i! ; also exports yarn, @ ic appens o!ten eno%g , e may b%y yarn !rom ? on a bill o! exc ange and t e spinner ? may pay t e broker A @it t e brokerGs o@n bill @ ic @as recei8ed in payment !rom ;0 ?t most, a balance @ill a8e to be paid in money0 5 e entire transaction t en consists merely in t e exc ange o! cotton and yarn0 5 e exporter represents only t e spinner, and t e cotton broker, t e cotton planter0 5@o t ings are no@ to be noted in t e circ%it o! t is p%rely commercial credit0

3<*

; apter JJJ

'irst: 5 e settlement o! t ese m%t%al claims depends %pon t e ret%rn !lo@ o! capital, t at is, on ; I M, @ ic is merely de!erred0 &! t e spinner as recei8ed a bill o! exc ange !rom a cotton goods man%!act%rer, t en man%!act%rer can pay i! t e cotton goods @ ic e as on t e market a8e been sold in t e interim0 &! t e corn spec%lator as a bill o! exc ange dra@n %pon is agent, t e agent can pay t e money i! t e corn as been sold in t e interim at t e expected price0 5 ese payments, t ere!ore, depend on t e !l%idity o! reprod%ction, t at is, t e prod%ction and cons%mption processes0 A%t since t e credits are m%t%al, t e sol8ency o! one depends %pon t e sol8ency o! anot er# !or in dra@ing is bill o! exc ange, one may a8e co%nted eit er on t e ret%rn !lo@ o! t e capital in is o@n b%siness or on t e ret%rn !lo@ o! t e capital in a t ird partyGs b%siness @ ose bill o! exc ange is d%e in t e meantime0 ?side !rom t e prospect o! ret%rn !lo@ o! capital, payment can only be possible by means o! reser8e capital at t e disposal o! t e person dra@ing t e bill o! exc ange, in order to meet is obligations in case t e ret%rn !lo@ o! capital s o%ld be delayed0 Secondly: 5 is credit system does not do a@ay @it t e necessity !or cas payments0 For one t ing, a large portion o! expenses m%st al@ays be paid in cas , e.g., @ages, taxes, etc0 F%rt ermore, capitalist A, @ o as recei8ed !rom ; a bill o! exc ange in place o! cas payment, may a8e to pay a bill o! is o@n @ ic as !allen d%e to 7 be!ore ;Gs bill becomes d%e, and so e m%st a8e ready cas 0 ? complete circ%it o! reprod%ction as t at ass%med abo8e, i.e., !rom cotton planter to cotton spinner and back again, can only constit%te an exception# it @ill be constantly interr%pted at many points0 We a8e seen in t e disc%ssion o! t e reprod%ction process B4ol &&, ,art &&&C t at t e prod%cers o! constant capital exc ange, in part, constant capital among t emsel8es0 ?s a res%lt, t e bills o! exc ange can, more or less, balance eac ot er o%t0 $imilarly, in t e ascending line o! prod%ction, @ ere t e cotton broker dra@s on t e cotton spinner, t e spinner on t e man%!act%rer o! cotton goods, t e man%!act%rer on t e exporter, t e exporter on t e importer Bper aps o! cotton againC0 A%t t e circ%it o! transactions, and, t ere!ore, t e t%rn abo%t o! t e series o! claims, does not take place at t e same time0 For example, t e claim o! t e spinner on t e @ea8er is not settled by t e claim o! t e coal-dealer on t e mac ine-b%ilder0 5 e spinner ne8er as any co%nter-claims on t e mac ine-b%ilder, in is b%siness, beca%se is prod%ct, yarn, ne8er enters as an element in t e mac ine-b%ilderGs reprod%ction process0 $%c claims m%st, t ere!ore, be settled by money0 5 e limits o! t is commercial credit, considered by t emsel8es, are 1C t e @ealt o! t e ind%strialists and merc ants, t at is, t eir command o! reser8e capital in case o! delayed ret%rns# <C t ese ret%rns t emsel8es0 5 ese ret%rns may be delayed, or t e prices o! commodities may !all in t e meantime or t e commodities may become momentarily %nsaleable d%e to a stagnant market0 5 e longer t e bills o! exc ange r%n, t e larger m%st be t e reser8e capital, and t e greater t e possibility o! a dimin%tion or delay o! t e ret%rns t ro%g a !all in prices or a gl%t on t e market0 ?nd, !%rt ermore, t e ret%rns are so m%c less sec%re, t e more t e original transaction @as conditioned %pon spec%lation on t e rise or !all o! commodity-prices0 A%t it is e8ident t at @it t e de8elopment o! t e prod%cti8e po@er o! labo%r, and t %s o! prod%ction on a large scale: 1C t e markets expand and become more distant !rom t e place o! prod%ction# <C credits m%st, t ere!ore, be prolonged# 3C t e spec%lati8e element m%st t %s more and more dominate t e transactions0 ,rod%ction on a large scale and !or distant markets t ro@s t e total prod%ct into t e ands o! commerce# b%t it is impossible t at t e capital o! a nation s o%ld do%ble itsel! in s%c a manner t at commerce s o%ld itsel! be able to b%y %p t e entire national prod%ct @it its o@n capital and to sell it again0 ;redit is, t ere!ore, indispensable ere# credit, @ ose 8ol%me gro@s @it t e gro@ing 8ol%me o! 8al%e o! prod%ction and @ ose time d%ration gro@s @it t e increasing distance o! t e markets0 ? m%t%al interaction takes place ere0 5 e de8elopment o! t e prod%ction process extends t e credit, and credit leads to an extension o! ind%strial and commercial operations0

33=

; apter JJJ

W en @e examine t is credit detac ed !rom bankerGs credit, it is e8ident t at it gro@s @it an increasing 8ol%me o! ind%strial capital itsel!0 'oan capital and ind%strial capital are identical ere0 5 e loaned capital is commodity-capital @ ic is intended eit er !or %ltimate indi8id%al cons%mption or !or t e replacement o! t e constant elements o! prod%cti8e capital0 W at appears ere as loan capital is al@ays capital existing in some de!inite p ase o! t e reprod%ction process, b%t @ ic by means o! p%rc ase and sale passes !rom one person to anot er, @ ile its eD%i8alent is not paid by t e b%yer %ntil some later stip%lated time0 For example, cotton is trans!erred to t e spinner !or a bill o! exc ange, yarn to t e man%!act%rer o! cotton goods !or a bill o! exc ange, cotton goods to t e merc ant !or a bill, !rom @ ose ands t ey go to t e exporter !or a bill, and t en, !or a bill to some merc ant in &ndia, @ o sells t e goods and b%ys indigo instead, etc0 7%ring t is trans!er !rom and to and t e trans!ormation o! cotton into cotton goods is e!!ected, and t e cotton goods are !inally transported to &ndia and exc anged !or indigo, @ ic is s ipped to E%rope and t ere enters into t e reprod%ction process again0 5 e 8ario%s p ases o! t e reprod%ction process are promoted ere by credit, @it o%t any payment on t e part o! t e spinner !or t e cotton, t e man%!act%rer o! cotton goods !or t e yarn, t e merc ant !or t e cotton goods, etc0 &n t e !irst stages o! t e process, t e commodity, cotton, goes t ro%g its 8ario%s prod%ction p ases, and t is transition is promoted by credit0 A%t as soon as t e cotton as recei8ed in prod%ction its %ltimate !orm as a commodity, t e same commodity-capital passes only t ro%g t e ands o! 8ario%s merc ants @ o promote its transportation to distant markets, and t e last o! @ om !inally sells t ese commodities to t e cons%mer and b%ys ot er commodities in t eir stead, @ ic eit er become cons%med or go into t e reprod%ction process0 &t is necessary, t en, to di!!erentiate bet@een t@o stages ere: &n t e !irst stage, credit promotes t e act%al s%ccessi8e p ases in t e prod%ction o! t e same article# in t e second, credit merely promotes t e trans!er o! t e article, incl%ding its transportation, !rom one merc ant to anot er, in ot er @ords, t e process ; I M0 A%t ere also t e commodity is at least in t e process o! circ%lation, t at is, in a p ase o! t e reprod%ction process0 &t !ollo@s, t en, t at it is ne8er idle capital @ ic is loaned ere, b%t capital @ ic m%st c ange its !orm in t e ands o! its o@ner# it exists in a !orm t at !or im is merely commodity-capital, i.e., capital @ ic m%st be retrans!ormed, and, to begin @it , at least con8erted into money0 &t is, t ere!ore, t e metamorp osis o! commodities t at is ere promoted by credit# not merely ; I M, b%t also M I ; and t e act%al prod%ction process0 ? large D%antity o! credit @it in t e reprod%cti8e circ%it BbankerGs credit exceptedC does not signi!y a large D%antity o! idle capital, @ ic is being o!!ered !or loan and is seeking pro!itable in8estment0 &t means rat er a large employment o! capital in t e reprod%ction process0 ;redit, t en, promotes ere 1C as !ar as t e ind%strial capitalists are concerned, t e transition o! ind%strial capital !rom one p ase into anot er, t e connection o! related and do8etailing sp eres o! prod%ction# <C as !ar as t e merc ants are concerned, t e transportation and transition o! commodities !rom one person to anot er %ntil t eir de!inite sale !or money or t eir exc ange !or ot er commodities0 5 e maxim%m o! credit is ere identical @it t e !%llest employment o! ind%strial capital, t at is, t e %tmost exertion o! its reprod%cti8e po@er @it o%t regard to t e limits o! cons%mption0 5 ese limits o! cons%mption are extended by t e exertions o! t e reprod%ction process itsel!0 3n t e one and, t is increases t e cons%mption o! re8en%e on t e part o! labo%rers and capitalists, on t e ot er and, it is identical @it an exertion o! prod%cti8e cons%mption0 ?s long as t e reprod%ction process is contin%o%s and, t ere!ore, t e ret%rn !lo@ ass%red, t is credit exists and expands, and its expansion is based %pon t e expansion o! t e reprod%ction process itsel!0 ?s soon as a stoppage takes place, as a res%lt o! delayed ret%rns, gl%tted markets, or !allen prices, a s%perab%ndance o! ind%strial capital becomes a8ailable, b%t in a !orm in @ ic it cannot per!orm its !%nctions0 6%ge D%antities o! commodity-capital, b%t %nsaleable0 6%ge D%antities o! !ixed capital, b%t largely idle d%e to stagnant reprod%ction0 ;redit is contracted 1C beca%se t is capital is idle, i.e., blocked in one o! its p ases o! reprod%ction beca%se it cannot

331

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complete its metamorp osis# <C beca%se con!idence in t e contin%ity o! t e reprod%ction process as been s aken# 3C beca%se t e demand !or t is commercial credit diminis es0 5 e spinner, @ o c%rtails is prod%ction and as a large D%antity o! %nsold yarn in stock, does not need to b%y any cotton on credit# t e merc ant does not need to b%y any commodities on credit beca%se e as more t an eno%g o! t em0 6ence, i! t ere is a dist%rbance in t is expansion or e8en in t e normal !lo@ o! t e reprod%ction process, credit also becomes scarce# it is more di!!ic%lt to obtain commodities on credit0 6o@e8er, t e demand !or cas payment and t e ca%tion obser8ed to@ard sales on credit are partic%larly c aracteristic o! t e p ase o! t e ind%strial cycle !ollo@ing a cras 0 7%ring t e crisis itsel!, since e8eryone as prod%cts to sell, cannot sell t em, and yet m%st sell t em in order to meet payments, it is not t e mass o! idle and in8estment-seeking capital, b%t rat er t e mass o! capital impeded in its reprod%ction process, t at is greatest H%st @ en t e s ortage o! credit is most ac%te Band t ere!ore t e rate o! disco%nt ig est !or bankerGs creditC0 5 e capital already in8ested is t en, indeed, idle in large D%antities beca%se t e reprod%ction process is stagnant0 Factories are closed, ra@ materials acc%m%late, !inis ed prod%cts !lood t e market as commodities0 -ot ing is more erroneo%s, t ere!ore, t an to blame a scarcity o! prod%cti8e capital !or s%c a condition0 &t is precisely at s%c times t at t ere is a s%perab%ndance o! prod%cti8e capital, partly in relation to t e normal, b%t temporarily red%ced scale o! reprod%ction, and partly in relation to t e paralysed cons%mption0 'et %s s%ppose t at t e @ ole o! society is composed only o! ind%strial capitalists and @age@orkers0 'et %s !%rt ermore disregard price !l%ct%ations, @ ic pre8ent large portions o! t e total capital !rom replacing t emsel8es in t eir a8erage proportions and @ ic , o@ing to t e general interrelations o! t e entire reprod%ction process as de8eloped in partic%lar by credit, m%st al@ays call !ort general stoppages o! a transient nat%re0 'et %s also disregard t e s am transactions and spec%lations, @ ic t e credit system !a8o%rs0 5 en, a crisis co%ld only be explained as t e res%lt o! a disproportion o! prod%ction in 8ario%s branc es o! t e economy, and as a res%lt o! a disproportion bet@een t e cons%mption o! t e capitalists and t eir acc%m%lation0 A%t as matters stand, t e replacement o! t e capital in8ested in prod%ction depends largely %pon t e cons%ming po@er o! t e non-prod%cing classes# @ ile t e cons%ming po@er o! t e @orkers is limited partly by t e la@s o! @ages, partly by t e !act t at t ey are %sed only as long as t ey can be pro!itably employed by t e capitalist class0 5 e %ltimate reason !or all real crises al@ays remains t e po8erty and restricted cons%mption o! t e masses as opposed to t e dri8e o! capitalist prod%ction to de8elop t e prod%cti8e !orces as t o%g only t e absol%te cons%ming po@er o! society constit%ted t eir limit0 ? real lack o! prod%cti8e capital, at least among capitalistically de8eloped nations, can be said to exist only in times o! general crop !ail%res, eit er in t e principal !oodst%!!s or in t e principal ind%strial ra@ materials0 6o@e8er, in addition to t is commercial credit @e a8e act%al money credit0 5 e ad8ances o! t e ind%strialists and merc ants among one anot er are amalgamated @it t e money ad8ances made to t em by t e bankers and money-lenders0 &n disco%nting bills o! exc ange t e ad8ance is only nominal0 ? man%!act%rer sells is prod%ct !or a bill o! exc ange and gets t is bill disco%nted by some bill-broker0 &n reality, t e latter ad8ances only t e credit o! is banker, @ o in t%rn ad8ances to t e broker t e money-capital o! is depositors0 5 e depositors consist o! t e ind%strial capitalists and merc ants t emsel8es and also o! @orkers Bt ro%g sa8ings-banksC I as @ell as gro%nd-rent recipients and ot er %nprod%cti8e classes0 &n t is @ay e8ery indi8id%al ind%strial man%!act%rer and merc ant gets aro%nd t e necessity o! keeping a large reser8e !%nd and being dependent %pon is act%al ret%rns0 3n t e ot er and, t e @ ole process becomes so complicated, partly by simply manip%lating bills o! exc ange, partly by commodity transactions !or t e sole p%rpose o! man%!act%ring bills o! exc ange, t at t e semblance o! a 8ery sol8ent b%siness @it a smoot !lo@ o! ret%rns can easily persist e8en long a!ter ret%rns act%ally come in only at t e

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expense partly o! s@indled money-lenders and partly o! s@indled prod%cers0 5 %s b%siness al@ays appears almost excessi8ely so%nd rig t on t e e8e o! a cras 0 5 e best proo! o! t is is !%rnis ed, !or instance, by t e )eports on Aank ?cts o! 18+> and 18+8, in @ ic all bank directors, merc ants, in s ort all t e in8ited experts @it 'ord 38erstone at t eir ead, congrat%lated one anot er on t e prosperity and so%ndness o! b%siness I H%st one mont be!ore t e o%tbreak o! t e crisis in ?%g%st 18+>0 ?nd, strangely eno%g , 5ooke in is (istory of &rices s%cc%mbs to t is ill%sion once again as istorian !or eac crisis0 A%siness is al@ays t oro%g ly so%nd and t e campaign in !%ll s@ing, %ntil s%ddenly t e debacle takes place0 We re8ert no@ to t e acc%m%lation o! money-capital0 -ot e8ery a%gmentation o! loanable money-capital indicates a real acc%m%lation o! capital or expansion o! t e reprod%ction process0 5 is becomes most e8ident in t e p ase o! t e ind%strial cycle immediately !ollo@ing a crisis, @ en loan capital lies aro%nd idle in great D%antities0 ?t s%c times, @ en t e prod%ction process is c%rtailed Bprod%ction in t e Englis ind%strial districts @as red%ced by one-t ird a!ter t e crisis o! 182>C, @ en t e prices o! commodities are at t eir lo@est le8el, @ en t e spirit o! enterprise is paralysed, t e rate o! interest is lo@, @ ic in t is case indicates not ing more t an an increase in loanable capital precisely as a res%lt o! contraction and paralysation o! ind%strial capital0 &t is D%ite ob8io%s t at a smaller D%antity o! a circ%lation medi%m is reD%ired @ en t e prices o! commodities a8e !allen, t e n%mber o! transactions decreased, and t e capital laid o%t !or @ages red%ced# t at, on t e ot er and, no additional money is reD%ired to !%nction as @orld-money a!ter !oreign debts a8e been liD%idated eit er by t e export o! gold or as a res%lt o! bankr%ptcies# t at, !inally, t e 8ol%me o! b%siness connected @it disco%nting bills o! exc ange diminis es in proportion @it t e red%ced n%mber and magnit%des o! t e bills o! exc ange t em-sel8es0 6ence t e demand !or loanable moneycapital, eit er to act as a medi%m o! circ%lation or as a means o! payment Bt e in8estment o! ne@ capital is still o%t o! t e D%estionC, decreases and t is capital, t ere!ore, becomes relati8ely ab%ndant0 (nder s%c circ%mstances, o@e8er, t e s%pply o! loanable money-capital also increases, as @e s all later see0 5 %s, t e sit%ation a!ter t e crisis o! 182> @as c aracterised by Ka limitation o! transaction and a great s%perab%ndance o! money0L B;ommercial 7istress, 182>-28, E8idence -o0 16620C 5 e rate o! interest @as 8ery lo@ beca%se o! t e Kalmost per!ect destr%ction o! commerce and t e almost total @ant o! means o! employing moneyL B loc. cit., p0 2+, testimony o! 6odgson, 7irector o! t e )oyal Aank o! 'i8erpoolC0 W at nonsense t ese gentlemen concocted Band 6odgson is, moreo8er, one o! t e best o! t emC in order to explain t ese !acts, can be seen !rom t e !ollo@ing remark: K5 e press%reL B182>C Karose !rom t e real dimin%tion o! t e moneyed capital o! t e co%ntry, ca%sed partly by t e necessity o! paying in gold !or imports !rom all parts o! t e @orld, and partly by t e absorption o! !loating into !ixed capital0L /10 c0, p0 3*01 6o@ t e con8ersion o! !loating capital into !ixed capital red%ces t e money-capital o! a co%ntry is %nintelligible0 For, in t e case o! rail@ays, e.g., in @ ic capital @as mainly in8ested at t at time, neit er gold nor paper is %sed !or 8iad%cts and rails, and t e money !or t e rail@ay stocks, to t e extent t at it ad been deposited solely in payment, per!ormed exactly t e same !%nctions as any ot er money deposited in banks and e8en increased t e loanable money-capital temporarily, as already s o@n abo8e# b%t to t e extent t at it ad act%ally been spent !or constr%ction, it circ%lated in t e co%ntry as a medi%m o! p%rc ase and o! payment0 3nly in so !ar as !ixed capital cannot be exported, so t at @it t e impossibility o! its export t e a8ailable capital sec%red !rom

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ret%rns !or exported articles also drops o%t o! t e pict%re I incl%ding t e ret%rns in cas or b%llion I only to t at extent co%ld t e money-capital be a!!ected0 A%t at t at time Englis export articles @ere also piled %p in %ge D%antities on t e !oreign markets @it o%t being able to be sold0 &t is tr%e, t e !loating capital o! t e merc ants and man%!act%rers o! Manc ester, etc0, @ o ad a portion o! t eir normal b%siness capital tied %p in rail@ay stocks and @ere t ere!ore dependent %pon borro@ed capital !or r%nning t eir b%siness, ad become !ixed, and t ey, t ere!ore, ad to s%!!er t e conseD%ences0 A%t it @o%ld a8e been t e same, i! t e capital belonging to t eir b%siness, b%t @it dra@n !rom it, ad been in8ested, say, in mines instead o! rail@ays-mining prod%cts like iron, coal, copper being t emsel8es in t%rn !loating capital0 5 e act%al red%ction o! a8ailable money-capital t ro%g crop !ail%res, corn imports, and gold exports constit%ted, nat%rally, an e8ent t at ad not ing to do @it t e rail@ay s@indle0 K?lmost all mercantile o%ses ad beg%n to star8e t eir b%siness more or less 000 by taking part o! t eir commercial capital !or rail@ays0L I K'oans to so great an extent by commercial o%ses to rail@ays / loc. cit., p0 2<1 ind%ced t em to lean too m%c %pon000 banks by t e disco%nt o! paper, @ ereby to carry on t eir commercial operationsL Bt e same 6odgson, loc. cit., p. 6>C0 K&n Manc ester t ere a8e been immense losses in conseD%ence o! t e spec%lation in rail@aysL B)0 :ardner, pre8io%sly cited in 4ol0 &, ; 0 J&&&, 3, c, and in se8eral ot er places# E8idence -o0 2882, loc. cit0C0 3ne o! t e principal ca%ses o! t e crisis o! 182> @as t e colossal !looding o! t e market and t e !ab%lo%s s@indle in t e East &ndian trade @it commodities0 A%t t ere @ere also ot er circ%mstances @ ic bankr%pted 8ery ric !irms in t is line: K5 ey ad large means, b%t not a8ailable0 5 e @ ole o! t eir capital @as locked %p in estates in t e Ma%riti%s, or indigo !actories, or s%gar !actories0 6a8ing inc%rred liabilities to t e extent o! V+==,===6==,===, t ey ad no a8ailable assets to pay t eir bills, and e8ent%ally it pro8ed t at to pay t eir bills t ey @ere entirely dependent %pon t eir credit0L B; 0 5%rner, big East &ndian merc ant in 'i8erpool, -o0 >3=, loc. cit0C $ee also :ardner B-o0 28><, loc. cit0C: K&mmediately a!ter t e ; ina treaty, so great a prospect @as eld o%t to t e co%ntry o! a great ; ina, t at t ere extension o! o%r commerce @it

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@ere many large mills b%ilt @it a 8ie@ to t at trade excl%si8ely, in order to man%!act%re t at class o! clot @ ic is principally taken !or t e ; ina market, and o%r pre8io%s man%!act%res ad t e addition o! all t ose0L I K28>20 6o@ as t at trade t%rned o%tQ I Most r%ino%s, almost beyond description# & do not belie8e, t at o! t e @ ole o! t e s ipments t at @ere made in 1822 and 182+ to ; ina, abo8e t@o-t irds o! t e amo%nt a8e e8er been ret%rned# in conseD%ence o! tea being t e principal article o! repayment and o! t e expectation t at @as eld o%t, @e, as man%!act%rers, !%lly calc%lated %pon a great red%ction in t e d%ty on tea0L ?nd no@, nai8ely expressed, comes t e c aracteristic credo o! t e Englis man%!act%rer: K3%r commerce @it no !oreign market is limited by t eir po@er to p%rc ase t e commodity, b%t it is limited in t is co%ntry by o%r capability o! cons%ming t at @ ic @e recei8e in ret%rn !or o%r man%!act%res0L B5 e relati8ely poor co%ntries, @it @ om England trades, are, o! co%rse, able to pay !or and cons%me any amo%nt o! Englis prod%cts, b%t %n!ort%nately @ealt y England cannot assimilate t e prod%cts sent in ret%rn0C K28>60 & sent o%t some goods in t e !irst instance, and t e goods sold at abo%t 2+ per cent loss, !rom t e !%ll con8iction t at t e price, at @ ic my agents co%ld p%rc ase tea, @o%ld lea8e so great a pro!it in t is co%ntry as to make %p t e de!iciency000 b%t instead o! pro!it, & lost in some instances <+ and %p to += per cent0L I K28>>0 7id t e man%!act%rers generally export on t eir o@n acco%ntQ I ,rincipally# t e merc ants, & t ink, 8ery soon sa@ t at t e t ing @o%ld not ans@er, and t ey rat er enco%raged t e man%!act%rers to consign t an take a direct interest t emsel8es0L &n 18+>, on t e ot er and, t e losses and !ail%res !ell mainly %pon t e merc ants, since t e man%!act%rers le!t t em t e task o! !looding t e !oreign markets Kon t eir o@n acco%nt0L ?n expansion o! money-capital, @ ic arises o%t o! t e !act t at, in 8ie@ o! t e expansion o! banking Bsee, belo@, t e example o! &ps@ic , @ ere in t e co%rse o! a !e@ years immediately

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preceding 18+> t e deposits o! t e capitalist !armers D%adr%pledC, @ at @as !ormerly a pri8ate oard or coin reser8e is al@ays con8erted into loanable capital !or a de!inite time, does not indicate a gro@t in prod%cti8e capital any more t an t e increasing deposits @it t e 'ondon stock banks @ en t e latter began to pay interest on deposits0 ?s long as t e scale o! prod%ction remains t e same, t is expansion leads only to an ab%ndance o! loanable money-capital as compared @it t e prod%cti8e0 6ence t e lo@ rate o! interest0 ?!ter t e reprod%ction process as again reac ed t at state o! prosperity @ ic precedes t at o! o8er-exertion, commercial credit becomes 8ery m%c extended# t is !orms, indeed, t e Kso%ndL basis again !or a ready !lo@ o! ret%rns and extended prod%ction0 &n t is state t e rate o! interest is still lo@, alt o%g it rises abo8e its minim%m0 5 is is, in !act, t e only time t at it can be said a lo@ rate o! interest, and conseD%ently a relati8e ab%ndance o! loanable capital, coincides @it a real expansion o! ind%strial capital0 5 e ready !lo@ and reg%larity o! t e ret%rns, linked @it extensi8e commercial credit, ens%res t e s%pply o! loan capital in spite o! t e increased demand !or it, and pre8ents t e le8el o! t e rate o! interest !rom rising0 3n t e ot er and, t ose ca8aliers @ o @ork @it o%t any reser8e capital or @it o%t any capital at all and @ o t %s operate completely on a money credit basis begin to appear !or t e !irst time in considerable n%mbers0 5o t is is no@ added t e great expansion o! !ixed capital in all !orms, and t e opening o! ne@ enterprises on a 8ast and !ar-reac ing scale0 5 e interest no@ rises to its a8erage le8el0 &t reac es its maxim%m again as soon as t e ne@ crisis sets in0 ;redit s%ddenly stops t en, payments are s%spended, t e reprod%ction process is paralysed, and @it t e pre8io%sly mentioned exceptions, a s%perab%ndance o! idle ind%strial capital appears side by side @it an almost absol%te absence o! loan capital0 3n t e @ ole, t en, t e mo8ement o! loan capital, as expressed in t e rate o! interest, is in t e opposite direction to t at o! ind%strial capital0 5 e p ase @ erein a lo@ rate o! interest, b%t abo8e t e minim%m, coincides @it t e Kimpro8ementL and gro@ing con!idence a!ter a crisis, and partic%larly t e p ase @ erein t e rate o! interest reac es its a8erage le8el, exactly mid@ay bet@een its minim%m and maxim%m, are t e only t@o periods d%ring @ ic an ab%ndance o! loan capital is a8ailable sim%ltaneo%sly @it a great expansion o! ind%strial capital0 A%t at t e beginning o! t e ind%strial cycle, a lo@ rate o! interest coincides @it a contraction, and at t e end o! t e ind%strial cycle, a ig rate o! interest coincides @it a s%perab%ndance o! ind%strial capital0 5 e lo@ rate o! interest t at accompanies t e Kimpro8ementL s o@s t at t e commercial credit reD%ires bank credit only to a slig t extent beca%se it is still sel!-s%pporting0 5 e ind%strial cycle is o! s%c a nat%re t at t e same circ%it m%st periodically reprod%ce itsel!, once t e !irst imp%lse as been gi8en0 x8iii 7%ring a period o! slack, prod%ction sinks belo@ t e le8el, @ ic it ad attained in t e preceding cycle and !or @ ic t e tec nical basis as no@ been laid0 7%ring prosperity I t e middle period I it contin%es to de8elop on t is basis0 &n t e period o! o8er-prod%ction and s@indle, it strains t e prod%cti8e !orces to t e %tmost, %ntil it exceeds t e capitalistic limits o! t e prod%ction process0 &t is clear t at t ere is a s ortage o! means o! payment d%ring a period o! crisis0 5 e con8ertibility o! bills o! exc ange replaces t e metamorp osis o! commodities t emsel8es, and so m%c more so exactly at s%c times t e more a portion o! t e !irms operates on p%re credit0 &gnorant and mistaken bank legislation, s%c as t at o! 1822-2+, can intensi!y t is money crisis0 A%t no kind o! bank legislation can eliminate a crisis0 &n a system o! prod%ction, @ ere t e entire contin%ity o! t e reprod%ction process rests %pon credit, a crisis m%st ob8io%sly occ%r I a tremendo%s r%s !or means o! payment I @ en credit s%ddenly ceases and only cas payments a8e 8alidity0 ?t !irst glance, t ere!ore, t e @ ole crisis seems to be merely a credit and money crisis0 ?nd in !act it is only a D%estion o! t e con8ertibility o! bills o! exc ange into money0 A%t t e maHority o! t ese bills represent act%al sales and p%rc ases, @ ose extension !ar beyond t e needs o! society is, a!ter all, t e basis o! t e @ ole crisis0 ?t t e same time, an enormo%s D%antity o! t ese bills o! exc ange represents plain s@indle,

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@ ic no@ reac es t e lig t o! day and collapses# !%rt ermore, %ns%ccess!%l spec%lation @it t e capital o! ot er people# !inally, commodity-capital @ ic as depreciated or is completely %nsaleable, or ret%rns t at can ne8er more be realised again0 5 e entire arti!icial system o! !orced expansion o! t e reprod%ction process cannot, o! co%rse, be remedied by a8ing some bank, like t e Aank o! England, gi8e to all t e s@indlers t e de!icient capital by means o! its paper and a8ing it b%y %p all t e depreciated commodities at t eir old nominal 8al%es0 &ncidentally, e8eryt ing ere appears distorted, since in t is paper @orld, t e real price and its real basis appear no@ ere, b%t only b%llion, metal coin, notes, bills o! exc ange, sec%rities0 ,artic%larly in centres @ ere t e entire money b%siness o! t e co%ntry is concentrated, like 'ondon, does t is distortion become apparent# t e entire process becomes incompre ensible# it is less so in centres o! prod%ction0 &ncidentally in connection @it t e s%perab%ndance o! ind%strial capital @ ic appears d%ring crises t e !ollo@ing s o%ld be noted: commodity-capital is in itsel! sim%ltaneo%sly moneycapital, t at is, a de!inite amo%nt o! 8al%e expressed in t e price o! t e commodities0 ?s %se-8al%e it is a de!inite D%ant%m o! obHects o! %tility, and t ere is a s%rpl%s o! t ese a8ailable in times o! crises0 A%t as money-capital as s%c , as potential money-capital, it is s%bHect to contin%al expansion and contraction0 3n t e e8e o! a crisis, and d%ring it, commodity-capital in its capacity as potential money-capital is contracted0 &t represents less money-capital !or its o@ner and is creditors Bas @ell as sec%rity !or bills o! exc ange and loansC t an it did at t e time @ en it @as bo%g t and @ en t e disco%nts and mortgages based on it @ere transacted0 &! t is is t e meaning o! t e contention t at t e money-capital o! a co%ntry is red%ced in times o! stringency, t is is identical @it saying t at t e prices o! commodities a8e !allen0 $%c a collapse in prices merely balances o%t t eir earlier in!lation0 5 e incomes o! t e %nprod%cti8e classes and o! t ose @ o li8e on !ixed incomes remain in t e main stationary d%ring t e in!lation o! prices @ ic goes and in and @it o8er-prod%ction and o8er-spec%lation0 6ence t eir cons%ming capacity diminis es relati8ely, and @it it t eir ability to replace t at portion o! t e total reprod%ction @ ic @o%ld normally enter into t eir cons%mption0 E8en @ en t eir demand remains nominally t e same, it decreases in reality0 &t s o%ld be noted in regard to imports and exports, t at, one a!ter anot er, all co%ntries become in8ol8ed in a crisis and t at it t en becomes e8ident t at all o! t em, @it !e@ exceptions, a8e exported and imported too m%c , so t at they all have an unfavourable balance of payments. 5 e tro%ble, t ere!ore, does not act%ally lie @it t e balance o! payments0 For example, England s%!!ers !rom a drain o! gold0 &t as imported too m%c 0 A%t at t e same time all ot er co%ntries are o8er-s%pplied @it Englis goods0 5 ey a8e t %s also imported too m%c , or a8e been made to import too m%c 0 B5 ere is, indeed, a di!!erence bet@een a co%ntry @ ic exports on credit and t ose @ ic export little or not ing on credit0 A%t t e latter t en import on credit# and t is is only t en not t e case @ en commodities are sent to t em on consignment0C 5 e crisis may !irst break o%t in England, t e co%ntry @ ic ad8ances most o! t e credit and takes t e least, beca%se t e balance o! payments, t e balance o! payments d%e, @ ic m%st be settled immediately, is unfavourable, e8en t o%g t e general balance o! trade is favourable. 5 is is explained partly as a res%lt o! t e credit @ ic it as granted, and partly as a res%lt o! t e %ge D%antity o! capital loaned to !oreign co%ntries, so t at a large D%antity o! ret%rns !lo@ back to it in commodities, in addition to t e act%al trade ret%rns0 B6o@e8er, t e crisis as at times !irst broken o%t in ?merica, @ ic takes most o! t e commercial and capital credit !rom England0C 5 e cras in England, initiated and accompanied by a gold drain, settles EnglandGs balance o! payments, partly by a bankr%ptcy o! its importers Babo%t @ ic more belo@C, partly by disposing o! a portion o! its commodity-capital at lo@ prices abroad, and partly by t e sale o! !oreign sec%rities, t e p%rc ase o! Englis sec%rities, etc0 -o@ comes t e t%rn o! some ot er co%ntry0 5 e balance o! payments @as momentarily in its !a8o%r# b%t no@ t e time lapse normally existing bet@een t e balance o! payments and balance o! trade as been eliminated or at least red%ced by t e crisis: all payments

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are no@ s%ddenly s%pposed to be made at once0 5 e same t ing is no@ repeated ere0 England no@ as a ret%rn !lo@ o! gold, t e ot er co%ntry a gold drain0 W at appears in one co%ntry as excessi8e imports, appears in t e ot er as excessi8e exports, and 8ice 8ersa0 A%t o8er-imports and o8er-exports a8e taken place in all co%ntries B@e are not speaking ere abo%t crop !ail%res, etc0, b%t abo%t a general crisisC# t at is o8er-prod%ction promoted by credit and t e general in!lation o! prices t at goes @it it0 &n 18+>, t e crisis broke o%t in t e (nited $tates0 ? !lo@ o! gold !rom England to ?merica !ollo@ed0 A%t as soon as t e b%bble in ?merica b%rst, t e crisis broke o%t in England and t e gold !lo@ed !rom ?merica to England0 5 e same took place bet@een England and t e continent0 5 e balance o! payments is in times o! general crisis %n!a8o%rable to e8ery nation, at least to e8ery commercially de8eloped nation, b%t al@ays to eac co%ntry in s%ccession, as in 8olley !iring, i.e., as soon as eac oneGs t%rn comes !or making payments# and once t e crisis as broken o%t, e.g., in England, it compresses t e series o! t ese terms into a 8ery s ort period0 &t t en becomes e8ident t at all t ese nations a8e sim%ltaneo%sly o8er-exported Bt %s o8er-prod%cedC and o8erimported Bt %s o8er-tradedC, t at prices @ere in!lated in all o! t em, and credit stretc ed too !ar0 ?nd t e same break-do@n takes place in all o! t em0 5 e p enomenon o! a gold drain t en takes place s%ccessi8ely in all o! t em and pro8es precisely by its general c aracter 1C t at gold drain is H%st a p enomenon o! a crisis, not its ca%se# <C t at t e seD%ence in @ ic it its t e 8ario%s co%ntries indicates only @ en t eir H%dgement-day as come, i.e., @ en t e crisis started and its latent elements come to t e !ore t ere0 &t is c aracteristic o! t e Englis economic @riters I and t e economic literat%re @ort mentioning since 183= resol8es itsel! mainly into a literat%re on c%rrency, credit, and crises I t at t ey look %pon t e export o! precio%s metals in times o! crisis, in spite o! t e t%rn in t e rates o! exc ange, only !rom t e standpoint o! England, as a p%rely national p enomenon, and resol%tely close t eir eyes to t e !act t at all ot er E%ropean banks raise t eir rate o! interest @ en t eir bank raises its o@n in times o! crisis, and t at, @ en t e cry o! distress o8er t e drain o! gold is raised in t eir co%ntry today, it is taken %p in ?merica tomorro@ and in :ermany and France t e day a!ter0 &n 182>, Kt e engagements r%nning %pon t is co%ntry ad to be metL /mostly !or corn10 K(n!ort%nately, t ey @ere met to a great extent by !ail%resL /@ealt y England sec%red relie! by bankr%ptcies in its obligations to@ard t e continent and ?merica1, Kb%t to t e extent to @ ic t ey @ere not met by !ail%res, t ey @ere met by t e exportation o! b%llion0L B)eport o! ;ommittee on Aank ?cts, 18+>0C &n ot er @ords, in so !ar as a crisis in England is intensi!ied by bank legislation, t is legislation is a means o! c eating t e corn-exporting co%ntries in periods o! !amine, !irst on t eir corn and t en on t e money !or t e corn0 ? pro ibition on t e export o! corn d%ring s%c periods !or co%ntries @ ic are t emsel8es labo%ring more or less %nder scarcities, is, t ere!ore, a 8ery rational meas%re to t @art t is plan o! t e Aank o! England to Kmeet obligationsL !or corn imports Kby bankr%ptcies0L &t is a!ter all m%c better t at t e corn prod%cers and spec%lators lose a portion o! t eir pro!it !or t e good o! t eir o@n co%ntry t an t eir capital !or t e good o! England0

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&t !ollo@s !rom t e abo8e t at commodity-capital, d%ring crises and d%ring periods o! b%siness depression in general, loses to a large extent its capacity to represent potential money-capital0 5 e same is tr%e o! !ictitio%s capital, interest-bearing paper, in so !ar as it circ%lates on t e stock exc ange as money-capital0 &ts price !alls @it rising interest0 &t !alls, !%rt ermore, as a res%lt o! t e general s ortage o! credit, @ ic compels its o@ners to d%mp it in large D%antities on t e market in order to sec%re money0 &t !alls, !inally, in t e case o! stocks, partly as a res%lt o! t e decrease in re8en%es !or @ ic it constit%tes dra!ts and partly as a res%lt o! t e sp%rio%s c aracter o! t e enterprises @ ic it o!ten eno%g represents0 5 is !ictitio%s money-capital is enormo%sly red%ced in times o! crisis, and @it it t e ability o! its o@ners to borro@ money on it on t e market0 6o@e8er, t e red%ction o! t e money eD%i8alents o! t ese sec%rities on t e stock exc ange list as not ing to do @it t e act%al capital @ ic t ey represent, b%t 8ery m%c indeed @it t e sol8ency o! t eir o@ners0

Chapter 31. 1one! Capital and Real Capital. 55.

We are still not !inis ed @it t is D%estion: to @ at extent does t e acc%m%lation o! capital in t e !orm o! loanable money-capital coincide @it act%al acc%m%lation, i.e., t e expansion o! t e reprod%ction process0 5 e trans!ormation o! money into loanable money-capital is a m%c simpler matter t an t e trans!ormation o! money into prod%cti8e capital0 A%t t@o t ings s o%ld be disting%is ed ere: 1C t e mere trans!ormation o! money into loan capital# <C t e trans!ormation o! capital or re8en%e into money, @ ic is trans!ormed into loan capital0 &t is only t e latter point @ ic can in8ol8e a positi8e acc%m%lation o! loan capital connected @it an act%al acc%m%lation o! ind%strial capital0

Transformation "f *one# Into Loan Capital

We a8e already seen t at a large b%ild-%p or s%rpl%s o! loan capital can occ%r, @ ic is connected @it prod%cti8e acc%m%lation only to t e extent t at it is in8ersely proportional to it0 5 is is t e case in t@o p ases o! t e ind%strial cycle, namely, !irst, @ en ind%strial capital in bot its !orms o! prod%cti8e and commodity-capital is contracted, i.e., at t e beginning o! t e cycle a!ter t e crisis# and, secondly, @ en t e impro8ement begins, b%t @ en commercial credit still does not %se bank credit to a great extent0 &n t e !irst case, money-capital, @ ic @as !ormerly employed in prod%ction and commerce, appears as idle loan capital# in t e second case, it appears %sed to an increasing extent, b%t at a 8ery lo@ rate o! interest, beca%se t e ind%strial and commercial capitalists no@ prescribe terms to t e money-capitalist0 5 e s%rpl%s o! loan capital expresses, in t e !irst case, a stagnation o! ind%strial capital, and in t e second, a relati8e independence o! commercial credit !rom banking credit I based on t e !l%idity o! t e ret%rns, s ort-term credit, and a preponderance o! operations @it one"s o@n capital0 5 e spec%lators, @ o co%nt on t e credit capital o! ot er people, a8e not yet appeared on t e !ield# t e people @ o @ork @it t eir o@n capital are still !ar remo8ed !rom approximately p%re credit operations0 &n t e !ormer p ase, t e s%rpl%s o! loan capital is directly opposite to expressing act%al acc%m%lation0 &n t e second p ase, it coincides @it a rene@ed expansion o! t e reprod%ction process I it accompanies it, b%t is not its ca%se0 5 e s%rpl%s o! loan capital is already decreasing, i.e., it is still only relati8e compared to t e demand0 &n bot cases, t e expansion o! t e act%al process o! acc%m%lation is promoted by t e !act t at t e lo@ interest I @ ic coincides in t e !irst case @it lo@ prices and in t e second, @it slo@ly rising prices I increases t at portion o! t e pro!it @ ic is trans!ormed into pro!it o! enterprise0 5 is takes place to an e8en greater extent @ en interest rises to its a8erage le8el d%ring t e eig t o! t e period o! prosperity, @ en it as indeed gro@n, b%t not relati8e to pro!it0 We a8e seen, on t e ot er and, t at an acc%m%lation o! loan capital can take place @it o%t any act%al acc%m%lation, i.e., by mere tec nical means s%c as an expansion and concentration o! t e banking system# and a sa8ing in t e circ%lation reser8e, or in t e reser8e !%nd o! pri8ate means o! payment, @ ic are t en al@ays trans!ormed into loan capital !or a s ort time0 ?lt o%g t is loan capital, @ ic , !or t is reason, is also called !loating capital, al@ays retains t e !orm o! loan capital only !or s ort periods o! time Band s o%ld indeed also be %sed !or disco%nting only !or s ort periods o! timeC, t ere is a contin%al ebb and !lo@ o! it0 &! one dra@s some a@ay, anot er adds to it0 5 e mass o! loanable money-capital t %s gro@s D%ite independently o! t e act%al

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acc%m%lation B@e are not speaking ere at all abo%t loans !or a n%mber o! years b%t only o! s ortterm ones on bills o! exc ange and depositsC0 Aank ;ommittee, 18+>0 M%estion +=10 KW at do yo% mean by "!loating capital"QL-/?ns@er o! Mr0 Weg%elin, :o8ernor o! t e Aank o! England:1 K&t is capital applicable to loans o! money !or s ort periods0000 B+=<C 5 e Aank o! England notes 000 t e co%ntry banks circ%lation, and t e amo%nt o! coin @ ic is in t e co%ntry0L /M%estion:1 K&t does not appear !rom t e ret%rns be!ore t e ;ommittee, i! by !loating capital yo% mean t e acti8e circ%lationL /o! t e notes o! t e Aank o! England1, Kt at t ere is any 8ery great 8ariation in t e acti8e circ%lationQL /A%t t ere is a 8ery great di!!erence @ et er t is acti8e circ%lation is ad8anced by t e money-lender or by t e reprod%cti8e capitalist imsel!0 Weg%elin"s ans@er:1 K& incl%de in !loating capital t e reser8es o! t e bankers, in @ ic t ere is a considerable !l%ct%ation0L 5 at is to say, t ere is considerable !l%ct%ation in t at portion o! t e deposits @ ic t e bankers a8e not loaned o%t again, b%t @ ic !ig%res as t eir reser8e and !or t e greater part also as t e reser8e o! t e Aank o! England, @ ere t ey are deposited0 Finally, t e same gentleman says: !loating capital may be b%llion, t at is, bar and coin B+=3C0 &t is tr%ly @onder!%l o@ in t is credit gibberis o! t e money-market all categories o! political economy recei8e a di!!erent meaning and a di!!erent !orm0 Floating capital is t e expression t ere !or circ%lating capital, @ ic is, o! co%rse, somet ing D%ite di!!erent, and money is capital, and b%llion is capital, and bank-notes are circ%lation, and capital is a commodity, and debts are commodities, and !ixed capital is money in8ested in ard-to-sell paperS K5 e Hoint-stock banks o! 'ondon 000 a8e increased t eir deposits !rom V8,8+=,>>2 in ;<=@ to V23,1==,><2 in 18+>0000 5 e e8idence gi8en to yo%r ;ommittee leads to t e in!erence t at o! t is 8ast amo%nt, a large part as been deri8ed !rom so%rces not ereto!ore made a8ailable !or t is p%rpose# and t at t e practice o! opening acco%nts and depositing money @it bankers as extended to n%mero%s classes @ o did not !ormerly employ t eir capital BSC in t at @ay0 &t is stated by Mr0 )od@ell, t e ; airman o! t e ?ssociation o! t e ,ri8ate ;o%ntry AankersL

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/disting%is ed !rom Hoint-stock banks1, Kand delegated by t em to gi8e e8idence to yo%r ;ommittee, t at in t e neig bo%r ood o! &ps@ic t is practice as lately increased !o%r-!old among t e !armers and s opkeepers o! t at district# t at almost e8ery !armer, e8en t ose paying only V+= per ann%m rent, no@ keeps deposits @it bankers0 5 e aggregate o! t ese deposits o! co%rse !inds its @ay to t e employments o! trade, and especially gra8itates to 'ondon, t e centre o! commercial acti8ity, @ ere it is employed !irst in t e disco%nt o! bills, or in ot er ad8ances to t e c%stomers o! t e 'ondon bankers0 5 at large portion, o@e8er, !or @ ic t e bankers t emsel8es a8e no immediate demand passes into t e ands o! t e billbrokers, @ o gi8e to t e banker in ret%rn commercial bills already disco%nted by t em !or persons in 'ondon and in di!!erent parts o! t e co%ntry, as a sec%rity !or t e s%m ad8anced by t e banker0L BAank ;ommittee, 18+8, p0 40C Ay making ad8ances to t e bill-broker on bills o! exc ange @ ic t is broker as already disco%nted once, t e banker does, in !act, redisco%nt t em# b%t in reality, 8ery many o! t ese bills a8e already been redisco%nted by t e bill-broker, and @it t e same money t at t e banker %ses to redisco%nt t e bills o! t e bill-broker, t e latter redisco%nts ne@ bills0 W at t is leads to is s o@n by t e !ollo@ing: KExtensi8e !ictitio%s credits !acilities !or @ ic a8e been created by means o! accommodation bills, and open credits, great a8e been a!!orded by t e practice o! Hoint-stock co%ntry banks disco%nting s%c bills, and redisco%nting t em @it t e bill-brokers in t e 'ondon market, %pon t e credit o! t e bank alone, @it o%t re!erence to t e D%ality o! t e bills ot er@iseL Bloc. cit., p0 JJ&C0 ;oncerning t is redisco%nting and t e assistance @ ic t is p%rely tec nical increase o! loanable money-capital gi8es to credit s@indles, t e !ollo@ing extract !rom t e 0conomist is o! interest: KFor some years past capitalL /namely, loanable money-capital1 K as acc%m%lated in some districts o! t e co%ntry more rapidly t an it co%ld be %sed, @ ile,

32<

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in ot ers, t e means o! employing capital

a8e

increased more rapidly t an t e capital itsel!0 W ile t e bankers in t e p%rely agric%lt%ral districts t ro%g o%t t e kingdom !o%nd no s%!!icient means o! pro!itably and sa!ely employing t eir deposits in t eir o@n districts, t ose in t e large mercantile to@ns, and in t e man%!act%ring and mining districts, a8e !o%nd a larger demand !or capital t an t eir o@n means co%ld s%pply0 5 e e!!ect o! t is relati8e state o! di!!erent districts as led, o! late years, to t e establis ment and rapid extension o! a ne@ class o! o%ses in t e distrib%tion o! capital, @ o, t o%g %s%ally called bill-brokers, are in reality bankers %pon an immense scale0 5 e b%siness o! t ese o%ses as been to recei8e, !or s%c periods, and at s%c rates o! interest as @ere agreed %pon, t e s%rpl%s-capital o! bankers in t ose districts @ ere it co%ld not be employed, as @ell as t e temporary %nemployed moneys o! p%blic companies and extensi8e mercantile establis ments, and ad8ance t em at ig er rates o! interest to banker in t ose districts @ ere capital @as more in demand, generally by redisco%nting t e bills taken !rom t eir c%stomers 000 and in t is @ay 'ombard $treet as become t e great centre in @ ic t e trans!er o! spare capital as been made !rom one part o! t e co%ntry, @ ere it co%ld not be pro!itably employed, to anot er, @ ere a demand existed !or it, as @ell as bet@een indi8id%als similarly circ%mstanced0 ?t !irst t ese transactions @ere con!ined almost excl%si8ely to borro@ing and lending on banking sec%rities0 A%t as t e capital o! t e co%ntry rapidly acc%m%lated, and became more economised by t e establis ment o! banks, t e !%nds at t e disposal o! t ese "disco%nt o%ses" became so large t at t ey @ere ind%ced to make ad8ances !irst on dock @arrants o! merc andise Bstorage bills on

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commodities in docksC, and next on bills o! lading, representing prod%ce not e8en arri8ed in t is co%ntry, t o%g sometimes, i! not generally, sec%red by bills dra@n by t e merc ant %pon is broker0 5 is practice rapidly c anged t e @ ole c aracter o! Englis commerce0 5 e !acilities t %s a!!orded in 'ombard $treet ga8e extensi8e po@ers to t e brokers in Mincing 'ane, @ o on t eir part 000 o!!ered t e !%ll ad8antage o! t em to t e importing merc ant# @ o so !ar took ad8antage o! t em, t at, @ ereas <+ years ago, t e !act t at a merc ant recei8ed ad8ances on is bills o! lading, or e8en is dock @arrants, @o%ld a8e been !atal to is credit, t e practice as become so common o! late years t at it may be said to be no@ t e general r%le, and not t e rare exception, as it @as <+ years ago0 -ay, so m%c !%rt er as t is system been carried, t at large s%ms 'ombard $treet on bills o! forthcoming crops a8e been raised in dra@n against t e 5 e colonies0

distant

conseD%ence o! s%c !acilities being t %s granted to t e importing merc ants led t em to extend t eir transactions abroad, and to in8est t eir !loating capital @it @ ic t eir b%siness as it erto been cond%cted, in t e most obHectionable o! all !ixed sec%rities-!oreign plantations I o8er @ ic t ey co%ld exercise little or no control0 ?nd t %s @e see t e direct c ange o! credit t ro%g @ ic t e capital o! t e co%ntry, collected in o%r r%ral districts, and in small amo%nts in t e s ape o! deposits in co%ntry banks, and centres in 'ombard $treet !or employment, as been, !irst, made a8ailable !or t e extending operations in o%r mining and man%!act%ring districts, by t e redisco%nt o! bills to banks in t ose localities# next, !or granting greater !acilities !or t e importation o! !oreign prod%ce by ad8ances %pon dock @arrants and bills o! lading, and t %s liberating t e "legitimate"

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mercantile capital o! o%ses engaged in !oreign and colonial trade, and ind%cing to its most obHectionable ad8ances on !oreign plantations0L B0conomist,-o8ember <=, 182>, p0 13320C 5 is is o@ credits are KnicelyL de8o%red0 5 e r%ral depositor !ancies t at e deposits only @it is banker, and !ancies !%rt ermore t at @ en is banker lends to ot ers, it is done to pri8ate persons @ om e kno@s0 6e as not t e slig test s%spicion t at t is banker places is deposit at t e disposal o! some 'ondon bill-broker, o8er @ ose operations neit er o! t em a8e t e slig test control0 We a8e already seen o@ large p%blic enterprises, s%c as rail@ays, may momentarily increase loan capital, o@ing to t e circ%mstance t at t e deposited amo%nts al@ays remain at t e disposal o! t e bankers !or a certain lengt o! time %ntil t ey are really %sed0 &ncidentally, t e mass o! loan capital is D%ite di!!erent !rom t e D%antity o! circ%lation0 Ay t e D%antity o! circ%lation @e mean ere t e s%m o! all t e bank-notes and coin, incl%ding bars o! precio%s metals, existing and circ%lating in a co%ntry0 ? portion o! t is D%antity constit%tes t e reser8e o! t e banks @ ic contin%o%sly 8ary in magnit%de0 K3n -o8ember 1<, 18+>L /t e date o! t e s%spension o! t e Aank ?ct o! 18221, Kt e entire reser8e o! t e Aank o! England @as only V+8=,>+1 Bincl%ding 'ondon and all its branc esC# t eir deposits at t e same time amo%nting to V<<,+==,===# o! @ ic near six and a al! million belonged to 'ondon bankers0 K BAank ?cts, 18+8, p0 '4&&0C 5 e 8ariations in t e interest rate Baside !rom t ose occ%rring o8er longer periods or t e 8ariation in t e interest rate among 8ario%s co%ntries# t e !ormer are dependent %pon 8ariations in t e general rate o! pro!it, t e latter on di!!erences in t e rates o! pro!it and in t e de8elopment o! creditC depend %pon t e s%pply o! loan capital Ball ot er circ%mstances, state o! con!idence, etc0 being eD%alC, t at is, o! capital loaned in t e !orm o! money, coin and notes# in contradistinction to ind%strial capital, @ ic , as s%c I in commodity-!orm I is loaned by means o! commercial credit among t e agents o! reprod%ction t emsel8es0 6o@e8er, t e mass o! t is loanable money-capital is di!!erent !rom, and independent o!, t e mass o! circ%lating money0 For example, i! V<= @ere loaned !i8e times per day, a money-capital o! V1== @o%ld be loaned, and t is @o%ld imply at t e same time t at t is V<= @o%ld a8e ser8ed, moreo8er, at least !o%r times as a means o! p%rc ase or payment# !or, i! no p%rc ase and payment inter8ened I so t at it @o%ld not a8e represented at least !o%r times t e con8erted !orm o! capital Bcommodities, incl%ding labo%r-po@erC I it @o%ld not constit%te a capital o! V1==, b%t only !i8e claims o! V<= eac 0 &n co%ntries @it a de8eloped credit, @e can ass%me t at all money-capital a8ailable !or lending exists in t e !orm o! deposits @it banks and money-lenders0 5 is is at least tr%e !or b%siness as a @ ole0 Moreo8er, in times o! !lo%ris ing b%siness, be!ore t e real spec%lation gets %nder@ay I @ en credit is easy and con!idence is gro@ing I most o! t e !%nctions o! circ%lation are settled by a simple trans!er o! credit, @it o%t t e elp o! coin or paper money0

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5 e mere possibility o! large s%ms o! deposits existing @ en a relati8ely small D%ant%m o! a medi%m o! circ%lation is a8ailable, depends solely on: 1C t e n%mber o! p%rc ases and payments @ ic t e same coin per!orms# <C t e n%mber o! ret%rn exc%rsions, @ ereby it goes back to t e banks as deposits, so t at its repeated !%nction as a means o! p%rc ase and payment is promoted t ro%g its rene@ed trans!ormation into deposits0 For example, a small dealer deposits @eekly @it is banker V1== in money# t e banker pays o%t a portion o! t e deposit o! a man%!act%rer @it t is# t e latter pays it to is @orkers# and t e @orkers %se it to pay t e small dealer, @ o deposits it in t e bank again0 5 e V1== deposited by t is small dealer a8e ser8ed, t ere!ore, !irst, to pay t e man%!act%rer a deposit o! is# secondly, to pay t e @orkers# t irdly, to pay t e dealer imsel!# !o%rt ly, to deposit anot er portion o! t e money-capital o! t e same small dealer# t %s at t e end o! t@enty @eeks, i! e imsel! did not a8e to dra@ against t is money, e @o%ld a8e deposited V<,=== in t e bank by means o! t e same V1==0 5o @ at extent t is money-capital is idle, is s o@n only by t e ebb and !lo@ in t e reser8e !%nd o! t e banks0 5 ere!ore, Mr0 Weg%elin, :o8ernor o! t e Aank o! England in 18+>, concl%des t at t e gold o! t e Aank o! England is t e KonlyL reser8e capital: K1<+80 ,ractically, & t ink, t e rate o! disco%nt is go8erned by t e amo%nt o! %nemployed capital @ ic t ere is in t e co%ntry0 5 e amo%nt o! %nemployed capital is represented by t e reser8e o! t e Aank o! England, @ ic is practically a reser8e o! b%llion0 W en, t ere!ore, t e b%llion is dra@n %pon, it diminis es t e amo%nt o! %nemployed capital in t e co%ntry, and conseD%ently raises t e 8al%e o! t at @ ic remains0L I /-e@marc 1 K13620 5 e reser8e o! b%llion in t e Aank o! England is, in tr%t , t e central reser8e, or oard o! treas%re, %pon @ ic t e @ ole trade o! t e co%ntry is carried on000 ?nd it is %pon t at oard or reser8oir t at t e action o! t e !oreign exc anges al@ays !alls0L B)eport on Aank ?cts, 18+> /,,0 1=8, 11*10C 5 e statistics o! exports and imports !%rnis a meas%re o! t e acc%m%lation o! real, i.e., prod%cti8e and commodity-capital0 5 ese al@ays s o@ t at, d%ring t e ten-year cyclical periods o! de8elopment o! Aritis ind%stry B181+ to 18>=C, t e maxim%m o! t e last prosperity before t e crisis al@ays reappears as t e minim%m o! t e !ollo@ing prosperity, @ ere%pon it rises to a ne@ and !ar ig er peak0 5 e act%al or declared 8al%e o! t e exported prod%cts !rom :reat Aritain and &reland in t e prosperity year o! 18<2 @as V2=,3*6,3==0 Wit t e crisis o! 18<+, t e amo%nt o! exports t en !alls belo@ t is s%m and !l%ct%ates bet@een 3+ and 3* million ann%ally0 Wit t e ret%rn o! prosperity in 1832, it rises abo8e t e !ormer maxim%m to S=;,?=A,;A;, and reac es in 1836 t e ne@ maxim%m o! V+3,368,+>10 Aeginning @it 183>, it !alls again to 2< million, so t at t e ne@ minim%m is already ig er t an t e old maxim%m, and t en !l%ct%ates bet@een += and +3 million0 5 e ret%rn o! prosperity li!ts t e amo%nt o! exports in 1822 to V+8,+==,===, @ ereby t e

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peak o! 1836 is again already !ar exceeded0 &n 182+, it reac es V6=,111,=8<# it t en !alls to somet ing o8er +> million in 1826, reac es in 182> almost +* million, in 1828 almost +3 million, rises in 182* to 63,+==,===, in 18+3 to nearly ** million, in 18+2 to *> million, in 18++ to *2,+==,===, in 18+6 almost 116 million and reac es a peak o! 1<< million in 18+>0 &t !alls in 18+8 to 116 million, rises already in 18+* to 13= million, in 186= to nearly 136 million, in 1861 only 1<+ million Bt e ne@ lo@ is ere again ig er t an t e !ormer peakC, in 1863 to 126,+==,===0 3! co%rse, t e same t ing co%ld be demonstrated in t e case o! imports, @ ic s o@s t e expansion o! t e market# ere it is only a matter o! t e scale o! prod%ction0 /3! co%rse, t is olds tr%e o! England only !or t e time o! its act%al ind%strial monopoly# b%t it applies in general to t e @ ole complex o! co%ntries @it modern large-scale ind%stries, as long as t e @orld-market is still expanding0 I '. 001

3. Transformation "f Capital "r )evenue Into *one# That Is Transformed Into Loan Capital
We @ill consider ere t e acc%m%lation o! money-capital, in so !ar as it is not an expression eit er o! a stoppage in t e !lo@ o! commercial credit or o! an economy I @ et er it be an economy in t e act%al circ%lating medi%m or in t e reser8e capital o! t e agents engaged in reprod%ction0 ?side !rom t ese t@o cases, an acc%m%lation o! money-capital can arise t ro%g an %n%s%al in!lo@ o! gold, as in 18+< and 18+3 as a res%lt o! t e ne@ ?%stralian and ;ali!ornian gold mines0 5 is gold @as deposited in t e Aank o! England0 5 e depositors recei8ed notes !or it, @ ic t ey did not directly redeposit @it bankers0 Ay t is means t e ;irc%lating medi%m @as %n%s%ally increased0 B5estimony o! Weg%elin, Aank ;ommittee, 18+>, -o0 13<*0C 5 e Aank stro8e to %tilise t ese deposits by lo@ering its disco%nt to <T0 5 e mass o! gold acc%m%lated in t e Aank rose d%ring six mont s o! 18+3 to <<-<3 million0 5 e acc%m%lation o! all money-lending capitalists nat%rally al@ays takes place directly in money!orm, @ ereas @e a8e seen t at t e act%al acc%m%lation o! ind%strial capitalists is accomplis ed, as a r%le, by an increase in t e elements o! reprod%cti8e capital itsel!0 6ence, t e de8elopment o! t e credit system and t e enormo%s concentration o! t e money-lending b%siness in t e ands o! large banks m%st, by t emsel8es alone, accelerate t e acc%m%lation o! loanable capital, as a !orm distinct !rom act%al acc%m%lation0 5 is rapid de8elopment o! loan capital is, t ere!ore, a res%lt o! act%al acc%m%lation, !or it is a conseD%ence o! t e de8elopment o! t e reprod%ction process, and t e pro!it @ ic !orms t e so%rce o! acc%m%lation !or t ese money-capitalists is only a ded%ction !rom t e s%rpl%s-8al%e @ ic t e reprod%cti8e ones !ilc Band it is at t e same time t e appropriation o! a portion o! t e interest !rom t e sa8ings of othersC0 'oan capital acc%m%lates at t e expense o! bot t e ind%strial and commercial capitalists0 We a8e seen t at in t e %n!a8o%rable p ases o! t e ind%strial cycle t e rate o! interest may rise so ig t at it temporarily cons%mes t e @ ole pro!it o! some lines o! b%siness @ ic are partic%larly andicapped0 ?t t e same time, prices o! go8ernment and ot er sec%rities !all0 &t is at s%c times t at t e moneycapitalists b%y t is depreciated paper in %ge D%antities @ ic in t e later p ases soon regains its !ormer le8el and rises abo8e it0 &t is t en sold again and a portion o! t e money-capital o! t e p%blic is t %s appropriated0 5 at portion @ ic is not sold yields a ig er interest beca%se it @as bo%g t belo@ par0 A%t t e money-capitalists con8ert all pro!its made, end recon8erted by t em into capital, !irst into loanable money-capital0 5 e acc%m%lation o! t e latter I as distinct !rom t e act%al acc%m%lation, alt o%g its o!!s oot I t %s takes place, e8en @ en @e consider only t e money-capitalists, bankers, etc0, by t emsel8es, as an acc%m%lation o! t is partic%lar class o! capitalists0 ?nd it m%st gro@ @it e8ery expansion o! t e credit system @ ic accompanies t e act%al expansion o! t e reprod%ction process0

32>

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&! t e interest rate is lo@, t is depreciation o! t e money-capital !alls principally %pon t e depositors, not %pon t e banks0 Ae!ore t e de8elopment o! stock banks, ` o! all t e deposits in England lay in t e banks @it o%t yielding interest0 W ile interest is no@ paid on t em, it amo%nts to at least 1T less t an t e c%rrent rate o! interest0 ?s !or t e money acc%m%lation o! t e ot er classes o! capitalists, @e disregard t at portion o! it @ ic is in8ested in interest-bearing paper and acc%m%lates in t is !orm0 We consider only t at portion @ ic is t ro@n %pon t e market as loanable money-capital0 &n t e !irst place, @e a8e ere t at portion o! t e pro!it @ ic is not spent as re8en%e, b%t is set aside !or acc%m%lation I !or @ ic , o@e8er, t e ind%strial capitalists a8e no %se in t eir o@n b%siness at t e moment0 5 is pro!it exists directly in commodity-capital, a part o! @ ose 8al%e it constit%tes, and along @it @ ic it is realised in money0 -o@, i! it is not recon8erted into t e prod%ction elements o! commodity-capital B@e lea8e o%t o! consideration !or t e present t e merc ant, @ om @e s all disc%ss separatelyC, it m%st remain !or a lengt o! time in t e !orm o! money0 5 is amo%nt increases @it t e amo%nt o! capital itsel!, e8en @ en t e rate o! pro!it declines0 5 at portion @ ic is to be spent as re8en%e is grad%ally cons%med, b%t, in t e meantime, as deposits, it constit%tes loan capital @it t e banker0 5 %s, e8en t e gro@t o! t at portion o! pro!it @ ic is spent as re8en%e expresses itsel! as a grad%al and contin%ally repeated acc%m%lation o! loan capital0 5 e same is tr%e o! t e ot er portion, @ ic is intended !or acc%m%lation0 5 ere!ore, @it t e de8elopment o! t e credit system and its organisation, e8en an increase in re8en%e, i.e., t e cons%mption o! t e ind%strial and commercial capitalists, expresses itsel! as an acc%m%lation o! loan capital0 ?nd t is olds tr%e !or all re8en%es so !ar as t ey are cons%med grad%ally, in ot er @ords, !or gro%nd-rent, @ages in t eir ig er !orm, incomes o! %nprod%cti8e classes, etc0 ?ll o! t em ass%me !or a certain time t e !orm o! money re8en%e and are, t ere!ore, con8ertible into deposits and t %s into loan capital0 ?ll re8en%e I @ et er it be intended !or cons%mption or acc%m%lation I as long as it exists in some !orm o! money, is a part o! t e 8al%e o! commodity-capital trans!ormed into money, and is, !or t is reason, an expression and res%lt o! act%al acc%m%lation, b%t is not prod%cti8e capital itsel!0 W en a spinner as exc anged is yarn !or cotton I t at portion @ ic constit%tes re8en%e o@e8er !or money, t e real existence o! is ind%strial capital is t e yarn, @ ic as passed into t e ands o! t e @ea8er or, per aps, o! some pri8ate cons%mer, and t e yarn is, in !act, t e existence I @ et er it is !or reprod%ction or cons%mption I o! t e capital-8al%e as @ell as t e s%rpl%s-8al%e contained in it0 5 e magnit%de o! t e s%rpl%s-8al%e trans!ormed into money depends %pon t e magnit%de o! t e s%rpl%s-8al%e contained in t e yarn0 A%t as soon as it as been trans!ormed into money, t is money is only t e 8al%e existence o! t is s%rpl%s-8al%e0 ?nd as s%c it becomes a moment o! loan capital0 For t is p%rpose, not ing more is reD%ired t an t at it be trans!ormed into a deposit, i! it as not already been loaned o%t by its o@ner0 A%t in order to be retrans!ormed into prod%cti8e capital, it m%st, on t e ot er and, already a8e reac ed a certain minim%m limit0

Chapter 32. 1one! Capital and Real Capital. 555.

5 e mass o! money to be trans!ormed back into capital in t is manner is a res%lt o! t e enormo%s reprod%ction process, b%t considered by itsel!, as loanable money-capital, it is not itsel! a mass o! reprod%cti8e capital0 5 e most important point o! o%r presentation so !ar is t at t e expansion o! t e part o! t e re8en%e intended !or cons%mption Blea8ing o%t o! consideration t e @orker, beca%se is re8en%e is eD%al to t e 8ariable capitalC s o@s itsel! at !irst as an acc%m%lation o! money-capital0 ? !actor, t ere!ore, enters into t e acc%m%lation o! money-capital t at is essentially di!!erent !rom t e act%al acc%m%lation o! ind%strial capital# !or t e portion o! t e ann%al prod%ct @ ic is intended !or cons%mption does not by any means become capital0 ? portion o! it replaces capital, i.e., t e constant capital o! t e prod%cers o! means o! cons%mption, b%t to t e extent t at it is act%ally trans!ormed into capital, it exists in t e nat%ral !orm o! t e re8en%e o! t e prod%cers o! t is constant capital0 5 e same money, @ ic represents t e re8en%e and ser8es merely !or t e promotion o! cons%mption, is reg%larly trans!ormed into loanable money-capital !or a period o! time0 &n so !ar as t is money represents @ages, it is at t e same time t e money-!orm o! t e 8ariable capital# and in so !ar as it replaces t e constant capital o! t e prod%cers o! means o! cons%mption, it is t e money-!orm temporarily ass%med by t eir constant capital and ser8es to p%rc ase t e components o! t eir constant capital to be replaced in kind0 -eit er in t e one nor in t e ot er !orm does it express in itsel! acc%m%lation, alt o%g its D%antity increases @it t e gro@t o! t e reprod%ction process0 A%t it per!orms temporarily t e !%nction o! loanable money, i.e., o! money-capital0 &n t is respect, t ere!ore, t e acc%m%lation o! money-capital m%st al@ays re!lect a greater acc%m%lation o! capital t an act%ally exists, o@ing to t e !act t at t e extension o! indi8id%al cons%mption, beca%se it is promoted by means o! money, appears as an acc%m%lation o! money-capital, since it !%rnis es t e money-!orm !or act%al acc%m%lation, i.e., !or money @ ic permits ne@ in8estments o! capital0 5 %s, t e acc%m%lation o! loanable money-capital expresses in part only t e !act t at all money into @ ic ind%strial capital is trans!ormed in t e co%rse o! its circ%it ass%mes t e !orm not o! money advanced by t e reprod%cti8e capitalists, b%t o! money borrowed by t em# so t at indeed t e ad8ance o! money t at m%st take place in t e reprod%ction process appears as an ad8ance o! borro@ed money0 &n !act, on t e basis o! commercial credit, one person lends to anot er t e money reD%ired !or t e reprod%ction process0 A%t t is no@ ass%mes t e !ollo@ing !orm: t e banker, @ o recei8es t e money as a loan !rom one gro%p o! t e reprod%cti8e capitalists, lends it to anot er gro%p o! reprod%cti8e capitalists, so t at t e banker appears in t e role o! a s%preme bene!actor# and at t e same time, t e control o8er t is capital !alls completely into t e ands o! t e banker in is capacity as middleman0 ? !e@ special !orms o! acc%m%lation o! money-capital still remain to be mentioned0 For example, capital is released by a !all in t e price o! t e elements o! prod%ction, ra@ materials, etc0 &! t e ind%strial capitalist cannot expand is reprod%ction process immediately, a portion o! is moneycapital is expelled !rom t e circ%it as s%per!l%o%s and is trans!ormed into loanable money-capital0 $econdly, o@e8er, capital in t e !orm o! money is released especially by t e merc ant, @ ene8er interr%ptions in is b%siness take place0 &! t e merc ant as completed a series o! transactions and cannot begin a ne@ series beca%se o! s%c interr%ptions %ntil later, t e money realised represents !or im only a oard, s%rpl%s-capital0 A%t at t e same time, it represents a direct acc%m%lation o! loanable money-capital0 &n t e !irst case, t e acc%m%lation o! money-

32*

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capital expresses a repetition o! t e reprod%ction process %nder more !a8o%rable conditions, an act%al release o! a portion o! !ormerly tied-%p capital# in ot er @ords, an opport%nity !or expanding t e reprod%ction process @it t e same amo%nt o! money0 A%t in t e ot er case, it expresses merely an interr%ption in t e !lo@ o! transactions0 6o@e8er, in bot cases it is con8erted into loanable money-capital, represents its acc%m%lation, in!l%ences eD%ally t e money-market and t e rate o! interest I alt o%g it expresses a promotion o! t e act%al acc%m%lation process in one case and its obstr%ction in t e ot er0 Finally, acc%m%lation o! money-capital is in!l%enced by t e n%mber o! people @ o a8e !eat ered t eir nests and a8e @it dra@n !rom reprod%ction0 5 eir n%mber increases as more pro!its are made in t e co%rse o! t e ind%strial cycle0 &n t is case, t e acc%m%lation o! loanable money-capital expresses, on t e one and, an act%al acc%m%lation Bin accordance @it its relati8e extentC, and, on t e ot er and, only t e extent o! t e trans!ormation o! t e ind%strial capitalists into mere money-capitalists0 ?s !or t e ot er portion o! pro!it, @ ic is not intended to be cons%med as re8en%e, it is con8erted into money-capital only @ en it is not immediately able to !ind a place !or in8estment in t e expansion o! b%siness in t e prod%cti8e sp ere in @ ic it as been made0 5 is may be d%e to t@o ca%ses0 Eit er beca%se t is sp ere o! prod%ction is sat%rated @it capital, or beca%se acc%m%lation m%st !irst reac a certain 8ol%me be!ore it can ser8e as capital, depending on t e in8estment magnit%des o! ne@ capital reD%ired in t is partic%lar sp ere0 6ence it is con8erted !or a @ ile into loanable money-capital and ser8es in t e expansion o! prod%ction in ot er sp eres0 ?ss%ming all ot er conditions being eD%al, t e D%antity o! pro!its intended !or trans!ormation back into capital @ill depend on t e D%antity o! pro!its made and t %s on t e extension o! t e reprod%ction process itsel!0 A%t i! t is ne@ acc%m%lation meets @it di!!ic%lties in its employment, t ro%g a lack o! sp eres !or in8estment, i.e., d%e to a s%rpl%s in t e branc es o! prod%ction and an o8er-s%pply o! loan capital, t is plet ora o! loanable money-capital merely s o@s t e limitations o! capitalist prod%ction0 5 e s%bseD%ent credit s@indle pro8es t at no real obstacle stands in t e @ay o! t e employment o! t is s%rpl%s-capital0 6o@e8er, an obstacle is indeed immanent in its la@s o! expansion, i.e., in t e limits in @ ic capital can realise itsel! as capital0 ? plet ora o! money-capital as s%c does not necessarily indicate o8er-prod%ction, not e8en a s ortage o! sp eres o! in8estment !or capital0 5 e acc%m%lation o! loan capital consists simply in t e !act t at money is precipitated as loanable money0 5 is process is 8ery di!!erent !rom an act%al trans!ormation into capital# it is merely t e acc%m%lation o! money in a !orm in @ ic it can be trans!ormed into capital0 A%t t is acc%m%lation can re!lect, as @e a8e s o@n, e8ents @ ic are greatly di!!erent !rom act%al acc%m%lation0 ?s long as act%al acc%m%lation is contin%ally expanding, t is extended acc%m%lation o! money-capital may be partly its res%lt, partly t e res%lt o! circ%mstances @ ic accompany it b%t are D%ite di!!erent !rom it, and, !inally, e8en partly t e res%lt o! impediments to act%al acc%m%lation0 &! !or no ot er reason t an t at acc%m%lation o! loan capital is in!lated by s%c circ%mstances, @ ic are independent o! act%al acc%m%lation b%t ne8ert eless accompany it, t ere m%st be a contin%o%s plet ora o! money-capital in de!inite p ases o! t e cycle and t is plet ora m%st de8elop @it t e expansion o! credit0 ?nd sim%ltaneo%sly @it it, t e necessity o! dri8ing t e prod%ction process beyond its capitalistic limits m%st also de8elop: o8er-trade, o8erprod%ction, and excessi8e credit0 ?t t e same time, t is m%st al@ays take place in !orms t at call !ort a reaction0 ?s !ar as acc%m%lation o! money-capital !rom gro%nd-rent, @ages, etc0, is concerned, it is not necessary to disc%ss t at matter ere0 3nly one aspect s o%ld be emp asised and t at is t at t e b%siness o! act%al sa8ing and abstinence Bby oardersC, to t e extent t at it !%rnis es elements o! acc%m%lation, is le!t by t e di8ision o! labo%r, @ ic comes @it t e progress o! capitalist prod%ction, to t ose @ o recei8e t e minim%m o! s%c elements, and @ o !reD%ently eno%g lose e8en t eir sa8ings, as do t e labo%rers @ en banks !ail0 3n t e one and, t e capital o! t e ind%strial capitalist is not Ksa8edL by imsel!, b%t e as command o! t e sa8ings o! ot ers in

3+=

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proportion to t e magnit%de o! is capital# on t e ot er and, t e money-capitalist makes o! t e sa8ings o! ot ers is o@n capital, and o! t e credit, @ ic t e reprod%cti8e capitalists gi8e to one anot er and @ ic t e p%blic gi8es to t em, a pri8ate so%rce !or enric ing imsel!0 5 e last ill%sion o! t e capitalist system, t at capital is t e !r%it o! oneGs o@n labo%r and sa8ings, is t ereby destroyed0 -ot only does pro!it consist in t e appropriation o! ot er peopleGs labo%r, b%t t e capital, @it @ ic t is labo%r o! ot ers is set in motion and exploited, consists o! ot er peopleGs property, @ ic t e money-capitalist places at t e disposal o! t e ind%strial capitalists, and !or @ ic e in t%rn exploits t e latter0 ? !e@ remarks remain to be made abo%t credit capital0 6o@ o!ten t e same piece o! money can !ig%re as loan capital, @ olly depends, as @e a8e already pre8io%sly s o@n, on: 1C o@ o!ten it realises commodity-8al%es in sale or payment, t %s trans!ers capital, and !%rt ermore o@ o!ten it realises re8en%e0 6o@ o!ten it gets into ot er ands as realised 8al%e, eit er o! capital or o! re8en%e, ob8io%sly depends, t ere!ore, on t e extent and magnit%de o! t e act%al transactions# <C t is depends on t e economy o! payments and t e de8elopment and organisation o! t e credit system# 3C !inally, t e concatenation and 8elocity o! action o! credits, so t at @ en a deposit is made at one point it immediately starts o!! as a loan at anot er0 E8en ass%ming t at t e !orm in @ ic loan capital exists is excl%si8ely t at o! real money, gold or sil8er I t e commodity @ ose s%bstance ser8es as a meas%re o! 8al%e I a large portion o! t is money-capital is al@ays necessarily p%rely !ictitio%s, t at is, a title to 8al%e I H%st as paper money0 &n so !ar as money !%nctions in t e circ%it o! capital, it constit%tes indeed, !or a moment, money-capital# b%t it does not trans!orm itsel! into loanable money-capital# it is rat er exc anged !or t e elements o! prod%cti8e capital, or paid o%t as a medi%m o! circ%lation in t e realisation o! re8en%e, and cannot, t ere!ore, trans!orm itsel! into loan capital !or its o@ner0 A%t in so !ar as it is trans!ormed into loan capital, and t e same money repeatedly represents loan capital, it is e8ident t at it exists only at one point in t e !orm o! metallic money# at all ot er points it exists only in t e !orm o! claims to capital0 Wit t e ass%mption made, t e acc%m%lation o! t ese claims arises !rom act%al acc%m%lation, t at is, !rom t e trans!ormation o! t e 8al%e o! commodity-capital, etc0, into money# b%t ne8ert eless t e acc%m%lation o! t ese claims or titles as s%c di!!ers !rom t e act%al acc%m%lation !rom @ ic it arises, as @ell as !rom t e !%t%re acc%m%lation Bt e ne@ prod%ction processC, @ ic is promoted by t e lending o! t is money0 &rima facie loan capital al@ays exists in t e !orm o! money, xix later as a claim to money, since t e money in @ ic it originally exists is no@ in t e ands o! t e borro@er in act%al money-!orm0 For t e lender it as been trans!ormed into a claim to money, into a title o! o@ners ip0 5 e same mass o! act%al money can, t ere!ore, represent 8ery di!!erent masses o! money-capital0 Mere money, @ et er it represents realised capital or realised re8en%e, becomes loan capital t ro%g t e simple act o! lending, t ro%g its trans!ormation into a deposit, i! @e consider t e general !orm in a de8eloped credit system0 5 e deposit is money-capital !or t e depositor0 A%t in t e ands o! t e banker it may be only potential money-capital, @ ic lies idle in is sa!e instead o! in its o@nerGs0xx Wit t e gro@t o! material @ealt t e class o! money-capitalists gro@s# on t e one and, t e n%mber and t e @ealt o! retiring capitalists, rentiers, increases# and on t e ot er and, t e de8elopment o! t e credit system is promoted, t ereby increasing t e n%mber o! bankers, moneylenders, !inanciers, etc0 Wit t e de8elopment o! t e a8ailable money-capital, t e D%antity o! interest-bearing paper, go8ernment sec%rities, stocks, etc0, also gro@s as @e a8e pre8io%sly s o@n0 6o@e8er, at t e same time t e demand !or a8ailable money-capital also gro@s, t e Hobbers, @ o spec%late @it t is paper, playing a prominent role on t e money-market0 &! all t e

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p%rc ases and sales o! t is paper @ere only an expression o! act%al in8estments o! capital, it @o%ld be correct to say t at t ey co%ld a8e no in!l%ence on t e demand !or loan capital, since @ en ? sells is paper, e dra@s exactly as m%c money as A p%ts into t e paper0 A%t e8en i! t e paper itsel! exists t o%g not t e capital Bat least not as money-capitalC originally represented by it, it al@ays creates pro tanto a ne@ demand !or s%c money-capital0 A%t at any rate it is t en money-capital, @ ic @as pre8io%sly at t e disposal o! A b%t is no@ at t e disposal o! ?0 A0 ?0 18+>0 -o0 28860 K7o yo% consider t at it is a correct description o! t e ca%ses @ ic determined t e rate o! disco%nt, to say t at it is !ixed by t e D%antity o! capital on t e market, @ ic is applicable to t e disco%nt o! mercantile bills, as disting%is ed !rom ot er classes o! sec%ritiesQL I /; apman:1 K-o, & t ink t at t e D%estion o! interest is a!!ected by all con8ertible sec%rities o! a c%rrent c aracter# it @o%ld be @rong to limit it simply to t e disco%nt o! bills, beca%se it @o%ld be abs%rd to say t at @ en t ere is a great demand !or money %pon /t e deposit o!1 consols, or e8en %pon Exc eD%er bills, as as r%led 8ery m%c o! late, at a rate m%c ig er t an t e commercial rate, o%r commercial @orld is not a!!ected by it# it is 8ery materially a!!ected by it0L I K28*=0 W en so%nd and c%rrent sec%rities, s%c as bankers ackno@ledge to be so, are on t e market, and people @ant to borro@ money %pon t em, it certainly as its e!!ect %pon commercial bills# !or instance, & can ardly expect a man to let me a8e money at +T %pon commercial bills, i! e can lend is money at t e same moment at 6T %pon consols, or @ ate8er it may be# it a!!ects %s in t e same manner# a man can ardly expect me to disco%nt bills at +ZT, i! & can lend my money at 6T0L I K28*<0 We do not talk o! in8estors @ o b%y t eir V<,===, or V+,===, or V2=,===, as a!!ecting t e money-market materially0 &! yo% ask me as to t e rate o! interest %pon /a deposit o!1 consols, & all%de to people, @ o deal in %ndreds o! t o%sands o! po%nds, @ o are @ at are called Hobbers, @ o take large portions o! loans, or make p%rc ases on t e

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market, and a8e to old t at stock till t e p%blic take it o!! t eir ands at a pro!it# t ese men, t ere!ore, @ant money0L Wit t e de8elopment o! t e credit system# great concentrated money-markets are created, s%c as 'ondon, @ ic are at t e same time t e main seats o! trade in t is paper0 5 e bankers place %ge D%antities o! t e p%blicGs money-capital at t e disposal o! t is %nsa8o%ry cro@d o! dealers, and t %s t is brood o! gamblers m%ltiplies0 KMoney %pon t e $tock Exc ange is, generally speaking, c eaper t an it is else@ ere,L says Pames Morris t e inc%mbent o! t e :o8ernorGs c air o! t e Aank o! England in 1828 be!ore t e $ecret ;ommittee o! 'ords B;0 70 1828, printed 18+>, -o0 <1*C0 &n t e disc%ssion on interest-bearing capital, @e a8e already s o@n t at t e a8erage interest o8er a long period o! years, ot er conditions remaining eD%al, is determined by t e a8erage rate o! pro!it# not pro!it o! enterprise, @ ic is not ing more t an pro!it min%s interest0 /,resent edition: ; 0 JJ&&0 I 0d01 &t as also been mentioned, and @ill be !%rt er analysed in anot er place, t at also !or t e 8ariations in commercial interest, t at is, interest calc%lated by t e money-lenders !or disco%nts and loans @it in t e commercial @orld, a p ase is reac ed, in t e co%rse o! t e ind%strial cycle, in @ ic t e rate o! interest exceeds its minim%m and reac es its mean le8el B@ ic it exceeds laterC and t at t is mo8ement is a res%lt o! a rise in pro!its0 &n t e meantime, t@o t ings are to be noted ere0 'irst: W en t e rate o! interest stays %p !or a long time B@e are speaking ere o! t e rate o! interest in a gi8en co%ntry like England, @ ere t e a8erage rate o! interest is gi8en o8er a lengt y period o! time, and also s o@s itsel! in t e interest paid on long-term loans I @ at co%ld be called pri8ate interestC, it isprima facie proo! t at t e rate o! pro!it is ig d%ring t is period, b%t it does not pro8e necessarily t at t e rate o! pro!it o! enterprise is ig 0 5 is latter distinction is more or less remo8ed !or capitalists, @ o operate mainly @it t eir o@n capital# t ey realise t e ig rate o! pro!it, since t ey pay t e interest to t emsel8es0 5 e possibility o! a ig rate o! interest o! long d%ration is present @ en t e rate o! pro!it is ig # t is does not re!er, o@e8er, to t e p ase o! act%al sD%eeEe0 A%t it is possible t at t is ig rate o! pro!it may lea8e only a lo@ rate o! pro!it o! enterprise, a!ter t e ig rate o! interest as been ded%cted0 5 e rate o! pro!it o! enterprise may s rink, @ ile t e ig rate o! pro!it contin%es0 5 is is possible beca%se t e enterprises m%st be contin%ed, once t ey a8e been started0 7%ring t is p ase, operations are carried on to a large extent @it p%re credit capital Bcapital o! ot er peopleC# and t e ig rate o! pro!it may be partly spec%lati8e and prospecti8e0 ? ig rate o! interest can be paid @it a ig rate o! pro!it b%t decreasing pro!it o! enterprise0 &t can be paid Band t is is done in part d%ring times o! spec%lationC, not o%t o! t e pro!it, b%t o%t o! t e borro@ed capital itsel!, and t is can contin%e !or a @ ile0 Secondly: 5 e statement t at t e demand !or money-capital, and t ere!ore t e rate o! interest, gro@s, beca%se t e rate o! pro!it is ig , is not identical @it t e statement t at t e demand !or ind%strial capital gro@s and t ere!ore t e rate o! interest is ig 0 &n times o! crisis, t e demand !or loan capital, and t ere!ore t e rate o! interest, reac es its maxim%m# t e rate o! pro!it, and @it it t e demand !or ind%strial capital, as to all intents and p%rposes disappeared0 7%ring s%c times, e8eryone borro@s only !or t e p%rpose o! paying, in

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order to settle pre8io%sly contracted obligations0 3n t e ot er and, in times o! rene@ed acti8ity a!ter a crisis, loan capital is demanded !or t e p%rpose o! b%ying and !or t e p%rpose o! trans!orming money-capital into prod%cti8e or commercial capital0 ?nd t en it is demanded eit er by t e ind%strial capitalist or t e merc ant0 5 e ind%strial capitalist in8ests it in means o! prod%ction and in labo%r-po@er0 5 e rising demand !or labo%r-po@er can ne8er by itsel! be a ca%se !or a rising rate o! interest, in so !ar as t e latter is determined by t e rate o! pro!it0 6ig er @ages are ne8er a ca%se !or ig er pro!its, alt o%g t ey may be one o! t e conseD%ences o! ig er pro!its d%ring some partic%lar p ases o! t e ind%strial cycle0 5 e demand !or labo%r-po@er can increase beca%se t e exploitation o! labo%r takes place %nder especially !a8o%rable circ%mstances, b%t t e rising demand !or labo%r-po@er, and t %s !or 8ariable capital, does not in itsel! increase t e pro!it# it, on t e contrary, lo@ers it pro tanto. A%t t e demand !or 8ariable capital can ne8ert eless increase at t e same time, t %s also t e demand !or money-capital I @ ic can raise t e rate o! interest0 5 e market-price o! labo%r-po@er t en rises abo8e its a8erage, more t an t e a8erage n%mber o! labo%rers are employed, and t e rate o! interest rises at t e same time beca%se %nder s%c circ%mstances t e demand !or money-capital rises0 5 e rising demand !or labo%r-po@er raises t e price o! t is commodity, as e8ery ot er, increases its price# b%t not t e pro!it, @ ic depends mainly %pon t e relati8e c eapness o! t is commodity in partic%lar0 A%t it raises at t e same time I %nder t e ass%med conditions I t e rate o! interest, beca%se it increases t e demand !or money-capital0 &! t e money-capitalist, instead o! lending t e money, s o%ld trans!orm imsel! into an ind%strial capitalist, t e !act t at e as to pay more !or labo%r-po@er @o%ld not increase is pro!it b%t @o%ld rat er decrease it correspondingly0 5 e state o! b%siness may be s%c t at is pro!it may ne8ert eless rise, b%t it @o%ld ne8er be so beca%se e pays more !or labo%r0 5 e latter circ%mstance, in so !ar as it increases t e demand !or money-capital, is, o@e8er, s%!!icient to raise t e rate o! interest0 &! @ages s o%ld rise !or some reason d%ring an ot er@ise %n!a8o%rable state o! b%siness, t e rise in @ages @o%ld lo@er t e rate o! pro!it, b%t raise t e rate o! interest to t e extent t at it increased t e demand !or money-capital0 'ea8ing labo%r aside, t e t ing called Kdemand !or capitalL by 38erstone consists only in a demand !or commodities0 5 e demand !or commodities raises t eir price, eit er beca%se it rises abo8e a8erage, or beca%se t e s%pply o! commodities !alls belo@ a8erage0 &! t e ind%strial capitalist or merc ant m%st no@ pay, e.g., V1+= !or t e same amo%nt o! commodities !or @ ic e %sed to pay V1==, e @o%ld no@ a8e to borro@ V1+= instead o! t e !ormer V1==, and i! t e rate o! interest @ere +T, e @o%ld no@ a8e to pay an interest o! V>Z as compared @it V+ !ormerly0 5 e amo%nt o! interest to be paid by im @o%ld rise beca%se e no@ as to borro@ more capital0 5 e @ ole endea8o%r o! Mr0 38erstone consists in representing t e interests o! loan capital and ind%strial capital as being identical, @ ereas is Aank ?ct is precisely calc%lated to exploit t is 8ery di!!erence o! interests to t e ad8antage o! money-capital0 &t is possible t at t e demand !or commodities, in case t eir s%pply as !allen belo@ a8erage, does not absorb any more money-capital t an !ormerly0 5 e same s%m, or per aps a smaller one, as to be paid !or t eir total 8al%e, b%t a smaller D%antity o! %se-8al%es is recei8ed !or t e same s%m0 &n t is case, t e demand !or loanable capital @ill be %nc anged and t ere!ore rate o! interest @ill not rise, alt o%g t e demand !or commodities @o%ld a8e risen as compared to t eir s%pply and conseD%ently t e price o! commodities @o%ld a8e become ig er0 5 e rate o! interest cannot be a!!ected, %nless t e total demand !or loan capital increases, and t is is not t e case %nder t e abo8e ass%mptions0 5 e s%pply o! an article can also !all belo@ a8erage, as it does @ en crop !ail%res in corn, cotton, etc0, occ%r# and t e demand !or loan capital can increase beca%se spec%lation in t ese commodities co%nts on !%rt er rise in prices and t e easiest @ay to make t em rise is to

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temporarily @it dra@ a portion o! t e s%pply !rom t e market0 A%t in order to pay !or t e p%rc ased commodities @it o%t selling t em, money is sec%red by means o! t e commercial Kbill o! exc ange operations0L &n t is case, t e demand !or loan capital increases, and t e rate o! interest can rise as a res%lt o! t is attempt to arti!icially pre8ent t e s%pply o! t is commodity !rom reac ing t e market0 5 e ig er rate o! interest t en re!lects an arti!icial red%ction in t e s%pply o! commodity-capital0 3n t e ot er and, t e demand !or an article can gro@ beca%se its s%pply as increased and t e article sells belo@ its a8erage price0 &n t is case, t e demand !or loan capital can remain t e same, or e8en !all, beca%se more commodities can be ad !or t e same s%m o! money0 $pec%lati8e stock-piling co%ld also occ%r, eit er !or t e p%rpose o! taking ad8antage o! t e most !a8o%rable moment !or prod%ction p%rposes, or in expectation o! a !%t%re rise in prices0 &n t is case, t e demand !or loan capital co%ld gro@, and t e rise in t e rate o! interest @o%ld t en be a re!lection o! capital in8estment in s%rpl%s stock-piling o! elements o! prod%cti8e capital0 We are only considering ere t e demand !or loan capital as it is in!l%enced by t e demand !or, and s%pply o!, commodity-capital0 We a8e already disc%ssed o@ t e 8arying state o! t e reprod%ction process in t e p ases o! t e ind%strial cycle in!l%ences t e s%pply o! loan capital0 5 e tri8ial proposition t at t e market rate o! interest is determined by t e s%pply and demand o! BloanC capital is s re@dly H%mbled %p by 38erstone @it is o@n post%late, namely, t at loan capital is identical @it capital in general# and in t is @ay e tries to trans!orm t e %s%rer into t e only capitalist and is capital into t e only capital0 &n times o! stringency, t e demand !or loan capital is a demand !or means o! payment and not ing else# it is by no means a demand !or money as a means o! p%rc ase0 ?t t e same time, t e rate o! interest may rise 8ery ig , regardless @ et er real capital, i.e., prod%cti8e and commodity capital, exists in ab%ndance or is scarce0 5 e demand !or means o! payment is a mere demand !or con8ertibility into money, so !ar as merc ants and prod%cers a8e good sec%rities to o!!er# it is a demand !or money1capital @ ene8er t ere is no collateral, so t at an ad8ance o! means o! payment gi8es t em not only t e form of money b%t also t e e3uivalent t ey lack, @ ate8er its !orm, @it @ ic to make payment0 5 is is t e point @ ere bot sides o! t e contro8ersy on t e pre8alent t eory o! crises are at t e same time rig t and @rong0 5 ose @ o say t at t ere is merely a lack o! means o! payment, eit er a8e only t e o@ners o! bona fide sec%rities in mind, or t ey are !ools @ o belie8e t at it is t e d%ty and po@er o! banks to trans!orm all bankr%pt s@indlers into sol8ent and respectable capitalists by means o! pieces o! paper0 5 ose @ o say t at t ere is merely a lack o! capital, are eit er H%st D%ibbling abo%t @ords, since precisely at s%c times t ere is a mass o! inconvertible capital as a res%lt o! o8er-imports and o8er-prod%ction, or t ey are re!erring only to s%c ca8aliers o! credit @ o are no@, indeed, placed in t e position @ ere t ey can no longer obtain ot er peopleGs capital !or t eir operations and no@ demand t at t e bank s o%ld not only elp t em to pay !or t e lost capital, b%t also enable t em to contin%e @it t eir s@indles0 &t is a basic principle o! capitalist prod%ction t at money, as an independent !orm o! 8al%e, stands in opposition to commodities, or t at exc ange-8al%e m%st ass%me an independent !orm in money# and t is is only possible @ en a de!inite commodity becomes t e material @ ose 8al%e becomes a meas%re o! all ot er commodities, so t at it t %s becomes t e general commodity, t e commodity par e cellence I as disting%is ed !rom all ot er commodities0 5 is m%st mani!est itsel! in t@o respects, partic%larly among capitalistically de8eloped nations, @ ic to a large extent replace money, on t e one and, by credit operations, and on t e ot er by credit-money0 &n times o! a sD%eeEe, @ en credit contracts or ceases entirely, money s%ddenly stands as t e only means o! payment and tr%e existence o! 8al%e in absol%te opposition to all ot er commodities0 6ence t e %ni8ersal depreciation o! commodities, t e di!!ic%lty or e8en impossibility o! trans!orming t em into money, i.e., into t eir o@n p%rely !antastic !orm0 $econdly, o@e8er, credit-money itsel! is only money to t e extent t at it absol%tely takes t e place o! act%al money to t e amo%nt o! its nominal 8al%e0 Wit a drain on gold its con8ertibility, i.e., its identity @it

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act%al gold becomes problematic0 6ence coerci8e meas%res, raising t e rate o! interest, etc0, !or t e p%rpose o! sa!eg%arding t e conditions o! t is con8ertibility0 5 is can be carried more or less to extremes by mistaken legislation, based on !alse t eories o! money and en!orced %pon t e nation by t e interests o! t e money-dealers, t e 38erstones and t eir ilk0 5 e basis, o@e8er, is gi8en @it t e basis o! t e mode o! prod%ction itsel!0 ? depreciation o! credit-money Bnot to mention, incidentally, a p%rely imaginary loss o! its c aracter as moneyC @o%ld %nsettle all existing relations0 5 ere!ore, t e 8al%e o! commodities is sacri!iced !or t e p%rpose o! sa!eg%arding t e !antastic and independent existence o! t is 8al%e in money0 ?s money-8al%e, it is sec%re only as long as money is sec%re0 For a !e@ millions in money, many millions in commodities m%st t ere!ore be sacri!iced0 5 is is ine8itable %nder capitalist prod%ction and constit%tes one o! its bea%ties0 &n !ormer modes o! prod%ction, t is does not occ%r beca%se, on t e narro@ basis %pon @ ic t ey stand, neit er credit nor credit-money can de8elop greatly0 ?s long as t e social c aracter o! labo%r appears as t e money1e istence o! commodities, and t %s as a thing external to act%al prod%ction, money crises I independent o! or as an intensi!ication o! act%al crises I are ine8itable0 3n t e ot er and, it is clear t at as long as t e credit o! a bank is not s aken, it @ill alle8iate t e panic in s%c cases by increasing credit-money and intensi!y it by contracting t e latter0 5 e entire istory o! modern ind%stry s o@s t at metal @o%ld indeed be reD%ired only !or t e balancing o! international commerce, @ ene8er its eD%ilibri%m is momentarily dist%rbed, i! only domestic prod%ction @ere organised0 5 at t e domestic market does not need any metal e8en no@ is s o@n by t e s%spension o! t e cas payments o! t e socalled national banks, @ ic resort to t is expedient in all extreme cases as t e sole relie!0 &n t e case o! t@o indi8id%als, it @o%ld be ridic%lo%s to say t at in t eir transactions @it one anot er bot a8e an %n!a8o%rable balance o! payments0 &! t ey are reciprocally creditor and debtor o! one anot er, it is e8ident t at @ en t eir claims do not balance, one m%st be t e creditor and t e ot er t e debtor !or t e balance0 Wit nations t is is by no means t e case0 ?nd t at t is is not t e case is ackno@ledged by all economists @ en t ey admit t at t e balance o! payments can be !a8o%rable or %n!a8o%rable !or a nation, t o%g its trade balance m%st %ltimately be settled0 5 e balance o! payments di!!ers !rom t e balance o! trade in t at it is a balance o! trade @ ic m%st be settled at a de!inite time0 W at t e crises no@ accomplis is to narro@ t e di!!erence bet@een t e balance o! payments and t e balance o! trade to a s ort inter8al# and t e speci!ic conditions @ ic de8elop in t e nation s%!!ering !rom a crisis and, t ere!ore, a8ing its payments become d%e I t ese conditions already lead to s%c a contraction o! t e time o! settlement0 First, s ipping a@ay precio%s metals# t en selling consigned commodities at lo@ prices# exporting commodities to dispose o! t em or to obtain money ad8ances on t em at ome# increasing t e rate o! interest, recalling credit, depreciating sec%rities, disposing o! !oreign sec%rities, attracting !oreign capital !or in8estment in t ese depreciated sec%rities, and !inally bankr%ptcy, @ ic settles a mass o! claims0 ?t t e same time, metal is still o!ten sent to t e co%ntry @ ere a crisis as broken o%t, beca%se t e dra!ts dra@n on it are insec%re and payment in specie is most tr%st@ort y0 F%rt ermore, in regard to ?sia, all capitalist nations are %s%ally sim%ltaneo%sly I directly or indirectly I its debtors0 ?s soon as t ese 8ario%s circ%mstances exert t eir !%ll e!!ect %pon t e ot er in8ol8ed nation, it like@ise begins to export gold and sil8er, in s ort, its payments become d%e and t e same p enomena are repeated0 &n commercial credit, t e interest I as t e di!!erence bet@een credit price and cas price I enters into t e price o! commodities only in so !ar as t e bills o! exc ange a8e a longer t an ordinary r%nning time0 3t er@ise it does not0 ?nd t is is explained by t e !act t at e8eryone takes credit @it one and and gi8es it @it t e ot er0 /5 is does not agree @it my experience0 I '.001 A%t in so !ar as disco%nt in t is !orm enters ere, it is not reg%lated by t is commercial credit, b%t by t e money-market0 &! s%pply and demand o! money-capital, @ ic determine t e rate o! interest, @ere identical @it s%pply and demand o! act%al capital, as 38erstone maintains, t e interest @o%ld be

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sim%ltaneo%sly lo@ and ig , depending on @ et er 8ario%s commodities or 8ario%s p ases Bra@ material, semi-!inis ed prod%ct, !inis ed prod%ctC o! t e same commodity @ere being considered0 &n 1822, t e rate o! interest o! t e Aank o! England !l%ct%ated bet@een 2T B!rom Pan%ary to $eptemberC and <Z and 3T B!rom -o8ember to t e end o! t e yearC0 &n 182+, it @as <Z, <`, and 3T !rom Pan%ary to 3ctober, and bet@een 3 and +T d%ring t e remaining mont s0 5 e a8erage price o! !air 3rleans cotton @as 6[d0 in 1822 and 2 >N8d0 in 182+0 3n Marc 3, 1822, t e cotton s%pply in 'i8erpool @as 6<>,=2< bales, and on Marc 3, 182+, it @as >>3,8== bales0 5o H%dge by t e lo@ price o! cotton, t e rate o! interest s o%ld a8e been lo@ in 182+, and it @as indeed !or t e greater part o! t is time0 A%t to H%dge by t e yarn, t e rate o! interest s o%ld a8e been ig , !or t e prices @ere relati8ely ig and t e pro!its absol%tely ig 0 From cotton at 2d0 per po%nd, yarn co%ld be sp%n, in 182+ @it a spinning cost o! 2d0 Bgood sec%nda m%le t@ist -o0 2=C, or a total cost o! 8d0 to t e spinner, @ ic e co%ld sell in $eptember and 3ctober 182+ at 1=Z or 11Zd0 per po%nd0 B$ee t e testimony o! Wylie belo@0C 5 e entire matter can be resol8ed as !ollo@s: $%pply and demand o! loan capital @o%ld be identical @it s%pply and demand o! capital generally Balt o%g t is last statement is abs%rd# !or t e ind%strial or commercial capitalist a commodity is a !orm o! is capital, yet e ne8er asks !or capital as s%c , b%t only !or t e partic%lar commodity as s%c , e b%ys and pays !or it as a commodity, e.g., corn or cotton, regardless o! t e role t at it as to play in t e circ%it o! is capitalC, i! t ere @ere no moneylenders, and i! in t eir stead t e lending capitalists @ere in possession o! mac inery, ra@ materials, etc0, @ ic t ey @o%ld lend or ire o%t, as o%ses are rented o%t no@, to t e ind%strial capitalists, @ o are t emsel8es o@ners o! some o! t ese obHects0 (nder s%c circ%mstances, t e s%pply o! loan capital @o%ld be identical @it t e s%pply o! elements o! prod%ction !or t e ind%strial capitalist and commodities !or t e merc ant0 A%t it is clear t at t e di8ision o! pro!it bet@een t e lender and borro@er @o%ld t en, to begin @it , completely depend on t e relation o! t e capital @ ic is lent to t at @ ic is t e property o! t e one @ o employs it0 ?ccording to Mr0 Weg%elin BA0 ?0 18+>C, t e rate o! interest is determined by Kt e amo%nt o! %nemployed capitalL B<+<C# it is Kb%t an indication o! a large amo%nt o! capital seeking employmentL B<>1C# later t is %nemployed capital becomes K!loating capitalL B28+C and by t is e means Kt e Aank o! England notes and ot er kinds o! circ%lation in t e co%ntry, !or instance, t e co%ntry banks circ%lation and t e amo%nt o! coin @ ic is in t e co%ntry0 & incl%de in !loating capital t e reser8es o! t e bankersL B+=<, +=3C, and later also gold b%llion B+=3C0 5 %s t e same Mr0 Weg%elin says t at t e Aank o! England exerts great in!l%ence %pon t e rate o! interest in times, @ en K@eL /t e Aank o! England1 Kare olders o! t e greater portion o! t e %nemployed capitalL B11*8C, @ ile, according to t e abo8e testimony o! Mr0 38erstone, t e Aank o! England Kis no place !or capital0L Mr0 Weg%elin !%rt er says: K& t ink t e rate o! disco%nt is go8erned by t e amo%nt o! %nemployed capital @ ic t ere is in t e co%ntry0 5 e amo%nt o! %nemployed capital is represented by t e reser8e o! t e Aank o! England, @ ic is practically a reser8e o! b%llion0 W en, t ere!ore, t e b%llion is dra@n %pon, it diminis es t e amo%nt o! %nemployed capital in t e co%ntry and conseD%ently raises t e 8al%e o! t at @ ic remainsL B1<+8C0 P0 $t%art Mill says B<1=<C:

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K5 e Aank is obliged to depend !or t e sol8ency o! its banking department %pon @ at it can do to replenis t e reser8e in t at department# and t ere!ore as soon as it !inds t at t ere is any drain in progress, it is obliged to look to t e sa!ety o! its reser8e, and to commence contracting its disco%nts or selling sec%rities0L 5 e reser8e, in so !ar as only t e banking department is considered, is a reser8e !or t e deposits only0 ?ccording to t e 38erstones, t e banking department is s%pposed to act only as a banker, @it o%t regard to t e Ka%tomaticL iss%e o! notes0 A%t in times o! act%al stringency t e Aank, independently o! t e reser8e o! t e banking department @ ic consists only o! notes, keeps a s arp eye on t e b%llion reser8e, and m%st do so i! it does not @is to !ail0 For, to t e extent t at t e b%llion reser8e d@indles, so t e reser8e o! bank-notes also d@indles, and no one s o%ld be better in!ormed o! t is t an Mr0 38erstone, @ o precisely by is Aank ?ct o! 1822 as so sagacio%sly arranged t is0

Chapter 33. The 1ediu

of Circulation in the

Credit S!ste
K5 e great reg%lator o! t e 8elocity o! t e c%rrency is credit0 5 is explains @ y a se8ere press%re %pon t e money-market is generally coincident @it a !%ll circ%lation0L B4he Currency 4heory 9eviewed, p0 6+0C 5 is is to be taken in a do%ble sense0 3n t e one and, all met ods @ ic sa8e on medi%m o! circ%lation are based %pon credit0 3n t e ot er and, o@e8er, take, !or example, a +==-po%nd note0 ? gi8es it to A on a certain day in payment !or a bill o! exc ange# A deposits it on t e same day @it is banker# t e latter disco%nts a bill o! exc ange @it it on t e 8ery same day !or ;# ; pays it to is bank, t e bank gi8es it to t e bill-broker as an ad8ance, etc0 5 e 8elocity @it @ ic t e note circ%lates ere, to ser8e !or p%rc ases and payments, is e!!ected by t e 8elocity @it @ ic it repeatedly ret%rns to someone in t e !orm o! a deposit and passes o8er to someone else again in t e !orm o! a loan0 5 e p%re economy in medi%m o! circ%lation appears most ig ly de8eloped in t e clearing o%se I in t e simple exc ange o! bills o! exc ange t at are d%e I and in t e preponderant !%nction o! money as a means o! payment !or merely settling balances0 A%t t e 8ery existence o! t ese bills o! exc ange depends in t%rn on credit, @ ic t e ind%strialists and merc ants m%t%ally gi8e one anot er0 &! t is credit declines, so does t e n%mber o! bills, partic%larly long-term ones, and conseD%ently also t e e!!ecti8eness o! t is met od o! balancing acco%nts0 ?nd t is economy, @ ic consists in eliminating money !rom transactions and rests entirely %pon t e !%nction o! money as a means o! payment, @ ic in t%rn is based %pon credit, can only be o! t@o kinds Baside !rom t e more or less de8eloped tec niD%e in t e concentration o! t ese paymentsC: m%t%al claims, represented by bills o! exc ange or c eD%es, are balanced o%t eit er by t e same banker, @ o merely transcribes t e claim !rom t e acco%nt o! one to t at o! anot er, or by t e 8ario%s bankers among t emsel8es0 xxi 5 e concentration o! 8 to 2= million bills o! exc ange in t e ands o! one bill-broker, s%c as t e !irm o! 38erend, :%rney g ;o0, @as one o! t e principal means o! expanding t e scale o! s%c balancing locally0 5 e e!!ecti8eness o! t e medi%m o! circ%lation is increased t ro%g t is economy in so !ar as a smaller D%antity o! it is reD%ired simply to balance acco%nts0 3n t e ot er and t e 8elocity o! t e money !lo@ing as medi%m o! circ%lation Bby @ ic it is also economisedC depends entirely %pon t e !lo@ o! p%rc ases and sales, and on t e c ain o! payments, in so !ar as t ey occ%r s%ccessi8ely in money0 A%t credit e!!ects and t ereby increases t e 8elocity o! circ%lation0 ? single piece o! money, !or instance, can e!!ect only !i8e mo8es, and remains longer in t e ands o! eac indi8id%al as mere medi%m o! circ%lation @it o%t credit mediating I @ en ?, its original o@ner, b%ys !rom A, A !rom ;, ; !rom 7, 7 !rom E, and E !rom F, t at is, @ en its transition !rom one and to anot er is d%e only to act%al p%rc ases and sales0 A%t @ en A deposits t e money recei8ed in payment !rom ? @it is banker and t e latter %ses it in disco%nting bills o! exc ange !or ;, ; in t%rn b%ys !rom 7, 7 deposits it @it is banker and t e latter lends it to E, @ o b%ys !rom F, t en e8en its 8elocity as mere medi%m o! circ%lation Bmeans o! p%rc aseC is e!!ected by se8eral credit operations: A"s depositing @it is banker and t e latter"s disco%nting !or ;, 7"s depositing @it is banker, and t e latter"s disco%nting !or E# in ot er @ords t ro%g !o%r credit operations0 Wit o%t t ese credit operations, t e same piece o! money @o%ld not a8e per!ormed !i8e p%rc ases s%ccessi8ely in t e gi8en period o! time0 5 e !act t at it c anged bands @it o%t

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mediation o! act%al sales and p%rc ases, t ro%g depositing and disco%nting, as ere accelerated its c ange o! ands in t e series o! act%al transactions0 We a8e seen pre8io%sly t at one and t e same bank-note can constit%te deposits in se8eral banks0 $imilarly, it can also constit%te 8ario%s deposits in t e same bank0 5 e banker disco%nts, @it t e note @ ic ? as deposited, A"s bill o! exc ange, A pays ;, and ; deposits t e same note in t e same bank t at iss%ed it0 We a8e already demonstrated in t e disc%ssion o! simple money circ%lation B4ol &, ; 0 &&&, <C t at t e mass o! act%al circ%lating money, ass%ming t e 8elocity o! circ%lation and economy o! payments as gi8en, is determined by t e prices o! commodities and t e D%antity o! transactions0 5 e same la@ go8erns t e circ%lation o! notes0 &n t e !ollo@ing table, t e ann%al a8erage n%mber o! notes o! t e Aank o! England, in so !ar as t ey @ere in t e ands o! t e p%blic, are recorded, namely, t e +- and 1=-po%nd notes, t e <=- to 1==-po%nd notes, and t e larger denominations bet@een <== and 1,=== po%nds sterling# also t e percentages o! t e total circ%lation t at eac one o! t ese gro%pings constit%tes0 5 e amo%nts are in t o%sands, i.e., t e last t ree !ig%res are omitted0 .ear V+-1= -otes 1822 *,<63 182+ *,6*8 1826 *,*18 182> *,+*1 1828 8,>3< 182* 8,6*< 18+= *,162 18+1 *,36< 18+< *,83* 18+3 1=,6** 18+2 1=,+6+ 18++ 1=,6<8 18+6 1=,68= 18+> 1=,6+* T V<=-1== T -otes V<==1,=== -otes T 5otal

2+0> +,>3+ 260* 6,=8< 280* +,>>8 +=01 +,2*8 2803 +,=26 2>0< +,<32 2>0< +,+8> 2801 +,++2 2+0= 6,161 2>03 6,3*3 +10= +,*1= +306 +,>=6 +202 +,62+ +20> +,+6>

<803 +,<+3 <*03 2,*2< <80+ 2,+*= <80> 2,=66 <>0* 2,3=> <80+ 2,2>> <808 2,626 <80+ 2,++> <80< +,8+6 <80< +,+21 <80+ 2,<32 <80* 3,2+* <80> 3,3<3 <806 3,<21

<60= <=,<21 <308 <=,><< <<06 <=,<86 <10< 1*,1++ <308 18,=8+ <203 18,2=3 <20= 1*,3*8 <302 1*,2>3 <608 <1,8+6 <20+ <<,6+3 <=0+ <=,>=* 1>0+ 1*,>*3 160* 1*,628 160> 1*,26>

BA0 ?0 18+8, p0 JJ4&0C 5 e total s%m o! circ%lating bank-notes, t ere!ore, positi8ely decreased !rom 1822 to 18+>, alt o%g commercial b%siness, as indicated by exports and imports, ad more t an do%bled0 5 e smaller bank-notes o! V+ and V1= increased, as t e table s o@s, !rom V*,<63,=== in 1822 to V1=,6+*,=== in 18+>0 ?nd t is took place sim%ltaneo%sly @it t e partic%larly ea8y increase in gold circ%lation at t at time0 3n t e ot er and, t ere @as a decrease in t e notes o! ig er denominations BV<== to V1,===C !rom V+,8+6,=== in 18+< to V3,<21,=== in 18+>, i.e., a decrease o! more t an V<Z million0 5 is is explained as !ollo@s:

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K3n t e 8t P%ne 18+2, t e pri8ate bankers o! 'ondon admitted t e Hoint-stock banks to t e arrangements o! t e clearing o%se, and s ortly a!ter@ards t e !inal clearing @as adH%sted in t e Aank o! England0 5 e daily clearances are no@ e!!ected by trans!ers in t e acco%nts @ ic t e se8eral banks keep in t at establis ment0 &n conseD%ence o! t e adoption o! t is system, t e large notes @ ic t e bankers !ormerly employed !or t e p%rpose o! adH%sting t eir acco%nts are no longer necessary0L BA0 ?0 18+8, p0 40C 5o @ at small minim%m t e %se o! money in @ olesale trade as been red%ced, can be ded%ced !rom t e table reprinted in Aook & B; 0 &&&, FootnoteC, @ ic @as presented to t e Aank ;ommittee by Morrison, 7illon g ;o0, one o! t e largest o! t ose 'ondon !irms !rom @ ic a small dealer can b%y is entire assortment o! commodities0 ?ccording to t e testimony o! W0 -e@marc be!ore t e Aank ;ommittee 18+>, -o0 1>21, ot er circ%mstances also contrib%ted to economy in t e circ%lating medi%m: penny postage, rail@ays, telegrap y, in s ort, t e impro8ed means o! comm%nication# t %s England can no@ carry on !i8e to six times more b%siness @it abo%t t e same circ%lation o! bank-notes0 5 is is also essentially d%e to t e @it dra@al !rom circ%lation o! notes o! ig er denomination t an V1=0 6ere -e@marc sees a nat%ral explanation !or t e p enomenon t at in $cotland and &reland, @ ere one-po%nd notes also circ%late, note circ%lation as risen by abo%t 31T B1>2>C0 5 e total circ%lation o! bank-notes in t e (nited Kingdom, incl%ding one-po%nd notes, is said to be V3* million B1>2*C0 5 e gold circ%lation, V>= million B1>+=C0 &n $cotland, t e circ%lation o! notes @as V3,1<=,=== in 1832# V3,=<=,=== in 1822# and V2,=+=,=== in 18+2 B1>+<C0 From t ese !ig%res alone, it is e8ident t at banks iss%ing notes can by no means increase t e n%mber o! circ%lating notes at @ill, as long as t ese notes are at all times exc angeable !or money0 /&ncon8ertible paper money is not considered ere at all# incon8ertible bank-notes can become a %ni8ersal medi%m o! circ%lation only @ ere t ey are act%ally backed by state credit, as is t e case in )%ssia at present0 5 ey t en !all %nder t e la@s o! incon8ertible paper money iss%ed by t e state, @ ic a8e already been de8eloped in Aook & B; 0 &&&, <, cC K;oin and $ymbols o! 4al%e0L I '.001 5 e D%antity o! circ%lating notes is reg%lated by t e t%rno8er reD%irements, and e8ery s%per!l%o%s note @ends its @ay back immediately to t e iss%er0 $ince in England only t e notes o! t e Aank o! England circ%late %ni8ersally as legal means o! payment, @e can disregard at t is point t e insigni!icant, and merely local, note circ%lation o! t e co%ntry banks0 Ae!ore t e Aank ;ommittee 18+8, Mr0 -ea8e, :o8ernor o! t e Aank o! England, testi!ies: K-o0 *2>0 BM%estion:C W ate8er meas%res yo% resort to, t e amo%nt o! notes @it remains t e same# t at is t e p%blic, yo% say, some@ ere abo%t

V<=,===,===Q I &n ordinary times, t e %ses o! t e p%blic seem to @ant abo%t V<=,===,===0 5 ere are special periodical moments @ en, t ro%g t e year,

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t ey rise to anot er V1,===,=== or V1,+==,===0 & stated t at, i! t e p%blic @anted more, t ey co%ld al@ays take it !rom t e Aank o! England0L I K*280 .o% stated t at d%ring t e panic t e p%blic @o%ld not allo@ yo% to diminis t e amo%nt o! notes# & @ant yo% to elping acco%nt !or t at0 I &n moments o! panic, t e p%blic a8e, as & belie8e, t e !%ll po@er o! t emsel8es as to notes# and o! co%rse, as long as t e Aank as a liability, t ey may %se t at liability to take t e notes !rom t e Aank0L I K*2*0 5 en t ere seems to be @it reD%ired, at all times, some@ ere abo%t V<=,===,=== o! legal tenderQ I V<=,===,=== o! notes t e p%blic# it 8aries0 &t is V18,+==,===, V1*,===,===, V<=,===,===, and so on# b%t taking t e a8erage, yo% may call it !rom V1*,===,=== to V<=,===,===0L 5estimony o! 5 omas 5ooke be!ore t e ;ommittee o! 'ords on ;ommercial 7istress B;0 70 1828N+>C, -o0 3=*2: K5 e Aank as no po@er o! its o@n 8olition to extend t e amo%nt o! its circ%lation in t e t e notes in t e ands o! t e o@e8er p%blic# b%t it as t e po@er o! red%cing t e amo%nt o! ands o! t e p%blic, not @it o%t a 8ery 8iolent operation0L P0 ;0 Wrig t, a banker !or 3= years in -otting am, a8ing explained at lengt t e impossibility !or a co%ntry bank to be able to keep more notes in circ%lation t an t e p%blic needs and @ants, says abo%t notes o! t e Aank o! England B;0 70 1828N+>C, -o0 <822: K& am not a@are t at t ere is any c eckL B!or note iss%eC K%pon t e Aank o! England, b%t any excess o! circ%lation @ill go into t e deposits and t %s ass%me a di!!erent name0L 5 e same olds tr%e !or $cotland, @ ere almost not ing b%t paper circ%lates, beca%se t ere as @ell as in &reland one-po%nd notes are also in %se and Kt e $cotc ate gold0L Kennedy, 7irector o! a $cottis bank, declares t at banks co%ld not e8en contract t eir circ%lation o! notes and Kconcei8es t at so long as t ere are internal transactions reD%iring notes or gold to per!orm t em, bankers m%st, eit er t ro%g t e demands o! t eir depositors or in one s ape or anot er, !%rnis as m%c

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c%rrency as t ose transactions reD%ire0000 5 e $cottis banks can restrict t eir transactions, b%t t ey cannot control t eir c%rrency0L BDbid., -os0 3226, 32280C $imilarly, ?nderson, 7irector o! t e (nion Aank o! $cotland, states B ibid., -o0 3+>8C: K5 e system o! exc anges bet@een yo%rsel8es K /among t e $cottis banks1 Kpre8ents any o8er-iss%e on t e part o! any one bankQ I .es# t ere is a more po@er!%l pre8enti8e t an t e system o! exc angesL /@ ic as really not ing to do @it t is, b%t does indeed g%arantee t e ability o! t e notes o! eac bank to circ%late t ro%g o%t $cotland1, Kt e %ni8ersal practice in $cotland o! keeping a bank acco%nt# e8erybody @ o as any money at all as a bank e acco%nt and p%ts in e8ery day t e money @ ic

does not immediately @ant, so t at at t e close o! t e b%siness o! t e day t ere is no money scarcely o%t o! t e banks except @ at people a8e in t eir pockets0L 5 e same applies to &reland, as indicated in t e testimony o! t e :o8ernor o! t e Aank o! &reland, Mac7onnell, and t e 7irector o! t e ,ro8incial Aank o! &reland, M%rray, be!ore t e same ;ommittee0 -ote circ%lation is H%st as independent o! t e state o! t e gold reser8e in t e 8a%lts o! t e bank @ ic g%arantees t e con8ertibility o! t ese notes, as it is o! t e @ill o! t e Aank o! England0 K3n $eptember 18, 1826, t e circ%lation o! t e Aank o! England @as V<=,*==,=== and t e b%llion in t e Aank V16,<>3,===# and on ?pril +, 182>, t e notes in circ%lation @ere V<=,81+,=== and t e b%llion V1=,<26,===0000 &t is e8ident t at six million o! gold @ere exported, @it o%t any contraction o! t e c%rrency o! t e co%ntry0L BP0 :0 Kinnear, 4he Crisis and the Currency, 'ondon, 182>, p0 +0C 3! co%rse, t is applies only %nder present conditions pre8ailing in England, and e8en ere only in so !ar as legislation does not decree a di!!erent relations ip bet@een t e note iss%e and metal reser8e0 6ence only t e reD%irements o! b%siness itsel! exert an in!l%ence on t e D%antity o! circ%lating money-notes and gold0 5o be noted ere, in t e !irst instance, are t e periodic !l%ct%ations, @ ic repeat t emsel8es ann%ally regardless o! t e general condition o! b%siness, so t at !or t e past <= years

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Kt e circ%lation is ig in one mont , and it is lo@ in anot er mont , and in a certain ot er mont occ%rs a medi%m point0L B-e@marc , A0 ?0 18+>, -o0 16+=0C 5 %s, in ?%g%st o! e8ery year a !e@ millions, generally in gold, pass !rom t e Aank o! England into domestic circ%lation to pay t e ar8est expenses# since @ages are t e principal payments to be made ere, bank-notes are less ser8iceable in England !or t is p%rpose0 Ay t e close o! t e year t is money as streamed back to t e Aank0 &n $cotland, t ere are almost not ing b%t onepo%nd notes instead o! so8ereigns# ere, t en, t e note circ%lation is expanded in t e corresponding sit%ation, namely, t@ice a year I in May and -o8ember I !rom 3 million to 2 million# a!ter a !ortnig t t e ret%rn !lo@ begins, and is almost completed in one mont 0 B?nderson, ;0 70 1828N+>, -os0 3+*+-36==0C 5 e note circ%lation o! t e Aank o! England also experiences a momentary !l%ct%ation e8ery t ree mont s beca%se o! t e D%arter1y payment o! Kdi8idends,L t at is, interest on t e national debt, @ ereby bank-notes are !irst @it dra@n !rom circ%lation and t en again released to t e p%blic# b%t t ey !lo@ back 8ery soon again0 Weg%elin BA0 ?0 18+>, -o0 38C states t at t is !l%ct%ation in t e note circ%lation amo%nts to <Z0 Mr0 ; apman o! t e notorio%s !irm o! 38erend, :%rney g ;o0, o@e8er, estimates t e amo%nt o! dist%rbance t %s created in t e money-market as being m%c ig er0 KW en yo% abstract !rom t e circ%lation V6,===,=== or V>,===,=== o! re8en%e in anticipation o! di8idends, somebody m%st be t e medi%m o! s%pplying t at in t e intermediate times0L BA0 ?0 18+>, -o0 +1*60C Far more signi!icant and end%ring are t e !l%ct%ations in D%antity o! circ%lating medi%m corresponding to t e 8ario%s p ases o! t e ind%strial cycle0 'et %s listen to anot er associe o! t at !irm on t is D%estion, t e esteemed M%aker $am%el :%rney B;0 70 1828N+>, -o0 <62+C: K?t t e end o! 3ctober B182>C t e amo%nt o! banknotes in t e ands o! t e p%blic @as V<=,8==,===0 ?t t at period t ere @as great di!!ic%lty in getting possession o! bank-notes in t e money-market0 5 is arose !rom t e alarm o! not being able to get t em in conseD%ence o! t e restriction o! t e ?ct o! 18220 ?t present /Marc 18281 t e amo%nt o! bank-notes in t e ands o! t e p%blic is 000 V1>,>==,===, b%t t ere being no@ no commercial alarm @ atsoe8er, it is m%c beyond @ at is reD%ired0 5 ere is no banking o%se or money-dealer in 'ondon, b%t @ at as a larger amo%nt o! bank-notes t an t ey can %se0L I K<6+=0 5 e amo%nt o! bank-notes 000 o%t o! t e c%stody o! t e Aank o! England a!!ords a totally ins%!!icient exponent o! t e acti8e state o! t e circ%lation, @it o%t

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taking into consideration like@ise 000 t e state o! t e commercial @orld and t e state o! credit0L I K<6+10 5 e !eeling o! s%rpl%s t at @e a8e %nder t e present amo%nt o! circ%lation in t e ands o! t e p%blic arises in a large degree !rom o%r present state o! great stagnation0 &n a state o! ig prices and excitement o! transaction V1>,>==,=== @o%ld gi8e %s a !eeling o! restriction0L /?s long as t e state o! b%siness is s%c t at ret%rns o! loans made come in reg%larly and credit t %s remains %ns aken, t e expansion and contraction o! circ%lation depend simply %pon t e reD%irements o! ind%strialists and merc ants0 $ince gold, at least in England, does not come into D%estion in t e @ olesale trade and t e circ%lation o! gold, aside !rom seasonal !l%ct%ations, may be regarded as rat er constant o8er a long period o! time, t e note circ%lation o! t e Aank o! England constit%tes a s%!!iciently acc%rate meas%re o! t ese c anges0 &n t e period o! stagnation !ollo@ing a crisis, circ%lation is smallest# @it t e rene@ed demand, a greater need !or circ%lating medi%m de8elops, @ ic increases @it rising prosperity# t e D%antity o! circ%lating medi%m reac es its apex in t e period o! o8er-tension and o8er-spec%lation I t e crisis precipito%sly breaks o%t and o8ernig t bank-notes @ ic yesterday @ere still so plenti!%l disappear !rom t e market and @it t em t e disco%nters o! bills, lenders o! money on sec%rities, and b%yers o! commodities0 5 e Aank o! England is called %pon !or elp I b%t e8en its po@ers are soon ex a%sted, !or t e Aank ?ct o! 1822 compels it to contract its note circ%lation at t e 8ery moment @ en t e @ ole @orld cries o%t !or notes# @ en o@ners o! commodities cannot sell, yet are called %pon to pay and are prepared !or any sacri!ice, i! only t ey can sec%re bank-notes0 K7%ring an alarm,L says t e earlier mentioned banker Wrig t Bloc. cit., -o0 <*3=C, Kt e co%ntry reD%ires t@ice as m%c circ%lation as in ordinary times, oarded by bankers and beca%se t e circ%lation is

ot ers0L 3nce t e crisis as broken o%t, it becomes !rom t en on only a D%estion o! means o! payment0 A%t since e8ery one is dependent %pon someone else !or t e receipt o! t ese means o! payment, and no one kno@s @ et er t e next one @ill be able to meet is payments @ en d%e, a reg%lar stampede ens%es !or t ose means o! payment a8ailable on t e market, t at is, !or bank-notes0 E8eryone oards as many o! t em as e can lay and on, and t %s t e notes disappear !rom circ%lation on t e 8ery day @ en t ey are most needed0 $am%el :%rney B;0 70 1828N+>, -o0 1116C estimates t e amo%nt o! bank notes bro%g t %nder lock and key in 3ctober 182>, at a time o! s%c alarm, to a8e reac ed V2 to V+ million0 I '.0.C &n t is connection, t e cross-examination o! ; apman, :%rney"s associate @ o as been pre8io%sly mentioned, be!ore t e Aank ;ommittee o! 18+> is especially interesting0 & present ere its principal contents in context, alt o%g certain points are to%c ed %pon @ ic @e s all not examine %ntil later0 Mr0 ; apman as t e !ollo@ing to say: K2*630 & a8e also no esitation in saying t at & do not t ink it is a proper condition o! t ings t at t e money-

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market s o%ld be %nder t e po@er o! any indi8id%al capitalist Bs%c as does exist in 'ondonC, to create a tremendo%s scarcity and press%re, @ en @e a8e a 8ery lo@ state o! circ%lation o%t0 5 at is possible 000 t ere is more t an one capitalist, @ o can @it dra@ !rom t e circ%lating medi%m V1,===,=== or V<,===,=== o! notes, i! t ey a8e an obHect to attain by it0L I 2*6+0 /&n t e :erman 18*2 edition t is reads: 2**+0 I0d. 1 ? big spec%lator can sell V1,===,=== or V<,===,=== o! consols and t %s take t e money o%t o! t e market0 $omet ing similar to t is as appened D%ite recently, Kit creates a 8ery 8iolent press%re0L 2*6>0 5 e notes are t en indeed %nprod%cti8e0 KA%t t at is not ing, i! it e!!ects is great obHect# is great obHect is to knock do@n t e !%nds, to create a scarcity, and e as it per!ectly in is po@er to do so0L ?n ill%stration: 3ne morning t ere @as a great demand !or money in t e $tock Exc ange# nobody kne@ its ca%se# somebody asked ; apman to lend im V+=,=== at >T0 ; apman @as astonis ed, !or is rate o! interest @as m%c lo@er# e accepted0 $oon a!ter t at t e man ret%rned, borro@ed anot er V+=,=== at >ZT, t en V1==,=== at 8T, and @anted still more at 8ZT0 5 en e8en ; apman became %neasy0 'ater it t%rned o%t t at a considerable s%m o! money ad been s%ddenly @it dra@n !rom t e market0 A%t, says ; apman, K& did lend a large s%m at 8T# & @as a!raid to go beyond# & did not kno@ @ at @as coming0L &t m%st ne8er be !orgotten t at, alt o%g V1* to V<= million in notes are almost constantly s%pposed to be in t e ands o! t e p%blic, ne8ert eless, t e portion o! t ese notes @ ic act%ally circ%lates, and, on t e ot er and, t e portion @ ic is eld idle by t e banks as a reser8e, contin%ally and signi!icantly 8ary @it respect to eac ot er0 &! t is reser8e is large, and t ere!ore t e act%al circ%lation small, it means, !rom t e point o! 8ie@ o! t e money-market, t at t e circ%lation is !%ll, money is plenti!%l# i! t e reser8e is small, and t ere!ore t e act%al circ%lation !%ll, in t e lang%age o! t e money-market t e circ%lation is lo@, money is scarce I in ot er @ords, t e portion representing idle loan capital is small0 ? real expansion or contraction o! t e circ%lation, t at is independent o! t e p ases o! t e ind%strial cycle I @it t e amo%nt needed by t e p%blic, o@e8er, remaining t e same I occ%rs only !or tec nical reasons, !or instance, on t e dates @ en taxes or t e interest on t e national debt are d%e0 W en taxes are paid, more notes and gold t an %s%al !lo@ into t e Aank o! England and, in e!!ect, contract t e circ%lation @it o%t regard to its needs0 5 e re8erse takes place @ en t e di8idends on t e national debt are paid o%t0 &n t e !ormer case, loans are made !rom t e Aank in order to obtain circ%lating medi%m0 &n t e latter case, t e rate o! interest !alls in pri8ate banks beca%se o! t e momentary gro@t o! t eir reser8es0 5 is as not ing to do @it t e absol%te D%antity o! circ%lating medi%m# it does, o@e8er, concern t e banking !irm @ ic sets t is circ%lating medi%m in motion and !or @ ic t is process consists in t e alienation o! loan capital and !or @ ic it pockets t e pro!its t ereby0

366

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&n t e one case, t ere is merely a temporary displacement o! circ%lating medi%m, @ ic t e Aank o! England balances by s ort-term loans at lo@ interest s ortly be!ore t e D%arterly taxes and also be!ore t e D%arterly di8idends on t e national debt become d%e# t e iss%e o! t ese s%pern%merary notes !irst !ills %p t e gap ca%sed by t e payment o! taxes, @ ile t eir ret%rn payment to t e Aank soon t erea!ter brings back t e excess o! notes obtained by t e p%blic t ro%g t e payment o! di8idends0 &n t e ot er case, lo@ or !%ll circ%lation is al@ays simply a matter o! di!!erent distrib%tion o! t e same D%antity o! circ%lating medi%m into acti8e circ%lation and deposits, i.e., an instr%ment o! loans0 3n t e ot er and, i!, !or example, t e n%mber o! notes iss%ed is increased on t e basis o! a !lo@ o! gold into t e Aank o! England, t ese notes assist in disco%nting bills o%tside o! t e Aank and ret%rn to it t ro%g t e repayment o! loans, so t at t e absol%te D%antity o! circ%lating notes is only momentarily increased0 &! t e circ%lation is !%ll beca%se o! b%siness expansion B@ ic may take place e8en t o%g prices are relati8ely lo@C, t en t e rate o! interest can be relati8ely ig beca%se o! t e demand !or loan capital as a res%lt o! rising pro!its and increased ne@ in8estments0 &! it is lo@, beca%se o! b%siness contraction, or per aps beca%se credit is 8ery plenti!%l, t e rate o! interest can be lo@ e8en t o%g prices are ig 0 B$ee 6%bbard0 ,resent edition: ; 0 JJJ&&&0 I 0dC 5 e absol%te amo%nt o! circ%lation as a determining in!l%ence on t e rate o! interest only in times o! stringency0 5 e demand !or !%ll circ%lation can eit er re!lect merely a demand !or a oarding medi%m Bdisregarding t e red%ced 8elocity o! t e money circ%lation and t e contin%o%s con8ersion o! t e same identical pieces o! money into loan capitalC o@ing to lack o! credit, as @as t e case in 182> @ en t e s%spension o! t e Aank ?ct did not ca%se any expansion o! t e circ%lation, b%t s%!!iced to dra@ !ort t e oarded notes and to c annel t em into circ%lation# or it may be t at more means o! circ%lation are act%ally reD%ired %nder t e circ%mstances, as @as t e case in 18+> @ en t e circ%lation act%ally expanded !or some time a!ter t e s%spension o! t e Aank ?ct0 3t er@ise, t e absol%te D%antity o! circ%lation as no in!l%ence @ ate8er %pon t e rate o! interest, since I ass%ming t e economy and 8elocity o! c%rrency to be constant I it is determined in t e !irst place by commodity-prices and t e D%antity o! transactions B@ ereby one o! t ese generally ne%tralises t e e!!ect o! t e ot erC, and !inally by t e state o! credit, @ ereas it by no means exerts t e re8erse e!!ect %pon t e latter# and, secondly, since commodity-prices and interest do not necessarily stand in any direct correlation to eac ot er0 7%ring t e li!e o! t e Aank )estriction ?ct B1>*>-181*C a s%rpl%s o! c%rrency existed and t e rate o! interest @as al@ays m%c ig er t an a!ter t e res%mption o! cas payments0 'ater, it !ell rapidly @it t e restriction o! t e note iss%e and rising bill D%otations0 &n 18<<, 18<3, and 183<, t e general circ%lation @as lo@, and so @as t e rate o! interest0 &n 18<2, 18<+, and 1836, t e circ%lation @as !%ll and t e rate o! interest rose0 &n t e s%mmer o! 183= t e circ%lation @as !%ll and t e rate o! interest lo@0 $ince t e gold disco8eries, money circ%lation t ro%g o%t E%rope as expanded, and t e rate o! interest risen0 5 ere!ore, t e rate o! interest does not depend %pon t e D%antity o! circ%lating money0 5 e di!!erence bet@een t e iss%e o! circ%lating medi%m and t e lending o! capital is best demonstrated in t e act%al reprod%ction process0 We a8e seen B4ol0 &&, ,art &&&C in @ at manner t e di!!erent component parts o! prod%ction are exc anged !or one anot er0 For example, 8ariable capital consists materially o! t e means o! s%bsistence o! t e labo%rers, a portion o! t eir o@n prod%ct0 A%t t is is paid o%t to t em piecemeal in money0 5 e capitalist as to ad8ance t is, and it is 8ery greatly dependent on t e credit system organisation @ et er e can pay o%t t e ne@ 8ariable capital t e !ollo@ing @eek @it t e old money @ ic e paid o%t in t e pre8io%s @eek0 5 e same olds !or exc ange among 8ario%s component parts o! t e total social capital, !or

36>

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instance, bet@een means o! cons%mption and means o! prod%ction o! means o! cons%mption0 5 e money !or t eir circ%lation, as @e a8e seen, m%st be ad8anced by one or bot o! t e exc anging parties0 &t remains t ere%pon in circ%lation, b%t ret%rns a!ter t e exc ange as been completed to t e one @ o ad8anced it, since it ad been ad8anced by im o8er and abo8e is act%ally employed ind%strial capital B4ol0 &&, ; 0 JJC0 (nder a de8eloped system o! credit, @it t e money concentrated in t e ands o! bankers, it is t ey, at least nominally, @ o ad8ance it0 5 is ad8ance re!ers only to money in circ%lation0 &t is an ad8ance o! circ%lation, not an ad8ance o! capitals @ ic it circ%lates0 ; apman: K+=6<0 5 ere may be times, @ en t e notes in t e ands o! t e p%blic, t o%g t ey may be large, are not to be ad0 Money also exists d%ring a panic# b%t e8eryone takes good care not to con8ert it into loanable capital, i.e., loanable money# e8eryone olds on to it !or t e p%rpose o! meeting real payment needs0 K+=**0 5 e co%ntry bankers in r%ral districts send %p t eir %nemployed balances to yo%rsel8es and ot er o%sesQ I .es0L I K+1==0 3n t e ot er and, t e 'ancas ire and .orks ire districts reD%ire disco%nts !rom yo% !or t e %se o! t eir tradesQ I .es0L I K+1=10 5 en by t at means t e s%rpl%s money o! one part o! t e co%ntry is made a8ailable !or t e demands o! anot er part o! t e co%ntryQ I ,recisely so0L ; apman states t at t e c%stom o! banks to in8est t eir s%rpl%s money-capital !or s ort periods in consols and treas%ry notes as decreased considerably o! late, e8er since it as become c%stomary to lend t is money at call, i.e., payable on demand0 6e personally considers t e p%rc ase o! s%c paper !or is b%siness 8ery impractical0 6e, t ere!ore, in8ests is money in reliable bills o! exc ange, some o! @ ic become d%e e8ery day, so t at e al@ays kno@s o@ m%c ready money e can co%nt on !rom day to day0 /+1=1 to +1=+01 E8en t e gro@t o! exports expresses itsel! more or less !or e8ery co%ntry, b%t partic%larly !or t e co%ntry granting credit, as an increasing demand on t e domestic money-market, @ ic is not !elt, o@e8er, %ntil a period o! stringency0 W en exports increase, Aritis man%!act%rers %s%ally dra@ long-term bills o! exc ange on t e export merc ants against consignments o! Aritis goods B+1<6C0 K+1<>0 &s it not !reD%ently t e case t at an %nderstanding exists t at t ose bills are to be redra@n !rom time to timeQ I /; apman:1 5 at is a t ing @ ic t ey keep !rom %s# @e s o%ld not admit any bill o! t at sort0 000 & dare say it is done, b%t & cannot speak to a t ing o! t e kind0L /5 e innocent

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; apman01 K+1<*0 &! t ere is a large increase o! t e exports o! t e co%ntry, as t ere @as last year, o! V<= million, @ill not t at nat%rally lead to a great demand !or capital !or t e disco%nt o! bills representing t ose exportsQ I -o do%bt0L I K+13=0 &nasm%c as t is co%ntry gi8es credit, as a general r%le, to !oreign co%ntries !or all exports, it @o%ld be an absorption o! a corresponding increase o! capital !or t e time beingQ I 5 is co%ntry gi8es an immense credit# b%t t en it takes credit !or its ra@ material0 We are dra@n %pon !rom ?merica al@ays at 6= days, and !rom ot er parts at *= days0 3n t e ot er and @e gi8e credit# i! @e send goods to :ermany, @e gi8e t@o or t ree mont s0L Wilson inD%ires o! ; apman B+131C, @ et er bills o! exc ange on England are not dra@n sim%ltaneo%sly @it t e loading o! t ese imported ra@ materials and colonial goods and @ et er t ese bills o! exc ange do not arri8e sim%ltaneo%sly @it t e bills o! lading0 ; apman belie8es so, b%t does not pro!ess to kno@ anyt ing abo%t s%c KcommercialL transactions and s%ggests t at experts in t is !ield be D%estioned0 I &n exporting to ?merica, remarks ; apman, Kt e goods are symbolised in transitL +133# t is gibberis is s%pposed to mean t at t e Englis export merc ant dra@s against is commodities bills o! exc ange @it a !o%r-mont term on one o! t e big ?merican banking o%ses in 'ondon and t is !irm recei8es collateral !rom ?merica0 K+1360 ?s a general r%le, are not t e more remote transactions cond%cted by t e merc ant, @ o @aits !or is capital %ntil t e goods are soldQ I 5 ere may be o%ses o! great pri8ate @ealt , @ o can a!!ord to lay o%t t eir o@n capital and not take any ad8ance %pon t e goods# b%t t e most part are con8erted into ad8ances by t e acceptances o! some @ell-kno@n establis ed o%ses0L I K+13>0 5 ose o%ses are resident in 000 'ondon, or 'i8erpool, or else@ ere0L I K+1380 5 ere!ore, it makes no di!!erence, @ et er t e man%!act%rer lays o%t is money, or @ et er e gets a merc ant in 'ondon or 'i8erpool to ad8ance it# it is still an ad8ance in t is co%ntryQ I ,recisely0 5 e man%!act%rer in !e@ cases as anyt ing to do @it itL /b%t in 182> in almost e8ery case10 K? man dealing in man%!act%red goods, !or instance, at Manc ester, @ill

36*

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b%y

is goods and s ip t em t ro%g

o%se o!

respectability in 'ondon# @ en t e 'ondon o%se is satis!ied t at t ey are all packed according to t e %nderstanding, e dra@s %pon t is 'ondon o%se !or six mont s against t ese goods to &ndia or ; ina, or @ ere8er t ey are going# t en t e banking @orld comes in and disco%nts t at bill !or im# so t at, by t e time e as to pay !or t ose goods, e as t e money all ready by t e disco%nt o! t at bill0L I K+13*0 ?lt o%g e as t e money, t e banker is laying o%t o! is moneyQ I 5 e ban-er has the billP the ban-er has bought the billP e %ses is banking capital in t at !orm, namely, in disco%nting commercial bills0L /6ence e8en ; apman does not regard t e disco%nting o! bills as an ad8ance o! money, b%t as a p%rc ase o! commodities0 I '.001 K+12=0 $till t at !orms part o! t e demand %pon t e money-market in 'ondonQ I -o do%bt# it is a s%bstantial occ%pation o! t e money-market and o! t e Aank o! England0 5 e Aank o! England are as glad to get t ese bills as @e are, beca%se t ey kno@ t em to be good property0L I K+1210 &n t at @ay, as t e export trade increases, t e demand %pon t e money-market increases alsoQ I ?s t e prosperity o! t e co%ntry increases, @eL /t e ; apmans1 Kpartake o! it0L I K+12<0 5 en @ en t ese 8ario%s !ields !or t e employment o! capital increase s%ddenly, o! co%rse, t e nat%ral conseD%ence is t at t e rate o! interest is ig erQ I -o do%bt abo%t it0L &n +123 ; apman cannot KD%ite %nderstand, t at %nder o%r large exports @e a8e ad s%c occasion !or b%llion0L &n +122 t e esteemed Wilson asks: KMay it not be t at @e gi8e larger credits %pon o%r exports t an @e take credits %pon o%r importsQ I & rat er do%bt t at point mysel!0 &! a man accepts against is Manc ester goods sent to &ndia, yo%

3>=

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cannot accept !or less t an ten mont s0 We a8e ad to pay ?merica !or er cotton Bt at is per!ectly tr%eC some time be!ore &ndia pays %s# b%t still it is rat er re!ined in its operation0L I K+12+0 &! @e a8e ad an increase, as @e ad last year, o! V<= million in o%r exports o! man%!act%res @e m%st a8e ad a 8ery large increase o! imports o! ra@ material pre8io%sly to t atL /and in t is @ay o8er-exports are already identi!ied @it @it o8er-imports, and o8er-prod%ction o8er-trading1, Kin order to make %p t at

increased D%antity o! goodsQ I -o do%bt0L I K+1260 We s o%ld a8e to pay a 8ery considerable balance, t at is to say, t e balance, no do%bt, @o%ld r%n against %s d%ring t at time, b%t in t e long r%n, @it ?merica 000 t e exc anges are in o%r !a8o%r, and @e a8e been recei8ing !or some time past large s%pplies o! b%llion !rom ?merica0L +1280 Wilson asks t e arc -%s%rer ; apman, @ et er e does not regard is ig rate o! interest as a sign o! great prosperity and a ig rate o! pro!it0 ; apman, e8idently s%rprised at t e nah8etF o! t is sycop ant, a!!irms t is, o! co%rse, b%t as eno%g integrity to add t e !ollo@ing: K5 ere are some, @ o cannot elp t emsel8es# t ey a8e engagements to meet, and t ey m%st !%l!il t em, @ et er it is pro!itable or not# b%t, !or a contin%anceL /o! t e ig rate o! interest1, Kit @o%ld indicate prosperity0L Aot !orget t at a ig rate o! interest can also indicate, as it did in 18+>, t at t e co%ntry is %ndermined by t e ro8ing ca8aliers o! credit @ o can a!!ord to pay a ig interest beca%se t ey pay it o%t o! ot er people"s pockets B@ ereby, o@e8er, t ey elp to determine t e rate o! interest !or allC, and mean@ ile t ey li8e in grand style on anticipated pro!its0 $im%ltaneo%sly, precisely t is can incidentally pro8ide a 8ery pro!itable b%siness !or man%!act%rers and ot ers0 )et%rns become @ olly decepti8e as a res%lt o! t e loan system0 5 is also explains t e !ollo@ing, @ ic s o%ld reD%ire no explanation so !ar as t e Aank o! England is concerned, since it disco%nts at a lo@er rate t an ot ers @ en t e interest rate is ig 0 K+1+60 & s o%ld say,L says ; apman, Kt at o%r disco%nts, taking t e present moment, @ en @e a8e ad !or so long a ig rate o! interest, are at t eir maxim%m0L /; apman made t is statement on P%ly <1, 18+>, a co%ple o! mont s be!ore t e cras 01

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K+1+>0 &n 18+<L /@ en t e interest rate @as lo@1 Kt ey @ere not nearly so large0L For b%siness @as indeed a great deal so%nder t en0 K+1+*0 &! t ere @as a great !lood o! money in t e market 000 and t e bank-rate lo@, @e s o%ld get a decrease o! bills 000 &n 18+< t ere @as a totally di!!erent p ase o! t ings0 5 e exports and imports o! t e co%ntry @ere as not ing t en compared to t e present0L I K+1610 (nder t is ig rate o! disco%nt o%r disco%nts are as large as t ey @ere in 18+20L /W en t e rate o! interest @as bet@een + and +ZT01 ? 8ery am%sing part o! ; apman"s testimony re8eals o@ t ese people really regard p%blic money as t eir o@n and ass%me !or t emsel8es t e rig t to constant con8ertibility o! t e bills o! exc ange disco%nted by t em0 5 e D%estions and replies s o@ great nah8etF0 &t becomes t e obligation o! legislation to make t ose bills @ ic are accepted by large !irms con8ertible at all time# to ens%re t at t e Aank o! England s o%ld %nder all circ%mstances contin%e to redisco%nt t em !or bill-brokers0 ?nd yet t ree o! s%c bill-brokers @ent bankr%pt in 18+>, o@ing abo%t 8 million and t eir o@n in!initesimally small capital compared @it t ese debts0 K+1>>0 7o yo% mean by t at t at yo% t ink t at t eyL /t at is bills accepted by Aarings or 'oyds1 Ko%g t to be disco%ntable on comp%lsion, in t e same @ay t at a Aank o! England note is no@ exc angeable against gold by comp%lsionQ I & t ink it @o%ld be a 8ery lamentable t ing, t at t ey s o%ld not be disco%ntable# a most extraordinary position, t at a man s o%ld stop payment, @ o ad t e acceptances o! $mit , ,ayne g ;o0, or Pones, 'oyd g ;o0 in is ands, beca%se e co%ld not get t em disco%nted0L I K+1>80 &s not t e engagement o! Messrs0 Aaring an engagement to pay a certain s%m o! money @ en t e bill is d%eQ I 5 at is per!ectly tr%e# b%t Messrs0 Aaring, @ en t ey contract t at engagement, and e8ery ot er merc ant @ o contracts an engagement, ne8er dream t at t ey are going to pay it in so8ereigns# t ey expect t at t ey are going to pay it at t e ;learing 6o%se0L I K+18=0 7o yo% t ink t at t ere s o%ld be any mac inery contri8ed by @ ic t e

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p%blic @o%ld a8e a rig t to claim money be!ore t at bill @as d%e by calling %pon somebody to disco%nt itQ I -o, not !rom t e acceptor# b%t i! yo% mean by t at t at @e are not to a8e t e possibility o! getting commercial bills disco%nted, @e m%st alter t e @ ole constit%tion o! t ings0L I K+18<0 5 en yo% t ink t at itL /commercial bill1 Ko%g t to be con8ertible into money, exactly in t e same @ay t at a Aank o! England note o%g t to be con8ertible into goldQ I Most decidedly so, %nder certain circ%mstances0L I K+1820 5 en yo% t ink t at t e pro8isions o! t e c%rrency s o%ld be so s aped t at a bill o! exc ange o! %ndo%bted c aracter o%g t at all times to be as readily exc angeable against money as a bank-noteQ I & do0L I K+18+0 .o% do not mean to say t at eit er t e Aank o! England or any indi8id%al s o%ld, by la@, be compelled to exc ange itQ I & mean to say t is, t at in !raming a bill !or t e c%rrency, @e s o%ld make pro8ision to pre8ent t e possibility o! an incon8ertibility o! t e bills o! exc ange o! t e co%ntry arising, ass%ming t em to be %ndo%btedly solid and legitimate0L 5 is is t e con8ertibility o! t e commercial bill as compared @it t e con8ertibility o! banknotes0 K+1*=0 5 e money-dealers o! t e co%ntry only, in point o! !act, represent t e p%blic0L ?s did Mr0 ; apman later be!ore t e co%rt o! assiEes in t e 7a8idson case0 $ee t e Great City 'rauds. /$0 'aing, $ew Series of the Great City 'rauds of Cole, Davison, and Cordon, 'ondon0 I 0d01 K+1*60 7%ring t e D%artersL /@ en t e di8idends are paid1 Kit is 000 absol%tely necessary t at @e s o%ld go to t e Aank o! England0 W en yo% abstract !rom t e circ%lation V6,===,=== or V>,===,=== o! re8en%e in anticipation o! t e di8idends, somebody m%st be t e medi%m o! s%pplying t at in t e intermediate time0L /&n t is case it is t en a D%estion o! a s%pply o! money, not o! capital or loan capital01

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K+16*0 E8erybody acD%ainted @it

o%r commercial

circle m%st kno@ t at @ en @e are in s%c a state t at @e !ind it impossible to sell Exc eD%er bills, @ en &ndia bonds are per!ectly %seless, @ en yo% cannot disco%nt t e !irst commercial bills, t ere m%st be great anxiety on t e part o! t ose @ ose b%siness renders t em liable to pay t e circ%lating medi%m o! t e realm on demand, @ ic is t e case @it all bankers0 5 en t e e!!ect o! t at is to make e8ery man do%ble is reser8e0 P%st see @ at t e res%lt o! t at is t ro%g o%t t e co%ntry, t at e8ery co%ntry banker, o! @ om t ere are abo%t +==, as to send %p to is 'ondon correspondent to remit im V+,=== in bank-notes0

5aking s%c a limited s%m as t at as t e a8erage, @ ic is D%ite abs%rd, yo% come to V<,+==,=== taken o%t o! t e circ%lation0 6o@ is t at to be s%ppliedQL 3n t e ot er and, t e pri8ate capitalists, etc0, @ o a8e money do not let go o! it at any interest, !or t ey say a!ter t e manner o! ; apman, K+1*+0 We @o%ld rat er a8e no interest at all, t an a8e a do%bt abo%t o%r getting t e money in case @e reD%ire it0L K+1>30 3%r system is t is: 5 at @e a8e V3==,===,=== o! liabilities @ ic may be called !or at a single moment to be paid in t e coin o! t e realm, and t at coin o! t e realm, i! t e @ ole o! it is s%bstit%ted, amo%nts to V<3,===,===, or @ ate8er it may be# is not t at a state @ ic may t ro@ %s into con8%lsions at any momentQL 6ence t e s%dden c ange o! t e credit system into a monetary system d%ring crises0 ?side !rom t e domestic panic d%ring crises, one can speak o! t e D%antity o! money only in so !ar as it concerns b%llion, %ni8ersal money0 ?nd t is is precisely @ at ; apman excl%des# e speaks only o! <3 million in ban-1notes. 5 e same ; apman: K+<180 5 e primary ca%se o! t e derangement o! t e money-marketL /in ?pril and later in 3ctober 182>1 Kno do%bt @as in t e D%antity o! money @ ic @as

3>2

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reD%ired to reg%late o%r exc anges, in conseD%ence o! t e extraordinary importations o! t e year0L &n t e !irst place, t is reser8e o! @orld-market money ad t en been red%ced to its minim%m0 $econdly, it ser8ed at t e same time as sec%rity !or t e con8ertibility o! credit-money, bank-notes0 &t combined in t is manner t@o D%ite di!!erent !%nctions, bot o! @ ic , o@e8er, stem !rom t e nat%re o! money, since real money is al@ays @orld-market money, and credit-money al@ays rests %pon @orld-market money0 &n 182>, @it o%t t e s%spension o! t e Aank ?ct o! 1822, Kt e clearing o%ses co%ld not a8e been settled0L B+<<10C 5 at ; apman ad an inkling o! t e imminent crisis, a!ter all: K+<360 5 ere are certain conditions o! t e moneymarket Band t e present is not 8ery !ar !rom itC, @ ere money is exceedingly di!!ic%lt, and reco%rse m%st e ad to t e Aank0L K+<3*0 Wit re!erence to t e s%ms @ ic @e took !rom t e Aank on t e Friday, $at%rday and Monday, t e 1*t , <=t , and <<nd o! 3ctober, 182>, @e s o%ld only a8e been too t ank!%l to a8e got t e bills back on t e Wednesday !ollo@ing# t e money re!lo@ed to %s directly t e panic @as o8er0L 3n 5%esday, 3ctober <3, t e Aank ?ct @as s%spended and t e crisis @as t %s broken0 ; apman belie8es B+<>2C t at t e bills o! exc ange r%nning sim%ltaneo%sly on 'ondon amo%nt to V1== or V1<= million0 5 is does not incl%de local bills made on pro8incial !irms0 K+<8>0 W ereas in 3ctober 18+6, t e amo%nt o! t e notes in t e ands o! t e p%blic ran %p to V<1,1++,===, t ere @as an extraordinary di!!ic%lty in obtaining money# not@it standing t at t e p%blic eld so m%c , @e co%ld not to%c it0L 5 is @as d%e to t e !ear ca%sed by t e sD%eeEe in @ ic t e Eastern Aank !o%nd itsel! !or a period o! time BMarc 18+6C0 +<*=-*<0 ?s soon as t e panic is o8er, Kall bankers deri8ing t eir pro!it !rom interest begin to employ t e money immediately0L +3=<0 ; apman does not explain t e %neasiness t at exists @ en t e bank reser8e decreases as being d%e to appre ension concerning deposits, b%t rat er t at all t ose @ o s%ddenly may be compelled to pay large s%ms o! money are @ell a@are t ey may be dri8en to seek t eir last re!%ge in t e bank @ en t ere is a stringency in t e money-market# and

3>+

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Ki! t e banks a8e a 8ery small reser8e, t ey are not glad to recei8e %s# b%t on t e contrary0L &t is pretty, incidentally, to obser8e o@ t e reser8e as a real magnit%de d@indles a@ay0 Aankers old a minim%m !or c%rrent b%siness needs eit er in t eir o@n ands or t e Aank o! England0 Aill-brokers old t e Kloose bank money o! t e co%ntryL @it o%t any reser8e0 ?nd t e Aank o! England as not ing to o!!set its liabilities !or deposits b%t t e reser8es o! bankers and ot ers, toget er @it some p%blic deposits, etc0, @ ic it permits to drop to a 8ery lo@ le8el, !or instance, to V< million0 ?side !rom t ese V< million in paper, t en, t is @ ole s@indle as absol%tely no ot er reser8e b%t t e b%llion reser8e in times o! stringency Band t is red%ces t e reser8e, beca%se t e notes @ ic come in to replace o%tgoing b%llion m%st be cancelledC, and t %s e8ery red%ction o! t is reser8e by drain on gold increases t e crisis0 K+3=60 &! t ere s o%ld not be c%rrency to settle t e transactions at t e clearing o%se, t e only next alternati8e @ ic & can see is to meet toget er, and to make o%r payments in !irst-class bills, bills %pon t e 5reas%ry, and Messrs0 $mit , ,ayne, and so !ort 0L I K+3=>0 5 en, i! t e go8ernment !ailed to s%pply yo% @it a circ%lating medi%m, yo% @o%ld create one !or yo%rsel8esQ I W at can @e doQ 5 e p%blic come in, and take t e circ%lating medi%m o%t o! o%r ands# it does not exist0L I K+3=80 .o% @o%ld only t en do in 'ondon @ at t ey do in Manc ester e8ery day o! t e @eekQ I .es0L ,artic%larly cle8er is ; apman"s reply to a D%estion posed by ;ayley Ba Airming am man o! t e ?tt@ood sc oolC regarding 38erstone"s conception o! capital: K+31+0 &t as been stated be!ore t is ;ommittee, t at in a press%re like t at o! 182>, men are not looking !or money, b%t are looking !or capital# @ at is yo%r opinion in t at respectQ I & do not %nderstand it# @e only deal in money# & do not %nderstand @ at yo% mean by it0L I K+3160 &! yo% mean t erebyL /commercial capital1 Kt e D%antity o! money @ ic a man as o! is o@n in is b%siness, i! yo% call t at capital, it !orms, in most cases, a 8ery small proportion o! t e money @ ic e @ields in is a!!airs t ro%g t e credit @ ic is gi8en im by t e p%blicL I t ro%g t e mediation o! t e ; apmans0

3>6

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K+33*0 &s it t e @ant o! property t at makes %s gi8e %p o%r specie paymentsQ I -ot at all0000 &t is not t at @e @ant property, b%t it is t at @e are mo8ing %nder a ig ly arti!icial system# and i! @e a8e an immense s%perinc%mbent demand %pon o%r c%rrency, circ%mstances may arise to pre8ent o%r obtaining t at c%rrency0 &s t e @ ole commercial ind%stry o! t e co%ntry to be paralysedQ $ all @e s %t %p all t e a8en%es o! employmentQL I K+3380 &! t e D%estion s o%ld arise @ et er @e s o%ld maintain specie payments, or @ et er @e s o%ld maintain t e ind%stry o! t e co%ntry, & a8e no esitation in saying @ ic & s o%ld drop0L ;oncerning t e oarding o! bank-notes K@it a 8ie@ to aggra8ate t e press%re and to take ad8antage o! t e conseD%encesL e says t at t is can 8ery easily occ%r0 5 ree large banks @o%ld be s%!!icient0 K+3830 M%st it not be @it in yo%r kno@ledge, as a man con8ersant @it t e great transactions o! t is metropolis, t at capitalists do a8ail t emsel8es o! t ese crises to make enormo%s pro!it o%t o! t e r%in o! t e people @ o !all 8ictims to t emQ I 5 ere can be no do%bt abo%t it0L ?nd @e may @ell belie8e Mr0 ; apman on t is score, alt o%g e !inally broke is o@n neck, commercially speaking, in an attempt at making Kenormo%s pro!it o%t o! t e r%in o! 8ictims0L For @ ile is associate :%rney says: E8ery c ange in b%siness is ad8antageo%s !or one @ o is @ell in!ormed, ; apman says: K5 e one section o! t e comm%nity kno@s not ing o! t e ot er# one is t e man%!act%rer, !or instance# @ o exports to t e continent, or imports is ra@ commodity# e kno@s not ing o! t e man @ o deals in b%llion0L B+=260C ?nd t %s it appened t at one !ine day :%rney and ; apman t emsel8es K@ere not @ell in!ormedL and @ent into ill-!amed bankr%ptcy0 We a8e pre8io%sly seen t at note iss%e does not in all cases signi!y an ad8ance o! capital0 5 e !ollo@ing testimony by 5ooke be!ore t e ;0 70 ;ommittee o! 'ords, 1828, indicates merely t at an ad8ance o! capital, e8en i! accomplis ed by t e bank t ro%g an iss%e o! ne@ notes, does not %nD%ali!iedly signi!y an increase in t e n%mber o! circ%lating notes:

3>>

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K3=**0 7o yo% t ink t at t e Aank o! England !or instance mig t enlarge its ad8ances greatly, and yet lead to no additional iss%e o! notesQ I 5 ere are !acts in ab%ndance to pro8e it# one o! t e most striking instances @as in 183+, @ en t e Aank made %se o! t e West &ndia deposits and o! t e loan !rom t e East &ndia ;ompany in extended ad8ances to t e p%blic0 ?t t at time t e amo%nt o! notes in t e ands o! t e p%blic @as act%ally rat er diminis ed0 ?nd somet ing like t e same discrepancy is obser8able in 1826 at t e time o! t e payment o! t e rail@ay deposits into t e Aank# t e sec%rities /in disco%nt and deposits1 @ere increased to abo%t t irty million, @ ile t ere @as no perceptible e!!ect %pon t e amo%nt o! notes in t e ands o! t e p%blic0L ?side !rom bank-notes, @ olesale trade as anot er medi%m o! circ%lation, @ ic is !ar more important to it, namely, bills o! exc ange0 Mr0 ; apman s o@ed %s o@ essential it is !or t e reg%lar !lo@ o! b%siness t at good ills o! exc ange be accepted in payment e8ery@ ere and %nder all conditions0 TGilt nicht mehr der 4ausves Jontof, was soll gelten, %eter, %eterR/ /K&! t e 5a%s8es-Ponto!"s not ing, W at is le!tQ 3 8ile detractorSL I 6eine, Disputation. I Ed01 6o@ are t ese t@o media o! circ%lation related to one anot erQ :ilbart @rites on t is score: K5 e red%ction o! t e amo%nt o! t e note circ%lation %ni!ormly increases t e amo%nt o! t e bill circ%lation0 5 ese bills are o! t@o classes I commercial bills and bankers" bills 000 @ en money becomes scarce, t e money-lenders say, "dra@ %pon %s and @e @ill accept"0 ?nd @ en a co%ntry banker disco%nts a bill !or is c%stomer, instead o! gi8ing im t e cas , e @ill gi8e im is o@n dra!t at t@enty-one days %pon is 'ondon agent0 5 ese bills ser8e t e p%rpose o! a c%rrency0L BP0 W0 :ilbart, +n Dn3uiry into the Causes of the &ressure, etc., p0 310C 5 is is corroborated in some@ at modi!ied !orm by -e@marc , A0 ?0 18+>, -o0 12<6:

3>8

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K5 ere is no connection bet@een t e 8ariations in t e amo%nt o! bill circ%lation and t e 8ariations in t e bank-note circ%lation 000 t e only pretty %ni!orm res%lt is 000t at @ ene8er t ere is any press%re %pon t e money-market, as indicated by a rise in t e rate o! disco%nt, t en t e 8ol%me o! t e bill circ%lation is 8ery m%c increased, and 8ice 8ersa0L 6o@e8er, t e bills o! exc ange dra@n at s%c times are by no means only t e s ort-term bankbills mentioned by :ilbart0 3n t e contrary, t ey are largely bills o! accommodation, @ ic represent no real transaction at all, or simply transactions made !or t e sole p%rpose o! dra@ing bills o! exc ange on t em# @e a8e presented s%!!icient ill%strations o! bot 0 6ence t e 0conomist BWilsonC says in comparing t e sec%rity o! s%c bills @it t at o! bank-notes: K-otes payable on demand can ne8er be kept o%t in excess, beca%se t e excess @o%ld al@ays ret%rn to t e bank !or payment, @ ile bills at t@o mont s may be iss%ed in great excess, t ere being no means o! c ecking t e iss%e till t ey a8e arri8ed at mat%rity, @ en t ey may a8e been replaced by ot ers0 For a people to admit t e sa!ety o! t e circ%lation o! bills payable only on a distant day, and to obHect to t e sa!ety o! a circ%lation o! paper payable on demand, is, to %s, per!ectly %nacco%ntable0L )0conomist, May <<, 182>, p0 +>+0C 5 e D%antity o! circ%lating bills o! exc ange, t ere!ore, like t at o! bank-notes, is determined solely by t e reD%irements o! commerce# in ordinary times, t ere circ%lated in t e !i!ties in t e (nited Kingdom, in addition to 3* million in bank-notes, abo%t 3== million in bills o! exc ange I o! @ ic 1==-1<= million @ere made o%t on 'ondon alone0 5 e 8ol%me o! circ%lating bills o! exc ange as no in!l%ence on note circ%lation and is in!l%enced by t e latter only in times o! money tig tness, @ en t e D%antity o! ills increases and t eir D%ality deteriorates0 Finally, in a period o! crisis, t e circ%lation o! bills collapses completely# nobody can make %se o! a promise to pay since e8eryone @ill accept only cas payment# only t e bank-note retains, at least t %s !ar in England, its ability to circ%late, beca%se t e nation @it its total @ealt backs %p t e Aank o! England0 We a8e seen t at e8en Mr0 ; apman, @ o a!ter all @as imsel! a magnate on t e money-market in 18+>, complains bitterly t at t ere @ere se8eral large money-capitalists in 'ondon strong eno%g to disr%pt t e @ ole money-market at any gi8en moment and t ereby bleed @ ite t e smaller money-dealers0 5 ere @ere se8eral s%c money s arks, e said, @ o co%ld considerably intensi!y a stringency by selling one or t@o million"s @ort o! consols and t ereby @it dra@ing an eD%al amo%nt o! bank-notes Band sim%ltaneo%sly a8ailable loan capitalC !rom t e market0 5 e Hoint action o! t ree large banks @o%ld s%!!ice to trans!orm a stringency into a panic by a similar manoe%8re0

3>*

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5 e largest capital po@er in 'ondon is, o! co%rse, t e Aank o! England, @ ic , o@e8er, is pre8ented by its stat%s as a semi-go8ernment instit%tion !rom s o@ing its domination in s%c a br%tal manner0 -e8ert eless it also kno@s eno%g abo%t @ays and means o! !eat ering its nest, partic%larly since t e Aank ?ct o! 18220 5 e Aank o! England as a capital o! V12,++3,===, and in addition as at its disposal abo%t V3 million Kbalance,L t at is, %ndistrib%ted pro!its, as @ell as all money collected by t e go8ernment !or taxes, etc0, @ ic m%st be deposited @it t e Aank %ntil it is needed0 &! @e add to t is t e s%m o! ot er deposits, abo%t V3= million in ordinary times, and t e bank-notes iss%ed @it o%t reser8e backing, @e s all !ind t at -e@marc made a rat er conser8ati8e estimate in stating BA0 ?0 18+>, -o0 288*C: K& satis!ied mysel! t at t e amo%nt o! !%nds constantly employed in t e /'ondon1 money-market may be described as somet ing like V2<=,===,===# and o! t at V1<=,===,=== a 8ery considerable proportion, somet ing like 1+ or <= per cent, is @ielded by t e Aank o! England0L &n so !ar as t e Aank iss%es notes @ ic are not co8ered by t e b%llion reser8e in its 8a%lts, it creates symbols o! 8al%e t at constit%te !or it not only circ%lating medi%m, b%t also additional I e8en i! !ictitio%s I capital to t e nominal amo%nt o! t ese %nbacked notes0 ?nd t is additional capital yields additional pro!it0 I &n A0 ?0 18+>, Wilson D%estions -e@marc : K1+630 5 e circ%lation o! a banker, so !ar as it is kept o%t %pon t e a8erage, is an addition to t e e!!ecti8e capital o! t at banker, is it notQ I ;ertainly0L I K1+620 5 en @ ate8er pro!it e deri8es !rom t at circ%lation is a pro!it deri8ed !rom credit, and not !rom a capital @ ic e act%ally possessesQ I ;ertainly0L 5 e same is tr%e, o! co%rse, !or pri8ate banks iss%ing notes0 &n is replies -os0 1866 to 1868, -e@marc considers t@o-t irds o! all bank-notes iss%ed by t em Bt e last t ird as to be co8ered by b%llion reser8e in t ese banksC as Kt e creation o! so m%c capitalL, beca%se t is amo%nt o! coin is sa8ed0 5 e pro!it o! t e banker as a res%lt o! t is may not be larger t an t at o! ot er capitalists0 5 e !act remains t at e dra@s t e pro!it o%t o! t is national sa8ing o! coin0 5 e !act t at a national sa8ing becomes a pri8ate pro!it does not s ock t e bo%rgeois economist in t e least, since pro!it is generally t e appropriation o! national labo%r0 &s t ere anyt ing more abs%rd, !or instance, t an t e Aank o! England B1>*> to 181>C I @ ose notes a8e credit only t anks to t e state I taking payment !rom t e state, i.e., !rom t e p%blic, in t e !orm o! interest on go8ernment loans, !or t e po@er granted it by t e state to trans!orm t ese same notes !rom paper into money and t en to lend it back to t e stateQ 5 e banks, incidentally, a8e still ot er means o! creating capital0 ?gain according to -e@marc , t e co%ntry banks, as mentioned abo8e, are acc%stomed to send t eir s%per!l%o%s !%nds Bt at is, Aank o! England notesC to 'ondon bill-brokers, in ret%rn !or disco%nted bills o! exc ange0 Wit t ese bills o! exc ange, t e bank ser8es its c%stomers, since it !ollo@s a r%le not to reiss%e bills o! exc ange recei8ed !rom its local c%stomers, in order to pre8ent t eir b%siness transactions !rom becoming kno@n in t eir o@n neig bo%r ood0 5 ese bills recei8ed !rom 'ondon not only ser8e t e p%rpose o! being iss%ed to c%stomers @ o a8e to make direct payments in 'ondon, in t e

38=

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e8ent t ey do not pre!er to get t e bank"s o@n dra!t on 'ondon# t ey also ser8e to settle payments locally, since t e banker"s endorsement sec%res local credit !or t em0 5 %s, in 'ancas ire, !or instance, all t e local banks" o@n notes and a large portion o! Aank o! England notes a8e been p%s ed o%t o! circ%lation by s%c bills0 BDbid.,1+68 to 1+>20C 5 %s @e see ere o@ banks create credit and capital by 1C iss%ing t eir o@n notes, <C @riting o%t dra!ts on 'ondon r%nning %p to <1 days, b%t paid in cas to t em immediately on iss%e and 3C paying o%t disco%nted bills o! exc ange, @ ic are endo@ed @it credit primarily and essentially by endorsement t ro%g t e bank I at least as !ar as concerns t e local district0 5 e po@er o! t e Aank o! England is re8ealed by its reg%lation o! t e market rate o! interest0 &n times o! normal acti8ity, it may appen t at t e Aank cannot pre8ent a moderate drain o! gold !rom its b%llion reser8e by raising t e disco%nt rate xxii beca%se t e demand !or means o! payment is satis!ied by pri8ate banks, stock banks and bill-brokers, @ o a8e gained considerably in capital po@er d%ring t e last t irty years0 &n s%c case, t e Aank o! England m%st a8e reco%rse to ot er means0 A%t t e statement made by banker :lyn Bo! :lyn, Mills, ;%rrie g ;o0C be!ore t e ;0 70 1828N+> still olds good !or critical periods: K1>=*0 (nder circ%mstances o! great press%re %pon t e co%ntry t e Aank o! England commands t e rate o! interest0L I K1>2=0 &n times o! extraordinary press%re 000 @ ene8er t e disco%nts o! t e pri8ate bankers or brokers become comparati8ely limited, t ey !all %pon t e Aank o! England, and t en it is t at t e Aank o! England as t e po@er o! commanding t e market rate0L -e8ert eless, t e Aank o! England, being a p%blic instit%tion %nder go8ernment protection and enHoying corresponding pri8ileges, cannot exploit its po@er as r%t lessly as does pri8ate b%siness0 For t is reason 6%bbard remarks be!ore t e Aanking ;ommittee BA0 ?0 18+>C: K<8220 /M%estion:1 &s not it t e case t at @ en t e rate o! disco%nt is ig est, t e Aank is t e c eapest place to go, and t at @ en it is t e lo@est, t e bill-brokers are t e c eapest partiesQ I /6%bbard:1 5 at @ill al@ays be t e case, beca%se t e Aank o! England ne8er goes D%ite so lo@ as its competitors, and @ en t e rate is ig est, it is ne8er D%ite as ig 0L A%t it is a serio%s e8ent in b%siness li!e ne8ert eless @ en, in time o! stringency, t e Aank o! England p%ts on t e scre@, as t e saying goes, t at is, @ en it raises still ig er t e interest rate @ ic is already abo8e a8erage0 K?s soon as t e Aank p%ts on t e scre@, all p%rc ases !or !oreign exportation immediately cease 000 t e exporters @ait %ntil prices a8e reac ed t e lo@est point o! depression# and t en, and not till t en, t ey make t eir p%rc ases0 A%t @ en t is point as arri8ed,

381

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t e exc anges a8e been recti!ied I gold ceases to be exported be!ore t e lo@est point o! depression as arri8ed0 ,%rc ases o! goods !or exportation may a8e t e e!!ect o! bringing back some o! t e gold @ ic as been sent abroad, b%t t ey come too late to pre8ent t e drain0L BP0 W0 :ilbart, +n Dn3uiry into the Causes of the &ressure on the Money1Mar-et, 'ondon, 182=, p0 3+0C K?not er e!!ect o! reg%lating t e c%rrency by t e !oreign exc anges is t at it leads in seasons o! press%re to an enormo%s rate o! interest0L B,oc. cit., p0 2=0C K5 e cost o! recti!ying t e exc anges !alls %pon t e prod%cti8e ind%stry o! t e co%ntry, @ ile d%ring t e process t e pro!its o! t e Aank o! England are act%ally a%gmented in conseD%ence o! carrying on er b%siness @it a less amo%nt o! treas%re0L B,oc. cit., p0 +<0C A%t, says !riend $am%el :%rney, K5 e great !l%ct%ations in t e rate o! interest are ad8antageo%s to bankers and dealers in money I all !l%ct%ations in trade are ad8antageo%s to t e kno@ing man0L ?nd e8en t o%g t e :%rneys skim o!! t e cream by r%t lessly exploiting t e precario%s state o! b%siness, @ ereas t e Aank o! England cannot do so @it t e same liberty, ne8ert eless it also makes a 8ery pretty pro!it I not to mention t e personal pro!its !alling into t e laps o! its directors, as a res%lt o! t eir exceptional opport%nity !or ascertaining t e general state o! b%siness0 ?ccording to data s%bmitted to t e 'ords" ;ommittee o! 181> @ en cas payments @ere res%med, t ese pro!its accr%ing to t e Aank o! England !or t e entire period !rom 1>*> to 181> @ere as !ollo@s: Aon%ses and di8idends increased >,2+1,136

-e@ stock di8ided among >,<>6,+== proprietors &ncreased 8al%e o! capital 12,++3,=== 5otal <*,<8=,636

5 is, on a capital o! V11,62<,2== o8er a period o! 1* years0 B70 6ardcastle, Gan-s and Gan-ers, <nd ed0, 'ondon, 1823, p0 1<=0C &! @e estimate t e total gain o! t e Aank o! &reland, @ ic also s%spended cas payments in 1>*>, by t e same met od, @e obtain t e !ollo@ing res%lt: 7i8idends as by ret%rns 2,>36,=8+

38<

; apter JJJ&&&

d%e 18<1 7eclared bon%s &ncreased assets 1,<<+,=== 1,<12,8==

&ncreased 8al%e o! capital 2,18+,=== 5otal 11,36=,88+

5 is, on a capital o! V3 million0 BDbid., pp0 363-620C 5alk abo%t centralisationS 5 e credit system, @ ic as its !oc%s in t e so-called national banks and t e big money-lenders and %s%rers s%rro%nding t em, constit%tes enormo%s centralisation, and gi8es to t is class o! parasites t e !ab%lo%s po@er, not only to periodically despoil ind%strial capitalists, b%t also to inter!ere in act%al prod%ction in a most dangero%s manner I and t is gang kno@s not ing abo%t prod%ction and as not ing to do @it it0 5 e ?cts o! 1822 and 182+ are proo! o! t e gro@ing po@er o! t ese bandits, @ o are a%gmented by !inanciers and stock-Hobbers0 $ o%ld anyone still do%bt t at t ese esteemed bandits exploit t e national and @orld prod%ction solely in t e interests o! prod%ction and t e exploited t emsel8es, e @ill s%rely learn better !rom t e !ollo@ing omily on t e ig moral @ort o! bankers: KAanking establis ments are 000 moral and religio%s &nstit%tions0000 6o@ o!ten as t e !ear o! being seen by t e @atc !%l and repro8ing eye o! is banker deterred t e yo%ng tradesman !rom Hoining t e company o! rioto%s and extra8agant !riendsQ 000 W at as been is anxiety to stand @ell in t e estimation o! more in!l%ence @it is bankerQ 000 6as not t e !ro@n o! is banker been o! im t an t e Heers and disco%ragements o! is !riendsQ 6as e not trembled to be s%pposed g%ilty o! deceit or t e slig test misstatement, lest it s o%ld gi8e rise to s%spicion, and is accommodation be in conseD%ence restricted or discontin%edQ 000 ?nd as not t at !riendly ad8ice been o! more 8al%e to im t an t at o! priestQL B:0 M0 Aell, a $cottis bank director, in 4he &hilosophy of Joint Stoc- Gan-ing, 'ondon, 182=, pp0 26, 2>0C

Chapter 34. The Currenc! Principle and the En)lish (an% 3e)islation of 1&44
/&n a !ormer @ork, )icardo"s t eory on t e 8al%e o! money as related to commodity-prices as been analysed# @e can, t ere!ore, con!ine o%rsel8es ere to t e indispensable0 ?ccording to )icardo, t e 8al%e o! metallic money is determined by t e labo%r-time incorporated in it, b%t only as long as t e D%antity o! money stands in correct relations ip to t e amo%nt and price o! commodities to be exc anged0 &! t e D%antity o! money rises abo8e t is ratio, its 8al%e !alls and commodity-prices rise# i! it !ails belo@ t e correct ratio, its 8al%e rises and commodity-prices !all I ass%ming all ot er conditions eD%al0 &n t e !irst case, t e co%ntry in @ ic t is excess gold exists @ill export t e gold @ ose 8al%e as depreciated and import commodities# in t e second case, gold @ill !lo@ to t ose co%ntries in @ ic it is assessed abo8e its 8al%e, @ ile t e %nderassessed commodities !lo@ !rom t ese co%ntries to ot er markets, @ ere t ey command normal prices0 $ince %nder t ese circ%mstances Kgold itsel! may become, eit er as coin or b%llion, a token o! metallic 8al%e o! greater or smaller magnit%de t an its o@n 8al%e, it is sel!-e8ident t at con8ertible bank-notes in circ%lation m%st s are t e same !ate0 ?lt o%g bank-notes are con8ertible, and t ere!ore t eir real 8al%e corresponds to t eir nominal 8al%e, t e aggregate c%rrency consisting o! metal and o! con8ertible notes may appreciate or depreciate in accordance @it its aggregate D%antity, !or reasons already stated, rising abo8e or !alling belo@ t e le8el determined by t e exc ange-8al%e o! circ%lating commodities and t e metallic 8al%e o! gold0000 5 is depreciation, not o! paper as compared @it gold, b%t o! gold and paper taken toget er, or o! t e aggregate c%rrency o! a co%ntry, is one o! )icardo"s principal disco8eries @ ic 'ord 38erstone and ;o0 pressed into t eir ser8ice and made a !%ndamental principle o! $ir )obert ,eel"s bank legislation o! 1822 and 182+0L B%ur Hriti- der &olitischen U-onomie, p01++0C We need not ere repeat a demonstration o! t e incorrectness o! t is )icardian t eory @ ic is gi8en in t e cited @ork0 We are merely interested in t e @ay )icardo"s t eses @ere elaborated by t at sc ool o! bank t eorists @ o dictated ,eel"s abo8e-mentioned Aank ?cts0 K5 e commercial crises o! t e 1*t cent%ry, especially t e great crises o! 18<+ and 1836, did not res%lt in any ne@ de8elopments in t e )icardian t eory o! money, b%t t ey did !%rnis ne@ applications !or it0 5 ese @ere no longer isolated economic p enomena, s%c as t e depreciation o! precio%s metals in t e 16t and 1>t cent%ries according to 6%me, or t e depreciation o! paper money in t e 18t and early 1*t cent%ries according to )icardo# t ese @ere instead t e 8iolent storms in t e @orld-market @ erein t e con!lict o! all elements o! t e capitalist prod%ction process disc arges itsel!, and @ ose origin and c%re @ere so%g t in t e most s%per!icial and abstract sp ere o! t is process, t e sp ere o! money circ%lation0 5 e act%al t eoretical ass%mption !rom @ ic t e sc ool o! economic @eat er prop ets proceeds, is act%ally red%ced to t e dogma t at )icardo disco8ered t e la@s go8erning t e p%rely metallic c%rrency0 5 e only t ing remaining !or t em to do @as to s%bordinate credit and bank-note circ%lation to t ese la@s0 K5 e most general and palpable p enomenon in commercial crises is t e s%dden general decline in prices !ollo@ing a prolonged o8erall rise0 5 e general decline in commodity-prices may be expressed as a rise in t e relati8e 8al%e o! money @it respect to all commodities, and t e general price rise as a decline in t e relati8e 8al%e o! money0 &n eit er expression t e p enomenon is described b%t not explained0000 5 e di!!erent @ording lea8es t e problem as little c anged as @o%ld its translation !rom :erman into Englis 0 )icardo"s t eory o! money @as t ere!ore exceedingly opport%ne, beca%se it lends to a ta%tology t e semblance o! a statement o! ca%sal relations ip0 W ence comes t e periodic general !all in commodity-pricesQ From t e periodic rise

382

; apter JJJ&4

o! t e relati8e 8al%e o! money0 W ence t e general periodic rise in pricesQ From t e periodic decline in t e relati8e 8al%e o! money0 &t mig t a8e been stated @it eD%al tr%t t at t e periodic rise and !all o! prices is d%e to t eir periodic rise and !all0 0003nce t e ta%tology is admitted as a ca%sal relations ip, t e rest !ollo@s easily0 ? rise in commodity-prices is ca%sed by a decline in t e 8al%e o! money and a decline in t e 8al%e o! money is ca%sed, as @e kno@ !rom )icardo, by an o8er-s%pply o! c%rrency, i.e., a rise in t e 8ol%me o! c%rrency o8er t e le8el determined by its o@n intrinsic 8al%e and t e intrinsic 8al%e o! commodities0 $imilarly, a general decline in commodity-prices is explained by a rise in t e 8al%e o! money abo8e its intrinsic 8al%e in conseD%ence o! %nder-s%pply o! c%rrency0 5 %s, prices rise and !all periodically, beca%se t ere is periodically too m%c or too little money in circ%lation0 $ o%ld a price rise appen to coincide @it contracted money circ%lation, and a !all in prices @it expanded circ%lation, it may be asserted despite t is t at t e D%antity o! money in circ%lation as, t o%g not absol%tely, yet relati8ely increased or declined in conseD%ence o! a contraction or expansion o! t e 8ol%me o! commodities in t e market, e8en i! t is cannot be statistically pro8ed0 We a8e seen t at according to )icardo t ese general price !l%ct%ations m%st take place e8en @it a p%rely metallic c%rrency, b%t t at t ey alternati8ely balance one anot er# t %s, e.g., an %nder-s%pply o! c%rrency ca%ses a !all in prices, t e export o! commodities abroad, b%t t is export ca%ses an import o! gold !rom abroad, @ ic in t%rn brings abo%t a price rise# t e opposite mo8ement taking place in t e case o! an o8er-s%pply o! c%rrency, @ en commodities are imported and gold is exported0 A%t, since despite t ese general price !l%ct%ations @ ic are in per!ect accord @it )icardo"s metallic c%rrency, t eir t%rb%lent and 8iolent !orm, t eir crisis !orm, belongs to t e period o! de8eloped credit system, it is crystal clear t at t e iss%e o! bank-notes is not exactly reg%lated by t e la@s o! metallic c%rrency0 Metallic c%rrency as its remedy in t e import and export o! precio%s metal, @ ic immediately enters circ%lation as coin and t %s, by its in!lo@ or o%t!lo@, ca%ses commodity-prices to !all or rise0 5 e same e!!ect on prices m%st no@ be exerted arti!icially by banks t ro%g imitating t e la@s o! metallic c%rrency0 &! gold is coming in !rom abroad it pro8es t at c%rrency is in %nder-s%pply, t at t e 8al%e o! money is too ig and commodity-prices too lo@, and, conseD%ently, t at bank-notes m%st be p%t into circ%lation in proportion to t e ne@ly imported gold0 3n t e ot er and, notes m%st be @it dra@n !rom circ%lation in proportion to t e gold exported !rom t e co%ntry0 5 e iss%e o! bank-notes, in ot er @ords, m%st be reg%lated by t e import and export o! precio%s metal or by t e rate o! exc ange0 )icardo"s !alse ass%mption t at gold is only coin, and, t ere!ore, all imported gold s@ells t e c%rrency, ca%sing prices to rise, @ ile all exported gold red%ces t e c%rrency, leading to a !all in prices I t is t eoretical ass%mption is ere t%rned into the practical e periment of putting an amount of coin in circulation e3ual in every case to the amount of gold available 0 'ord 38erstone Bbanker o! Pones 'oydC, ;olonel 5orrens, -orman, ;lay, ?rb%t not and a ost o! ot er @riters, kno@n in England as ad8ocates o! t e ";%rrency ,rinciple", a8e not only preac ed t is doctrine, b%t s%cceeded in 1822 and 182+ @it t e aid o! $ir )obert ,eel"s Aank ?cts in making it t e basis o! Englis and $cottis bank legislation0 &ts ignominio%s !ail%re, bot t eoretical as @ell as practical, !ollo@ing %pon experiments on t e broadest national scale, can be treated only in connection @it t e t eory o! credit0L B,oc. cit., pp0 16+-680C 5 e critiD%e o! t is sc ool @as !%rnis ed by 5 omas 5ooke, Pames Wilson Bin t e 0conomist o! 1822 to 182>C and Po n F%llarton0 A%t @e a8e seen on se8eral occasions, partic%larly in ; apter JJ4&&& o! t is book, o@ incompletely t ey, too, sa@ t ro%g t e nat%re o! gold, and o@ %nclear t ey @ere abo%t t e relations ip o! money and capital0 We D%ote ere merely a !e@ instances in connection @it t e transactions o! t e ;ommittee o! t e 'o@er 6o%se o! 18+> concerning ,eel"s Aank ?cts BA0 ;0 18+>C0 I '.0.1 P0 :0 6%bbard, !ormer :o8ernor o! t e Aank o! England, testi!ies:

38+

; apter JJJ&4

K<2==0 5 e e!!ect o! t e export o! b%llion 000 as no re!erence @ ate8er to t e prices o! commodities0 &t as an e!!ect, and a 8ery important one, %pon t e price o! interest-bearing sec%rities, beca%se, as t e rate o! interest 8aries, t e 8al%e o! commodities @ ic embodied t at interest is necessarily po@er!%lly a!!ected0L 6e presents t@o tables co8ering t e years 1832 to 1823, and 182+ to 18+3, @ ic s o@ t at t e price 8ariations o! !i!teen maHor commercial articles @ere D%ite independent o! t e export and import o! gold and t e interest rate0 3n t e ot er and, t ey s o@ a close connection bet@een t e export and import o! gold, @ ic is, indeed, t e Krepresentati8e o! o%r %nin8ested capital,L and t e interest rate0 K/<2=<1 &n 182>, a 8ery large amo%nt o! ?merican sec%rities @ere retrans!erred to ?merica, and )%ssian sec%rities to )%ssia, and ot er continental sec%rities @ere trans!erred to t ose places !rom @ ic @e dre@ o%r s%pplies o! grain0L 5 e !i!teen maHor articles on @ ic t e !ollo@ing tables o! 6%bbard are based incl%de cotton, cotton yarn, cotton !abrics, @ool, @oollen clot , !lax, linen, indigo, pig-iron, tin, copper, tallo@, s%gar, co!!ee, and silk0 I. 18;4!184; Date Gullion Mar-et &rice &rice 9eserve of 9ate of increase Decrease Nnchanged Gan- S Discount V -

1832, *,1=2,=== <`T Marc 1 183+, 6,<>2,=== 3`T Marc 1 1836, >,*18,=== 3[T Marc 1 183>, 2,=>>,=== +T Marc 1 1838, 1=,2>1,=== <`T Marc 1 183*, <,682,=== 6T

>

>

11

11

<

386

; apter JJJ&4

$ept0 1 182=, 2,+>1,=== 2`T P%ne 1 182=, 3,62<,=== +`T 7ec0 1 1821, 2,8>3,=== +T 7ec0 1 182<, 1=,6=3,=== <ZT 7ec0 1 1823, 11,+66,=== <[T P%ne 1 + > 3 < 1 * 6 < 13 12 1 < -

,rice c anges on 1+ maHor items II. 1844!185; 7ate A%llion Market ,rice ,rice )eser8e o! )ate o! &ncrease 7ecrease (nc anged Aank V 7isco%nt -

1822, 16,16<,=== <[T Marc 1 182+, 13,<3>,=== 2ZT 7ec 1 1826, 16,366,=== 3T $ept0 1 182>, *,12=,=== 6T $ept0 1 18+=, 1>,1<6,=== <ZT Marc 1 18+1, 13,>=+,=== 3T P%ne 1 18+<, <1,8+3,=== 1`T $ept0 1 18+3, 1+,=*3,=== +T 7ec0 1

11 > 6 +

2 8 6 *

3 1

< * 12

11 + -

< 1 1

,rice c anges on 1+ maHor items 6%bbard comments in t is regard: K?s in t e 1= years 1832-23, so in 1822-+3, mo8ements in t e b%llion o! t e Aank @ere in8ariably accompanied by a decrease or increase in t e loanable

38>

; apter JJJ&4

8al%e o! money ad8anced on disco%nt# and t e 8ariations in t e prices o! commodities in t is co%ntry ex ibit an entire independence o! t e amo%nt o! circ%lation as s o@n in t e !l%ct%ations in b%llion at t e Aank o! EnglandL BAank ?cts )eport, 18+>, &&, pp0 <*=, <*1C0 $ince t e demand and s%pply o! commodities reg%late t eir market-prices, it becomes e8ident ere o@ @rong 38erstone is in identi!ying t e demand !or loanable money-capital Bor rat er t e de8iations o! s%pply t ere!romC, as expressed by t e disco%nt rate, @it t e demand !or act%al Kcapital0L 5 e contention t at commodity-prices are reg%lated by !l%ct%ations in t e D%antity o! c%rrency is no@ concealed by t e p rase t at disco%nt rate !l%ct%ations express !l%ct%ations in t e demand !or act%al material capital, as distinct !rom money-capital0 We a8e seen t at be!ore t e same ;ommittee bot -orman and 38erstone act%ally contended t is, and t at t e latter especially @as compelled to resort to 8ery lame s%bter!%ges, %ntil e @as !inally cornered B; ap0 JJ4&C0 &t is indeed an old %mb%g t at c anges in t e existing D%antity o! gold in a partic%lar co%ntry m%st raise or lo@er commodity-prices @it in t is co%ntry by increasing or decreasing t e D%antity o! t e medi%m o! circ%lation0 &! gold is exported, t en, according to t is ;%rrency 5 eory, commodity-prices m%st rise in t e co%ntry importing t is gold, and t ereby t e 8al%e o! exports !rom t e gold-exporting co%ntry on t e gold-importing co%ntry"s market# on t e ot er and, t e 8al%e o! t e gold-importing co%ntry"s exports @o%ld !all on t e gold-exporting co%ntry"s market @ ile it @o%ld rise on t e domestic market, i.e., t e co%ntry recei8ing t e gold0 A%t, in !act, a decrease in t e D%antity o! gold raises only t e interest rate, @ ereas an increase in t e D%antity o! gold lo@ers t e interest rate# and i! not !or t e !act t at t e !l%ct%ations in t e interest rate enter into t e determination o! cost-prices, or in t e determination o! demand and s%pply, commodity prices @o%ld be @ olly %na!!ected by t em0 &n t e same report, -0 ?lexander, ead o! a large !irm doing b%siness @it &ndia, expresses t e !ollo@ing 8ie@s on t e ea8y drain o! sil8er to &ndia and ; ina in t e mid-!i!ties0 5 is @as partly d%e to t e ; inese ;i8il War, @ ic c ecked t e sale o! Englis !abrics in ; ina, and partly d%e to t e disease among silk@orms in E%rope, @ ic s arply red%ced silk@orm breeding in &taly and France: K233>0 &s t e drain !or ; ina or !or &ndiaQ I .o% send t e sil8er to &ndia, and yo% b%y opi%m @it a great deal o! it, all o! @ ic goes on to ; ina to lay do@n !%nds !or t e p%rc ase o! t e silk# and t e state o! t e markets in &ndiaL Bin spite o! t e acc%m%lation o! sil8er t ereC Kmakes it a more pro!itable in8estment !or t e merc ant to lay do@n sil8er t an to send piece-goods or Englis man%!act%res0L I K23380 &n order to obtain t e sil8er, as t ere not been a great drain !rom FranceQ I .es, 8ery large0L I K23220 &nstead o! bringing in silk !rom France and &taly, @e

388

; apter JJJ&4

are sending it t ere in large D%antities, bot

!rom

Aengal and !rom ; ina0L &n ot er @ords, sil8er, t e money metal o! t at continent, @as sent to ?sia instead o! commodities, not beca%se commodity-prices ad risen in t e co%ntry @ ic prod%ced t em BEnglandC, b%t beca%se prices ad !allen, as a res%lt o! o8er-imports in t e co%ntry @ ic imported t em# and t is despite t e !act t at t e sil8er @as recei8ed by England !rom France and ad to be paid !or partly in gold0 ?ccording to t e ;%rrency 5 eory, prices s o%ld a8e !allen in England and risen in &ndia and ; ina as a res%lt o! s%c imports0 ?not er ill%stration0 Ae!ore t e 'ords" ;ommittee B;0 70 1828N+>C, Wylie, one o! t e !irst 'i8erpool merc ants, testi!ies as !ollo@s: K1**20 ?t t e close o! 182+ t ere @as no trade t at @as more rem%nerating, and in @ ic t ere @ere s%c large pro!its /t an cotton spinning10 5 e stock o! cotton @as large and good, %se!%l cotton co%ld be bo%g t at 2d0 per po%nd, and !rom s%c cotton good sec%nda m%le t@ist -o0 2= @as made at an expense not exceeding a like amo%nt, say at a cost o! 8d0 per po%nd in all to t e spinner0 5 is yarn @as largely sold and contracted !or in $eptember and 3ctober 182+ at 1=Z and 11Zd0 per po%nd, and in some instances t e spinners realised a pro!it eD%al to t e !irst cost o! t e cotton0L I K1**60 5 e trade contin%ed to be rem%nerati8e %ntil t e beginning o! 18260L I K<===0 3n Marc 3, 1822, t e stock o! cotton /6<>,=2< bales1 @as more t an do%ble @ at it is t is day /on Marc 3, 1828, @ en it @as 3=1,=>= bales1 and yet t e price t en @as 1[d0 per po%nd dearer0L /6[d0 as against +d01 I ?t t e same time yarn, good sec%nda m%le t@ist -o0 2=, ad !allen !rom 11Z-1<d0 to *Zd0 per lb0 in 3ctober, and to >`d0 at t e end o! 7ecember 182># yarn @as sold at t e p%rc ase price o! t e cotton !rom @ ic it ad been sp%n Bibid., -os0 <=<1 and <=<<C0 5 is s o@s t e sel!-interest o! 38erstone"s sagacity according to @ ic money s o%ld be KdearL beca%se capital is Kscarce0L 3n Marc 3, 1822, t e bank interest rate stood at 3T# in 3ctober and -o8ember o! 182> it rose to 8 and *T, and @as still 2T on Marc 3, 18280 5 e prices o! cotton @ere depressed !ar belo@ t e price @ ic corresponded to t e state o! s%pply by t e complete stoppage o! sales and t e panic @it its ens%ing ig rate o! interest0 ?s a res%lt, t ere @as an enormo%s decrease in imports in 1828, on t e one and, and, on t e ot er, a decrease in prod%ction in ?merica# ence a ne@ rise in cotton prices in 182*0 ?ccording to 38erstone, t e commodities @ere too dear beca%se t ere @as too m%c money in t e co%ntry0

38*

; apter JJJ&4

K<==<0 5 e late decline in t e condition o! t e cotton man%!actories is not to be ascribed to t e @ant o! t e ra@ material, as t e price seems to a8e been lo@er, t o%g t e stock o! t e ra@ material is 8ery m%c diminis ed0L 6o@ nicely 38erstone con!%ses prices, or t e 8al%e o! commodities, @it t e 8al%e o! money, t at is, t e interest rate0 &n is reply to M%estion <=<6, Wylie s%ms %p is general H%dgement o! t e ;%rrency 5 eory, based on @ ic ;ard@ell and $ir ; arles Wood, in May 182>, Kasserted t e necessity o! carrying o%t t e Aank ?ct o! 1822 in its !%ll and entire integrity0L I K5 ese principles seemed to me to be o! a nat%re t at @o%ld gi8e an arti!icial ig 8al%e to money and an arti!icial and r%ino%sly lo@ 8al%e to all commodities and prod%ce0L 6e says, !%rt ermore, concerning t e e!!ects o! t is Aank ?ct on b%siness in general: K?s bills at !o%r mont s, @ ic is t e reg%lar co%rse o! dra!ts, !rom man%!act%ring to@ns on merc ants and bankers !or t e p%rc ase o! goods going to t e (nited $tates, co%ld not be disco%nted except at great sacri!ices, t e exec%tion o! orders @as c ecked to a great extent, %ntil a!ter t e :o8ernment 'etter o! 3ctober <+ Bs%spension o! t e Aank ?ctC, @ en t ose !o%r mont s" bills became disco%ntableL B<=*>C0 We see, t en, t at t e s%spension o! t is Aank ?ct @as recei8ed @it relie! in t e pro8inces as @ell0 K<1=<0 'ast 3ctober /182>1 t ere @as scarcely an ?merican b%yer p%rc asing goods ere @ o did not at once c%rtail is orders as m%c as e possibly co%ld# and @ en o%r ad8ices o! t e dearness o! money reac ed ?merica, all !res orders ceased0L I K<1320 ;orn and s%gar @ere special0 5 e corn market @as a!!ected by t e prospects o! t e ar8est, and s%gar @as a!!ected by t e immense stocks and imports0L I K<2630 3! o%r indebtedness to ?merica 000 m%c @as liD%idated by !orced sales o! consigned goods, and & !ear t at m%c @as cancelled by t e !ail%res ere0L I

3*=

; apter JJJ&4

K<1*60 &! & recollect rig tly, @B per cent was paid on our Stoc- 0 change in :ctober ;<=@.L /5 e crisis o! 183> @it its protracted a!termat , !ollo@ed in 182< by a reg%lar post-crisis, and t e sel!-interested blindness o! ind%strialists and merc ants, @ o absol%tely re!%sed to see any o8er-prod%ction I !or s%c a t ing @as abs%rd and impossible according to 8%lgar economy I ad %ltimately ac ie8ed t at con!%sion o! t o%g t @ ic enabled t e ;%rrency $c ool to p%t its dogma into practice on a national scale0 5 e bank legislation o! 1822 and 182+ @as passed0 5 e Aank ?ct o! 1822 di8ides t e Aank o! England into an iss%e department and a banking department0 5 e !ormer recei8es sec%rities I principally go8ernment obligations I amo%nting to 12 million, and t e entire metal oard, o! @ ic not more t an one-D%arter is to consist o! sil8er, and iss%es notes to t e !%ll amo%nt o! t e total0 &n so !ar as t ese notes are not in t e ands o! t e p%blic, t ey are eld in t e banking department and, toget er @it t e small amo%nt o! coin reD%ired !or daily %se Babo%t one millionC, constit%te its e8er ready reser8e0 5 e iss%e department gi8es t e p%blic gold !or notes and notes !or gold# t e remaining transactions @it t e p%blic are carried on by t e banking department0 ,ri8ate banks in England and Wales a%t orised in 1822 to iss%e t eir o@n notes retained t is pri8ilege, b%t t eir note iss%e @as !ixed# i! one o! t ese banks ceases to iss%e its o@n notes, t e Aank o! England can increase its %nbacked notes by t@o-t irds o! t e D%ota t %s made a8ailable# in t is @ay its iss%e @as increased by 18*< !rom V12 to V16Z million Bto be exact, V16,2+=,===C0 5 %s, !or e8ery !i8e po%nds in gold @ ic lea8e t e bank treas%ry, a !i8e-po%nd note ret%rns to t e iss%e department and is destroyed# !or e8ery !i8e so8ereigns going into t e treas%ry a ne@ !i8e-po%nd note comes into circ%lation0 &n t is manner, 38erstone"s ideal paper circ%lation, @ ic strictly !ollo@s t e la@s o! metallic circ%lation, is carried o%t in practice, and by t is means, according to t e ad8ocates o! t e ;%rrency 5 eory, crises are made impossible !or all time0 A%t in reality t e separation o! t e Aank into t@o independent departments depri8ed its management o! t e possibility o! !reely %tilising its entire a8ailable means at critical times, so t at sit%ations co%ld arise in @ ic t e banking department mig t be on t e 8erge o! bankr%ptcy @ ile t e iss%e department still ad intact se8eral millions in gold and, in addition, its entire 12 million in sec%rities0 ?nd t is co%ld take place so m%c more easily since t ere is a period in almost e8ery crisis @ en ea8y exports o! gold take place @ ic m%st be co8ered in t e main by t e metal reser8e o! t e bank0 A%t !or e8ery !i8e po%nds in gold @ ic t en go abroad, t e domestic circ%lation is depri8ed o! a !i8e-po%nd note, so t at t e D%antity o! circ%lating medi%m is red%ced precisely at a time @ en t e largest D%antity is most needed0 5 e Aank ?ct o! 1822 t %s directly ind%ces t e entire commercial @orld !ort @it to oard a reser8e !%nd o! bank-notes at t e o%tbreak o! a crisis# in ot er @ords, to accelerate and intensi!y t e crisis0 Ay s%c arti!icial intensi!ication o! demand !or money accommodation, t at is, !or means o! payment at t e decisi8e moment, and t e sim%ltaneo%s restriction o! t e s%pply t e Aank ?ct dri8es t e rate o! interest to a it erto %nkno@n eig t d%ring a crisis0 6ence, instead o! eliminating crises, t e ?ct, on t e contrary, intensi!ies t em to a point @ ere eit er t e entire ind%strial @orld m%st go to pieces, or else t e Aank ?ct0 Aot on 3ctober <+, 182>, and on -o8ember 1<, 18+>, t e crisis reac ed s%c a point# t e go8ernment t en li!ted t e restriction !or t e Aank in iss%ing notes by s%spending t e ?ct o! 1822, and t is s%!!iced in bot cases to o8ercome t e crisis0 &n 182>, t e ass%rance t at bank-notes @o%ld again be iss%ed !or !irst-class sec%rities s%!!iced to bring to lig t t e V2 to V+ million o! oarded notes and p%t t em back into circ%lation# in 18+>, t e iss%e o! notes exceeding t e legal amo%nt reac ed almost one million, b%t t is lasted only !or a 8ery s ort time0 &t s o%ld also be mentioned t at t e 1822 legislation still s o@s traces recalling t e !irst t@enty years o! t e 1*t cent%ry, t e period @ en specie payments @ere s%spended and notes de8al%ated0 5 e !ear t at notes may lose t eir credit is still plainly in e8idence0 A%t t is !ear is D%ite

3*1

; apter JJJ&4

gro%ndless, since e8en in 18<+ t e iss%e o! a disco8ered old s%pply o! one-po%nd notes, @ ic ad been taken o%t o! circ%lation, broke t e crisis and pro8ed t ereby t at t e credit o! t e notes remained %ns aken e8en in times o! t e most general and deepest mistr%st0 ?nd t is is D%ite %nderstandable# !or, a!ter all, t e entire nation backs %p t ese symbols o! 8al%e @it its credit0 I '.0.1 'et %s no@ t%rn to a !e@ comments on t e e!!ect o! t e Aank ?ct0 Po n $t%art Mill belie8es t at t e Aank ?ct o! 1822 /&n t e :erman 18*2 edition t is reads: 182>0 I 0d1 kept do@n o8erspec%lation0 6appily t is sage spoke on P%ne 1<, 18+>0 Fo%r mont s later t e crisis broke o%t0 6e literally congrat%lated t e Kbank directors and t e commercial p%blic generallyL on t e !act t at t ey K%nderstand m%c better t an t ey did t e nat%re o! a commercial crisis, and t e extreme misc ie! @ ic t ey do bot to t emsel8es and to t e p%blic by %p olding o8er-spec%lation0L BA0;0 18+>, -o0 <=310C 5 e sagacio%s Mr0 Mill t inks t at i! one-po%nd notes are iss%ed Kas ad8ances to man%!act%rers and ot ers, @ o pay @ages 000 t e notes may get into t e ands o! ot ers @ o expend t em !or cons%mption, and in t at case t e notes do constit%te in t emsel8es a demand !or commodities and may !or some time tend to promote a rise o! pricesL /<=6610 7oes Mr0 Mill ass%me, t en, t at man%!act%rers @ill pay ig er @ages beca%se t ey pay t em in paper instead o! goldQ 3r does e belie8e t at i! a man%!act%rer recei8es is loan in V1== notes and exc anges t em !or gold, t ese @ages @o%ld constit%te less demand t an i! paid immediately in one-po%nd notesQ ?nd does e not kno@ t at, !or instance, in certain mining districts @ages @ere paid in t e notes o! local banks, so t at se8eral labo%rers toget er recei8ed one !i8e-po%nd noteQ 7oes t is increase t eir demandQ 3r @ill bankers ad8ance money to man%!act%rers more easily and in larger D%antities in small notes t an in large onesQ /5 is sing%lar !ear @ ic Mill as !or one-po%nd notes @o%ld be inexplicable i! is @ ole @ork on political economy did not re8eal an eclecticism @ ic s o@s no esitation in t e !ace o! any contradiction0 3n t e one and, e agrees on many points @it 5ooke as opposed to 38erstone# on t e ot er, e belie8es t at commodity-prices are determined by t e D%antity o! a8ailable money0 6e is t %s by no means con8inced t at, all ot er conditions being eD%al, a so8ereign @ill !ind its @ay into t e co!!ers o! t e Aank !or e8ery one-po%nd note iss%ed0 6e !ears t at t e D%antity o! circ%lating medi%m co%ld be increased and t ereby de8al%ated, t at is, commodityprices mig t rise0 5 is and not ing more is concealed be ind t e abo8e-mentioned appre ension0 I '.0.C 5ooke expresses t e !ollo@ing 8ie@s be!ore t e ;0 70 1828N+> concerning t e di8ision o! t e Aank into t@o departments and t e excessi8e preca%tions taken to sa!eg%ard t e cas ing o! notes: 5 e greater !l%ct%ations o! t e interest rate in 182>, as compared @it 183> and 183*, are d%e solely to t e separation o! t e Aank into t@o departments B3=1=C0 I 5 e sa!ety o! bank-notes @as a!!ected neit er in 18<+

3*<

; apter JJJ&4

nor in 183> and 183* B3=1+C0 I 5 e demand !or gold in 18<+ @as aimed only at !illing t e 8ac%%m created by t e complete discredit o! t e one-po%nd notes o! co%ntry banks# t is 8ac%%m co%ld be !illed only by gold, %ntil s%c time as t e Aank o! England also iss%ed one-po%nd notes B3=<<C0 I &n -o8ember and 7ecember 18<+ not t e slig test demand existed !or gold !or export p%rposes B3=<3C0 K&n point o! discredit at ome as @ell as abroad, a !ail%re in paying t e di8idends and t e deposits @o%ld be o! !ar greater conseD%ence t an t e s%spending o! t e payment o! t e bank-notes B3=<8C0L K3=3+0 Wo%ld yo% not say t at any circ%mstance, @ ic ad t e e!!ect o! %ltimately endangering t e con8ertibility o! t e note, @o%ld be one likely to add serio%s di!!ic%lty in a moment o! commercial press%reQ I -ot at all0L K&n t e co%rse o! 182> 000 an increased iss%e !rom t e circ%lating department mig t a8e contrib%ted to replenis t e co!!ers o! t e Aank, as it did in 18<+L B3=+8C0 Ae!ore t e ;ommittee on A0 ?0 18+>, -e@marc testi!ies: K13+>0 5 e !irst misc ie8o%s e!!ect 000 o! t at separation o! departmentsL Bo! t e AankC K and 000 a necessary conseD%ence !rom t e c%tting in t@o o! t e reser8e o! b%llion as been t at t e banking b%siness o! t e Aank o! England, t at is to say, t e @ ole o! t at part o! t e operation o! t e Aank o! England @ ic brings it more immediately into contact @it t e commerce o! t e co%ntry, as been carried on as arisen, as been %pon a moiety only o! its !ormer amo%nts o! reser8e0 3%t o! t at di8ision o! t e reser8e reser8e o! t e banking department t ere!ore, t is state o! t ings, t at @ ene8er t e diminis ed, e8en to a small extent, it as rendered

3*3

; apter JJJ&4

necessary an action by t e Aank %pon its rate o! disco%nt0 5 at diminis ed reser8e, t ere!ore, as prod%ced a !reD%ent s%ccession o! c anges and Herks in t e rate o! disco%nt0L I K13+80 5 e alterations since 1822L /%ntil P%ne 18+>1 K a8e been some 6= in n%mber, @ ereas t e alterations prior to 1822 in t e same space o! time certainly did not amo%nt to a doEen0L 3! special interest is t e testimony o! ,almer, a 7irector o! t e Aank o! England since 1811 and !or a @ ile its :o8ernor, be!ore t e 'ords" ;ommittee on ;0 70 1828N+>: K8<80 &n 7ecember 18<+, t ere @as abo%t V1,1==,=== o! b%llion remaining in t e Aank0 ?t t at period it m%st %ndo%btedly a8e !ailedin toto, i! t is ?ct ad been in existenceL /meaning t e ?ct o! 182210 K5 e iss%e in 7ecember, & t ink, @as + or 6 millions o! notes in a @eek, @ ic relie8ed t e panic t at existed at t at period0L K8<+0 5 e !irst periodL /since P%ly 1, 18<+1 K@ en t e present ?ct @o%ld attempted to a8e !ailed, i! t e Aank t e transactions ad t en carry o%t

%ndertaken, @as on t e <8t o! Febr%ary 183># at t at period t ere @ere V3,*==,=== to V2,===,=== o! b%llion in t e possession o! t e Aank, and t en t e Aank @o%ld a8e been le!t @it V6+=,=== only in t e o! P%ly to t e +t o! reser8e0 ?not er period is in t e year 183*, @ ic contin%ed !rom t e *t 7ecember0L I K8<60 W at @as t e amo%nt o! t e reser8e in t at caseQ I 5 e reser8e @as min%s altoget er V<==,=== %pon t e +t o! $eptember0 3n t e +t o! -o8ember it rose to abo%t a million or a million and a al!0L I K83=0 5 e ?ct o! 1822 @o%ld a8e pre8ented t e Aank gi8ing assistance to t e ?merican trade in 183>0L I K8310 5 ere @ere t ree o! t e principal ?merican o%ses t at !ailed0 000 ?lmost e8ery o%se connected @it ?merica @as in a state o! discredit, and %nless t e Aank ad come !or@ard at

3*2

; apter JJJ&4

t at period, & do not belie8e t at t ere @o%ld a8e been more t an one or t@o o%ses t at co%ld a8e s%stained t emsel8es0L I K8360 5 e press%re in 183> is not to be compared @it t at o! 182>0 5 e press%re in t e !ormer year @as c ie!ly con!ined to t e ?merican trade0L I 8380 BEarly in P%ne 183> t e management o! t e Aank disc%ssed t e D%estion o! o8ercoming t e press%re0C K$ome gentlemen ad8ocated t e opinion 000 t at t e correct principle @as to raise t e rate o! interest, by @ ic t e price o! commodities @o%ld be lo@ered# in s ort, to make money dear and commodities c eap, by @ ic t e !oreign payment @o%ld be accomplis ed0L I K*=60 5 e establis ment o! an arti!icial limitation o! t e po@ers o! t e Aank %nder t e ?ct o! 1822, instead o! t e ancient and nat%ral limitation o! t e Aank"s po@ers, namely, t e act%al amo%nt o! its specie, tends to create arti!icial di!!ic%lty, and t ere!ore an operation %pon t e prices o! merc andise t at @o%ld a8e been %nnecessary b%t !or t e pro8isions o! t e ?ct0L I K*680 .o% cannot, by t e @orking o! t e ?ct o! 1822, materially red%ce t e b%llion, %nder ordinary circ%mstances, belo@ nine million and a al!0 &t @o%ld t en ca%se a press%re %pon prices and credit @ ic @o%ld occasion s%c an ad8ance in t e exc ange @it !oreign co%ntries as 1= increase t e import o! b%llion, and to t at extent add to t e amo%nt in t e iss%e department0L I K**60 (nder t e limitation t at yo%L /t e Aank1 Kare no@ s%bHect to, yo% a8e not t e command o! sil8er to an extent t at yo% reD%ire at a time @ en sil8er @o%ld be reD%ired !or an action %pon t e !oreign exc anges0L I K***0 W at @as t e obHect o! t e reg%lation restricting t e Aank as to t e amo%nt o! sil8er to one-!i!t Q I & cannot ans@er t at D%estion0L

3*+

; apter JJJ&4

5 e p%rpose @as to make money dear# aside !rom t e ;%rrency 5 eory, t e separation o! t e t@o bank departments and t e reD%irement !or $cottis and &ris banks to old gold in reser8e !or backing notes iss%ed beyond a certain amo%nt ad t e same p%rpose0 5 is bro%g t abo%t a decentralisation o! t e national metal reser8e, @ ic decreased its capability o! correcting %n!a8o%rable exc ange rates0 ?ll t e !ollo@ing stip%lations aim to raise t e interest rate: t at t e Aank o! England s all not iss%e notes exceeding 12 million except against gold reser8e# t at t e banking department s all be administered as an ordinary bank, !orcing t e interest rate do@n @ en money is plenti!%l and dri8ing it, %p @ en money is scarce# limiting t e sil8er reser8e, t e principal means o! recti!ying t e rates o! exc ange @it t e continent and ?sia# t e reg%lations concerning t e $cottis and &ris banks, @ ic ne8er reD%ire gold !or export b%t m%st no@ keep it %nder t e pretence o! ens%ring an act%ally ill%sory con8ertibility o! t eir notes0 5 e !act is t at t e ?ct o! 1822 ca%sed a r%n on t e $cottis banks !or gold in 18+> !or t e !irst time0 -or does t e ne@ bank legislation make any distinction bet@een a drain o! gold abroad or !or domestic p%rposes, alt o%g it goes @it o%t saying t at t eir e!!ects are D%ite di!!erent0 6ence t e contin%al large !l%ct%ations in t e market rate o! interest0 Wit re!erence to sil8er, ,almer says on t@o separate occasions, **< and **2, t at t e Aank can b%y sil8er !or notes only @ en t e rate o! exc ange is !a8o%rable !or England, i.e., sil8er is s%per!l%o%s# !or: K1==30 5 e only obHect in olding a considerable amo%nt o! b%llion in sil8er is to !acilitate making t e !oreign payment so long as t e exc anges are against t e co%ntry0L I K1==20 $il8er is 000 a commodity @ ic , being money in e8ery ot er part o! t e @orld, is t ere!ore t e most direct commodity !or t e p%rposeL /payments abroad10 K5 e (nited $tates latterly a8e taken gold alone0L &n is opinion, t e Aank did not a8e to raise t e interest rate abo8e its old le8el o! +T in times o! stringency, so long as %n!a8o%rable exc ange rates do not drain gold to !oreign co%ntries0 Were it not !or t e ?ct o! 1822, t e Aank @o%ld be able to disco%nt all !irst-class bills presented to it @it o%t di!!ic%lty0 /1=18-<=01 A%t %nder t e ?ct o! 1822 and in t e state in @ ic t e Aank !o%nd itsel! in 3ctober 182>, Kt ere @as no rate o! interest @ ic t e Aank co%ld a8e c arged to o%ses o! credit, @ ic t ey @o%ld not a8e been @illing to pay to carry on t eir paymentsL /1=<<10 ?nd t is ig interest rate @as precisely t e p%rpose o! t e ?ct0 K1=<*0 000 :reat distinction @ ic & @is to dra@ bet@een t e action o! t e rate o! interest %pon a !oreign demandL /!or precio%s metal1 Kand an ad8ance in t e rate !or t e obHect o! c ecking a demand %pon t e Aank d%ring a period o! internal discredit0L I K2=<30 ,re8io%sly to t e ?ct o! 1822 000 @ en t e exc anges @ere in !a8o%r o! t e co%ntry, and positi8e

3*6

; apter JJJ&4

panic and alarm existed t ro%g t e co%ntry, t ere @as no limit p%t %pon t e iss%e, by @ ic alone t at state o! distress co%ld be relie8ed0L $o speaks a man @ o as occ%pied a post !or 3* years in t e administration o! t e Aank o! England0 'et %s no@ listen to a pri8ate banker, 5@ells, an associate o! $pooner, ?tt@ood g ;o0 since 18=10 6e is alone among t e @itnesses be!ore t e A0 ;0 28+> @ o pro8ides %s @it an insig t into t e co%ntry"s act%al state o! a!!airs and @ o sees t e crisis approac ing0 &n ot er respects, o@e8er, e is a sort o! little-s illing man !rom Airming am, like is associates, t e ?tt@ood brot ers, @ o are t e !o%nders o! t is sc ool0 B$ee %ur Hriti- der pol. :e-., $0 +*0C 6e testi!ies: K22880 6o@ do yo% t ink t at t e ?ct o! 1822 as operatedQ I &! & @ere to ans@er yo% as a banker, & s o%ld say t at it as operated exceedingly @ell, !or it as a!!orded a ric ar8est to bankers and /money-1capitalists o! all kinds0 A%t it as operated 8ery badly to t e onest ind%strio%s trades-man @ o reD%ires steadiness in t e rate o! disco%nt, t at e may be enabled to make is arrangements @it con!idence0000 &t as made money-lending a most

pro!itable p%rs%it0L I K228*0 &t /t e Aank ?ct,1 enables t e 'ondon Hoint-stock banks to ret%rn !rom <= to <<T to t eir proprietorsQ I 5 e ot er day one o! t em @as paying 18T and & t ink anot er <=T# t ey o%g t to s%pport t e ?ct o! 1822 8ery strongly0L I K22*=0 5 e little tradesmen and respectable merc ants, @ o a8e not a large capital 000 it pinc es t em 8ery m%c indeed 000 5 e only means t at & a8e o! kno@ing is t at & obser8e s%c an amaEing D%antity o! t eir acceptances %npaid0 5 ey are al@ays small, per aps ranging !rom V<= to V2==, a great many o! t em are %npaid and go back %npaid to all parts o! t e co%ntry, @ ic is al@ays an indication o! s%!!ering amongst 000 little s opkeepers0L 22*20 6e declares t at b%siness is not pro!itable no@0 5 e !ollo@ing remarks o! is are important beca%se t ey s o@ t at e sa@ t e latent existence o! t e crisis @ en none o! t e ot ers ad e8en an inkling o! it0

3*>

; apter JJJ&4

K22*20 5 ings keep t eir prices in Mincing 'ane, b%t @e sell not ing, @e cannot sell %pon any terms# @e keep t e nominal price0L 22*+0 6e relates t e !ollo@ing case: ? Frenc man sends a broker in Mincing 'ane commodities !or V3,=== to be sold at a certain price0 5 e broker cannot obtain t e reD%ested price, and t e Frenc man cannot sell belo@ t is price0 5 e commodities remain %nsold, b%t t e Frenc man needs money0 5 e broker t ere!ore makes im an ad8ance o! V1,=== and as t e Frenc man dra@ a bill o! exc ange o! V1,=== !or t ree mont s on t e broker against is commodities as sec%rity0 ?t t e end o! t e t ree mont s t e bill becomes d%e, b%t t e commodities still remain %nsold0 5 e broker m%st t en pay t e bill, and alt o%g e possesses sec%rity !or V3,===, e cannot con8ert it into cas and as a res%lt !aces di!!ic%lties0 &n t is manner, one person drags anot er do@n @it im0 K22*60 Wit regard to t e large exports 000 @ ere t ere is a depressed state o! trade at ome, it necessarily !orces large exportation0L I K22*>0 7o yo% t ink t at t e ome cons%mption as been diminis edQ I Lery much indeed ... immensely ... t e s opkeepers are t e best a%t orities0L I K22*80 $till t e importations are 8ery large# does not t at indicate a large cons%mptionQ I &t does, if you can sellP b%t many o! t e @are o%ses are !%ll o! t ese t ings# in t is 8ery instance @ ic & a8e been relating, t ere is V3,=== @ort imported, @ ic cannot be sold0L K2+120 W en money is dear, @o%ld yo% say t at capital @o%ld be c eapQ I .es0 5 is man, t en, is by no means o! 38erstone"s opinion t at a ig rate o! interest is t e same as dear capital0 5 e !ollo@ing s o@s o@ b%siness is no@ cond%cted: K26160 3t ers are going to a 8ery great extent, carrying on a prodigio%s trade in exports and imports, to an extent !ar beyond @ at t eir capital H%sti!ies t em in doing# t ere can be no do%bt o! all o! t at0 5 ese men may s%cceed# t ey may by some l%cky 8ent%re get large !ort%nes, and p%t t emsel8es rig t0 5 at is 8ery m%c t e system in @ ic a great deal o! trade is no@ carried on0 ,ersons @ill consent to lose <=, 3=, and 2= per cent %pon a s ipment# t e next 8ent%re may bring it back to t em0 &! t ey !ail in one

3*8

; apter JJJ&4

a!ter anot er, t en t ey are broken %p# and t at is H%st t e case @ ic mercantile o%ses @e a8e o!ten seen recently# a8e broken %p, @it o%t one

s illing o! property being le!t0L K2>*10 5 e lo@ rate o! interestL /d%ring t e last ten years1 Koperates against bankers, it is tr%e, b%t & s o%ld a8e 8ery great di!!ic%lty in explaining to yo%, %nless & co%ld s o@ yo% t e books, o@ m%c ig er t e pro!itsL / is o@n1 K are no@ t an t ey %sed to be !ormerly0 W en interest is lo@, !rom excessi8e iss%es, @e a8e large deposits# @ en interest is ig , @e get t e ad8antage in t at @ay0L I K2>*20 W en money is at a moderate rate, @e a8e more demand !or it# @e lend more# it operates in t at @ayL /!or %s, t e bankers10 KW en it gets ig er, @e get more t an a !air proportion !or it# @e get more t an @e o%g t to do0L We a8e seen t at t e credit o! Aank o! England notes is considered beyond D%estion by all experts0 -e8ert eless, t e Aank ?ct completely ties %p nine to ten million in gold !or t e con8ertibility o! t ese notes0 5 e sacredness and in8iolability o! t is reser8e is t ereby carried m%c !art er t an among oarders o! olden times0 Mr0 Aro@n B'i8erpoolC testi!ies, ;0 70 182>N+>: K<311: 5 is moneyL /t e metal reser8e in t e iss%e department1 Kmig t as @ell a8e been t ro@n into t e sea !rom any %se t at it @as o! at t at time, t ere being no po@er to employ any o! it @it o%t 8iolating t e ?ct o! ,arliament0L 5 e b%ilding contractor E0 ;apps, already cited earlier, @ ose testimony is also %sed to ill%strate t e modern b%ilding system in 'ondon B4ol0 &&, ; 0 J&&C, s%ms %p is opinion o! t e Aank ?ct o! 1822 as !ollo@s /A0 ?0 18+>1: K++=80 5 en %pon t e @ ole 000 yo% t ink t at t e present systemL /o! bank legislation1 Kis a some@ at adroit sc eme !or bringing t e pro!its o! ind%stry periodically into t e %s%rer"s bagQ I & t ink so0 & kno@ t at it as operated so in t e b%ilding trade0L ?s mentioned be!ore, t e $cottis banks @ere !orced by t e Aank ?ct o! 182+ into a system resembling t at o! t e Englis 0 5 ey @ere obliged to old gold in reser8e !or t eir note iss%e

3**

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beyond t e limit !ixed !or eac bank0 5 e e!!ect o! t is may be seen !rom t e !ollo@ing testimony be!ore t e ;0 70 1828N+>0 Kennedy, 7irector o! a $cottis bank: K33>+0 Was t ere anyt ing t at yo% can call a circ%lation o! gold in $cotland pre8io%sly to t e passing o! t e ?ct o! 182+Q I -one @ ate8er0L I K33>60 6as t ere been any additional circ%lation o! gold sinceQ I -one @ ate8er# t e people dislike gold0L I 32+=0 5 e s%m o! abo%t V*==,=== in gold, @ ic t e $cottis banks are compelled to keep since 182+, can only be inH%rio%s in is opinion and Kabsorbs %npro!itably so m%c o! t e capital o! $cotland0L F%rt ermore, ?nderson, 7irector o! t e (nion Aank o! $cotland: K3+880 5 e only press%re %pon t e Aank o! England by t e banks in $cotland !or gold @as !or !oreign exc angesQ I &t @as# and t at is not to be relie8ed by olding gold in Edinb%rg 0L I K3+*=0 6a8ing t e same amo%nt o! sec%rities in t e Aank o! EnglandL /or in t e pri8ate banks o! England1 K@e a8e t e same po@er t at @e ad be!ore o! making a drain %pon t e Aank o! England0L Finally, @e D%ote an article !rom t e 0conomist BWilsonC: K5 e $cotc banks keep %nemployed amo%nts o! cas @it t eir 'ondon agents# t ese keep t em in t e banks, Aank o! England0 5 is gi8es to t e $cotc

@it in t e limits o! t ese amo%nts, command o8er t e metal reser8e o! t e Aank, and ere it is al@ays in t e place @ ere it is needed, @ en !oreign payments are to be made0L 5 is system @as dist%rbed by t e ?ct o! 182+: K&n conseD%ence o! t e ?ct o! 182+ !or $cotland o! late a large drain o! t e coin o! t e Aank as taken place, to s%pply a mere contingent demand in $cotland, @ ic may ne8er occ%r000 $ince t at period t ere as been a large s%m %ni!ormly locked %p in

2==

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$cotland, and anot er considerable s%m constantly tra8elling back and !or@ard bet@een 'ondon and $cotland0 &! a period arri8es @ en a $cotc bank expects an increased demand !or its notes, a box o! gold is bro%g t do@n !rom 'ondon# @ en t is period is past, t e same box, generally %nopened, is sent back to 'ondon0L B0conomist, 3ctober <3, 182> /pp0 1<12-1<1+10C /?nd @ at does t e !at er o! t e Aank ?ct, banker $am%el Pones 'oyd, alias 'ord 38erstone, say to all t isQ ?lready in 1828 e repeated be!ore t e 'ords" ;ommittee on ;ommercial 7istress t at Kpress%re, and a ig rate o! interest ca%sed by t e @ant o! s%!!icient capital, cannot be relie8ed by an extra iss%e o! bank-notesL B1+12C, in spite o! t e !act t at t e mere authority to increase t e note iss%e, gi8en by t e :o8ernment"s 'etter o! 3ctober <+, 182>, ad s%!!iced to take t e edge o!! t e crisis0 6e olds to t e 8ie@ t at Kt e ig rate o! interest and t e depression o! t e man%!act%ring interests @as t e necessary res%lt o! t e dimin%tion o! t e materialcapital applicable to man%!act%ring and trading p%rposesL B16=2C0 ?nd yet t e depressed condition o! t e man%!act%ring ind%stry ad !or mont s consisted in material commodity-capital !illing t e @are o%ses to o8er!lo@ing and being act%ally %nsaleable# so t at !or precisely t is reason, material prod%cti8e capital lay @ olly or partly idle, in order not to prod%ce still more %nsaleable commodity-capital0 ?nd be!ore t e Aank ;ommittee o! 18+> e says: KAy strict and prompt ad erence to t e principles o! t e ?ct o! 1822, e8eryt ing as passed o!! @it reg%larity and ease, t e monetary system is sa!e and %ns aken, t e prosperity o! t e co%ntry is %ndisp%ted, t e p%blic con!idence in t e @isdom o! t e ?ct o! 1822 is daily gaining strengt , and i! t e ;ommittee @is !or !%rt er practical ill%stration o! t e so%ndness o! t e principles on @ ic it rests, or o! t e bene!icial res%lts @ ic it as ens%red, t e tr%e and s%!!icient ans@er to t e ;ommittee is, look aro%nd yo%, look at t e present state o! t e trade o! t is co%ntry, 000 look at

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t e contentment o! t e people, look at t e @ealt and prosperity @ ic per8ades e8ery class o! t e comm%nity, and t en a8ing done so, t e ;ommittee may be !airly called %pon to decide @ et er t ey @ill inter!ere @it t e contin%ance o! an ?ct %nder @ ic t ose res%lts a8e been de8eloped0L BA0 ;0 18+>, -o0 218*0C 5o t is song o! praise by 38erstone be!ore t e ;ommittee on P%ly 12, t e antistrop e @as gi8en on -o8ember 1< o! t e same year in t e s ape o! a letter to t e Aank"s management, in @ ic t e go8ernment s%spended t e miracle-@orking la@ o! 1822 to sa8e @ at co%ld still be sa8ed0 I '. 0.1

Chapter 35. Precious 1etal and Rate of E6chan)e

I. *ovement "f The Gold )eserve
&t s o%ld be noted in regard to t e acc%m%lation o! notes in times o! stringency, t at it is a repetition o! t e oarding o! precio%s metal as %sed to take place in tro%bled times in t e most primiti8e conditions o! society0 5 e ?ct o! 1822 is interesting in its operation beca%se it seeks to trans!orm all precio%s metal existing in t e co%ntry into a circ%lating medi%m# it seeks to eD%ate a drain o! gold @it a contraction o! t e circ%lating medi%m and a ret%rn !lo@ o! gold @it an expansion o! t e circ%lating medi%m0 ?s a res%lt, t e experiment pro8ed t e contrary to be t e case0 Wit a single exception, @ ic @e s all mention s ortly, t e D%antity o! circ%lating notes o! t e Aank o! England as ne8er, since 1822, reac ed t e maxim%m @ ic it @as a%t orised to iss%e0 5 e crisis o! 18+> pro8ed on t e ot er and t at t is maxim%m does not s%!!ice %nder certain circ%mstances0 From -o8ember 13 to 3=, 18+>, a daily a8erage o! V288,83= abo8e t is maxim%m @as circ%lating BA0 ?0 18+8, p0 J&C0 5 e legal maxim%m @as at t at time V12,2>+,===, pl%s t e amo%nt o! metal reser8e in t e 8a%lts o! t e Aank0 ;oncerning t e o%t!lo@ and in!lo@ o! precio%s metal, t e !ollo@ing is to be noted: 'irst, a distinction s o%ld be made bet@een t e back and !ort mo8ement o! metal @it in a region @ ic does not prod%ce any gold and sil8er, on t e one and, and, on t e ot er, t e !lo@ o! gold and sil8er !rom t eir so%rces o! prod%ction to 8ario%s ot er co%ntries and t e distrib%tion o! t is additional metal among t em0 Ae!ore t e gold mines o! )%ssia, ;ali!ornia and ?%stralia made 5 eir in!l%ence !elt, t e s%pply since t e beginning o! t e 1*t cent%ry s%!!iced only !or t e replacement o! @orn-o%t coins, !or general %se in articles o! l%x%ry, and !or t e export o! sil8er to ?sia0 6o@e8er, in t e !irst place, sil8er exports to ?sia a8e since increased extraordinarily, o@ing to t e ?siatic trade o! ?merica and E%rope0 5 e sil8er exported !rom E%rope @as largely replaced by t e additional s%pply o! gold0 $econdly, a portion o! t e ne@ly imported gold @as absorbed by internal money circ%lation0 &t is estimated t at %p to 18+> abo%t 3= million in gold @ere added to England"s internal circ%lation0xxiii F%rt ermore, t e a8erage le8el o! metal reser8es in all t e central banks o! E%rope and ?merica increased since 18220 5 e expansion o! domestic money circ%lation res%lted at t e same time in bank reser8es gro@ing more rapidly in t e period o! stagnation !ollo@ing %pon t e panic, beca%se o! t e larger D%antity o! gold coins t r%st o%t o! domestic circ%lation and immobilised0 Finally, t e cons%mption o! precio%s metal !or l%x%ry articles increased since t e disco8ery o! ne@ gold deposits as a conseD%ence o! t e increased @ealt 0 Secondly, precio%s metal !lo@s back and !ort bet@een co%ntries @ ic do not prod%ce any gold or sil8er, t e same co%ntry contin%ally importing, and also exporting0 &t is only t e preponderance o! t is mo8ement in one or anot er direction @ ic , in t e !inal analysis, determines @ et er a drain or an a%gmentation as taken place, since t e mere oscillations and !reD%ently parallel mo8ements largely ne%tralise one anot er0 A%t !or t is reason, in so !ar as t e res%lt is concerned, t e contin%ity and, in t e main, t e parallel co%rse o! bot mo8ements is o8erlooked0 ? greater import or a greater export o! precio%s metal is al@ays interpreted to be solely t e e!!ect and expression o! t e relation bet@een t e imports and exports o! commodities, @ ereas it is sim%ltaneo%sly indicati8e o! t e relation bet@een exports and imports o! precio%s metal itsel!, D%ite independent o! commodity trade0

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4hirdly, t e preponderance o! imports o8er exports, and 8ice 8ersa, is meas%red on t e @ ole by t e increase or decrease in metal reser8es o! t e central banks0 5 e greater or lesser precision o! t is criterion nat%rally depends primarily on t e degree o! centralisation o! t e banking b%siness in general0 For on t is depends t e extent t at precio%s metal in general acc%m%lated in t e socalled national banks represents t e national metal reser8e0 A%t ass%ming t is to be t e case, t e criterion is not acc%rate beca%se an additional import may be absorbed %nder certain circ%mstances by domestic circ%lation and t e gro@ing cons%mption o! gold and sil8er in prod%cing l%x%ry articles# !%rt ermore, beca%se @it o%t additional import, a @it dra@al o! gold coin !or domestic circ%lation co%ld take place, and t %s t e metal reser8e co%ld decrease e8en @it o%t a sim%ltaneo%s increase in exports0 'ourthly, an export o! metal ass%mes t e aspect o! a drain @ en t e mo8ement o! decrease contin%es !or a long time, so t at t e decrease represents a tendency o! mo8ement and depresses t e metal reser8e o! t e bank considerably belo@ its a8erage le8el, do@n to approximately its a8erage minim%m0 5 is minim%m is more or less arbitrarily !ixed, in so !ar as it is di!!erently determined in e8ery indi8id%al case by legislation concerning backing !or t e cas ing o! notes, etc0 ;oncerning t e D%antitati8e limits @ ic s%c a drain can reac in England, -e@marc testi!ied be!ore t e ;ommittee on A0 ?0 18+>, E8idence -o0 12*2: KP%dging !rom experience, it is 8ery %nlikely t at t e e!!l%x o! treas%re arising !rom any oscillation in t e !oreign trade @ill proceed beyond V3,===,=== or V2,===,===0L &n 182>, t e lo@est gold reser8e le8el o! t e Aank o! England, occ%rring on 3ctober <3, s o@ed a decrease o! V+,1*8,1+6 as compared @it t at o! 7ecember <6, 1826, and a decrease o! V6,2+3,>28 as compared @it t e ig est le8el o! 1826 B?%g%st <*C0 'ifthly, t e determination o! t e metal reser8e o! t e so-called national banks, a determination, o@e8er, @ ic does not by itsel! reg%late t e magnit%de o! t is metal oard, !or it can gro@ solely by t e paralysis o! domestic and !oreign trade, is t ree!old: 1C reser8e !%nd !or international payments, in ot er @ords, reser8e !%nd o! @orld-money# <C reser8e !%nd !or alternately expanding and contracting domestic metal circ%lation# 3C reser8e !%nd !or t e payment o! deposits and !or t e con8ertibility o! notes Bt is is connected @it t e !%nction o! t e bank and as not ing to do @it t e !%nctions o! money as s%c C0 5 e reser8e !%nd can, t ere!ore, also be in!l%enced by conditions @ ic a!!ect e8ery one o! t ese t ree !%nctions0 5 %s, as an international !%nd it can be in!l%enced by t e balance o! payments, no matter by @ at !actors t e latter may be determined and @ ate8er its relation to t e balance o! trade may be0 ?s a reser8e !%nd !or domestic metal circ%lation it can be in!l%enced by t e latter"s expansion or contraction0 5 e t ird !%nction I t at o! a sec%rity !%nd I does not, admittedly, determine t e independent mo8ement o! t e metal reser8e, b%t as a t@o-!old e!!ect0 &! notes are iss%ed @ ic replace metallic money Balso incl%ding sil8er coins in co%ntries @ ere sil8er is a meas%re o! 8al%eC in domestic circ%lation, t e !%nction o! t e reser8e !%nd %nder <C drops a@ay0 ?nd a portion o! t e precio%s metal, @ ic ser8ed to per!orm t is !%nction, @ill !or a long time !ind its @ay abroad0 &n t is case metallic coins are not @it dra@n !or domestic circ%lation, and t %s t e temporary a%gmentation o! t e metal reser8e by immobilising a part o! t e circ%lating coined metal sim%ltaneo%sly !alls a@ay0 F%rt ermore, i! a minim%m metal reser8e m%st be maintained %nder all circ%mstances !or t e payment o! deposits and !or t e con8ertibility o! notes, t is a!!ects in its o@n @ay t e res%lts o! a drain or ret%rn !lo@ o! gold# it a!!ects t at part o! t e reser8e @ ic t e bank is obliged to maintain %nder all circ%mstances, or t at part @ ic it seeks to get rid o! as %seless at certain times0 &! t e circ%lation @ere p%rely metallic and t e banking system concentrated, t e bank

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@o%ld like@ise a8e to consider its metal reser8e as sec%rity !or t e payment o! its deposits, and a drain o! metal co%ld ca%se a panic s%c as @as @itnessed in 6amb%rg in 18+>0 Si thly, @it t e exception o! per aps 183>, t e real crisis al@ays broke o%t only a!ter a c ange in t e rates o! exc ange, t at is, as soon as t e import o! precio%s metal ad again gained preponderance o8er its export0 &n 18<+, t e real cras came a!ter t e drain on gold ad ceased0 &n 183*, t ere @as a drain on gold, b%t it did not bring abo%t a cras 0 &n 182>, t e drain on gold ceased in ?pril and t e cras came in 3ctober0 &n 18+>, t e drain on gold to !oreign co%ntries ad ceased in early -o8ember, and t e cras did not come %ntil later t at same mont 0 5 is is partic%larly e8ident in t e crisis o! 182>, @ en t e drain on gold ceased in ?pril a!ter ca%sing a slig t preliminary crisis, and t e real b%siness crisis did not come %ntil 3ctober0 5 e !ollo@ing testimony @as presented at t e $ecret ;ommittee o! t e 6o%se o! 'ords on ;ommercial 7istress, 18280 5 is e8idence @as not printed %ntil 18+> Balso cited as ;0 70 1828N+>C0 E8idence o! 5ooke:

&n ?pril 182>, a stringency arose, @ ic , strictly speaking, eD%alled a panic, b%t @as o! relati8ely s ort d%ration and not accompanied by any commercial !ail%res o! importance0 &n 3ctober t e stringency @as !ar more intensi8e t an at any time d%ring ?pril, an almost %n eard-o! n%mber o! commercial !ail%res taking place B<**6C0 I &n ?pril t e rates o! exc ange, partic%larly @it ?merica, compelled %s to export a considerable amo%nt o! gold in payment !or %n%s%ally large imports# only by an extreme e!!ort did t e Aank stop t e drain and dri8e t e rates ig er B<**>C0 I &n 3ctober t e rates o! exc ange !a8o%red England B<**8C0 I 5 e c ange in t e rates o! exc ange ad beg%n in t e t ird @eek o! ?pril B3===C0 I 5 ey !l%ct%ated in P%ly and ?%g%st# since t e beginning o! ?%g%st t ey al@ays !a8o%red England B3==1C0 I 5 e drain on gold in ?%g%st arose !rom a demand !or internal circ%lation /3==310 P0 Morris, :o8ernor o! t e Aank o! England: ?lt o%g t e rate o! exc ange !a8o%red England since ?%g%st 182>, and an import o! gold ad taken place in conseD%ence, t e b%llion reser8e o! t e Aank decreased0

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KV<,<==,=== @ent o%t into t e co%ntry in conseD%ence o! t e internal demandL B13>C0 I 5 is is explained on t e one and by an increased employment o! labo%rers in rail@ay constr%ction, and on t e ot er by t e Kcirc%mstance o! t e bankers @is ing to pro8ide t emsel8es @it gold in times o! distressL B12>C0 ,almer, ex-go8ernor and a 7irector o! t e Aank o! England since 1811: K6820 7%ring t e @ ole period !rom t e middle o! ?pril 182> to t e day o! @it dra@ing t e restricti8e cla%se in t e ?ct o! 1822 t e !oreign exc anges @ere in !a8o%r o! t is co%ntry0L 5 e drain o! b%llion, @ ic created an independent money panic in ?pril 182> @as ere t ere!ore, as al@ays, b%t a prec%rsor o! t e crisis, and a t%rn ad already taken place be!ore it broke o%t0 &n 183*, a ea8y drain o! b%llion took place !or grain, etc0, @ ile b%siness @as strongly depressed, b%t t ere @as no crisis or money panic0 Seventhly, as soon as general crises a8e spent t emsel8es, gold and sil8er I lea8ing aside t e in!lo@ o! ne@ precio%s metal !rom t e prod%cing co%ntries I distrib%te t emsel8es once more in t e proportions in @ ic t ey existed in a state o! eD%ilibri%m as indi8id%al oards o! t e 8ario%s co%ntries0 3t er conditions being eD%al, t e relati8e magnit%de o! a oard in eac co%ntry @ill be determined by t e role o! t at co%ntry in t e @orld-market0 5 ey !lo@ !rom t e co%ntry @ ic ad more t an its normal s are to t ose @it less t an a normal amo%nt0 5 ese mo8ements o! o%tgoing and incoming metal merely restore t e original distrib%tion among t e 8ario%s national reser8es0 5 is redistrib%tion, o@e8er, is bro%g t abo%t by t e e!!ects o! 8ario%s circ%mstances, @ ic @ill be taken %p in o%r treatment o! rates o! exc ange0 ?s soon as t e normal distrib%tion is once more restored I beginning @it t is moment I a stage o! gro@t sets in and t en again a drain0 /5 is last statement applies, o! co%rse, only to England, as t e centre o! t e @orld moneymarket0 I '.0.1 0ighthly, a drain o! metal is generally t e symptom o! a c ange in t e state o! !oreign trade, and t is c ange in t%rn is a premonition t at conditions are again approac ing a crisis0 xxi8 $inthly, t e balance o! payments can !a8o%r ?sia against E%rope and ?merica0 xx8 ?n import o! precio%s metal takes place mainly d%ring t@o periods0 3n t e one and, it takes place in t e !irst p ase o! a lo@ interest rate, @ ic !ollo@s %pon a crisis and re!lects a restriction o! prod%ction# and t en in t e second p ase, @ en t e interest rate rises, b%t be!ore it attains its a8erage le8el0 5 is is t e p ase d%ring @ ic ret%rns come D%ickly, commercial credit is ab%ndant, and t ere!ore t e demand !or loan capital does not gro@ in proportion to t e expansion o! prod%ction0 &n bot p ases, @it loan capital relati8ely ab%ndant, t e s%per!l%o%s addition o! capital existing in t e !orm o! gold and sil8er, i.e., a !orm in @ ic it can primarily ser8e only as loan capital, m%st serio%sly a!!ect t e rate o! interest and concomitantly t e atmosp ere o! b%siness in general0 3n t e ot er and, a drain, a contin%ed and ea8y export o! precio%s metal, takes place as soon as ret%rns no longer !lo@, markets are o8erstocked, and an ill%sory prosperity is maintained only by means o! credit# in ot er @ords, as soon as a greatly increased demand !or loan capital exists and t e interest rate, t ere!ore, as reac ed at least its a8erage le8el0 (nder s%c circ%mstances, @ ic are re!lected precisely in a drain o! precio%s metal, t e e!!ect o! contin%ed @it dra@al o! capital, in a !orm in @ ic it exists directly as loanable money-capital, is considerably intensi!ied0 5 is

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m%st a8e a direct in!l%ence on t e interest rate0 A%t instead o! restricting credit transactions, t e rise in interest rate extends t em and leads to an o8er-straining o! all t eir reso%rces0 5 is period, t ere!ore, precedes t e cras 0 -e@marc is asked, A0 ?0 18+>: K1+<=0 A%t t en t e 8ol%me o! bills in circ%lation increases @it t e rate o! disco%ntQ I &t seems to do so0L I K1+<<0 &n D%iet ordinary times t e ledger is t e real instr%ment o! exc ange# b%t @ en any di!!ic%lty arises# @ en, !or example, %nder s%c circ%mstances as & a8e s%ggested, t ere is a rise in t e bank-rate o! disco%nt 000 t en t e transactions nat%rally resol8e t emsel8es into dra@ing bills o! exc ange, t ose bills o! exc ange being not only more con8enient as regards legal proo! o! t e transaction @ ic as taken place, b%t also being more con8enient in order to e!!ect p%rc ases else@ ere, and being pre-eminently con8enient as a means o! credit by @ ic capital can be raised0L F%rt ermore, as soon as some@ at t reatening conditions ind%ce t e bank to raise its disco%nt rate I @ ereby t e probability exists at t e same time t at t e bank @ill c%t do@n t e r%nning time o! t e bills to be disco%nted by it I t e general appre ension spreads t at t is @ill rise in crescendo0 E8eryone, and abo8e all t e credit s@indler, @ill t ere!ore stri8e to disco%nt t e !%t%re and a8e as many means o! credit as possible at is command at t e gi8en time0 5 ese reasons, t en, amo%nt to t is: it is not t at t e mere D%antity o! imported or exported precio%s metal as s%c @ ic makes its in!l%ence !elt, b%t t at it exerts its e!!ect, !irstly, by 8irt%e o! t e speci!ic c aracter o! precio%s metal as capital in money-!orm, and secondly, by acting like a !eat er @ ic , @ en added to t e @eig t on t e scales, s%!!ices to tip t e oscillating balance de!initely to one side# it acts beca%se it arises %nder conditions @ en any addition decides in !a8o%r o! one or t e ot er side0 Wit o%t t ese gro%nds, it @o%ld be D%ite inexplicable @ y a drain o! gold amo%nting to, say, V+,===,=== to V8,===,=== I and t is is t e limit o! experience to date I s o%ld a8e any appreciable e!!ect0 5 is small decrease or increase o! capital, @ ic seems insigni!icant e8en compared to t e V>= million in gold @ ic circ%late on an a8erage in England, is really a negligibly small magnit%de @ en compared to prod%ction o! s%c 8ol%me as t at o! t e Englis 0xx8i A%t it is precisely t e de8elopment o! t e credit and banking system, @ ic tends, on t e one and, to press all money-capital into t e ser8ice o! prod%ction Bor @ at amo%nts to t e same t ing, to trans!orm all money income into capitalC, and @ ic , on t e ot er and, red%ces t e metal reser8e to a minim%m in a certain p ase o! t e cycle, so t at it can no longer per!orm t e !%nctions !or @ ic it is intended I it is t e de8eloped credit and banking system @ ic creates t is o8er-sensiti8eness o! t e @ ole organism0 ?t less de8eloped stages o! prod%ction, t e decrease or increase o! t e oard belo@ or abo8e its a8erage le8el is a relati8ely insigni!icant matter0 $imilarly, on t e ot er and, e8en a 8ery considerable drain o! gold is relati8ely ine!!ecti8e i! it does not occ%r in t e critical period o! t e ind%strial cycle0 &n t e gi8en explanation @e a8e not considered cases in @ ic a drain o! gold takes place as a res%lt o! crop !ail%res, etc0 &n s%c cases t e large and s%dden dist%rbance o! t e eD%ilibri%m o!

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prod%ction, @ ic is expressed by t is drain, reD%ires no !%rt er explanation as to its e!!ect0 5 is e!!ect is t at m%c greater t e more s%c a dist%rbance occ%rs in a period @ en prod%ction is in !%ll s@ing0 We a8e also omitted !rom consideration t e !%nction o! t e metal reser8e as a sec%rity !or banknote con8ertibility and as t e pi8ot o! t e entire credit system0 5 e central bank is t e pi8ot o! t e credit system0 ?nd t e metal reser8e, in t%rn, is t e pi8ot o! t e bank0 xx8ii 5 e c ange-o8er !rom t e credit system to t e monetary system is necessary, as & a8e already s o@n in 4ol0 & B; 0 &&&C in disc%ssing means o! payment0 5 at t e greatest sacri!ices o! real @ealt are necessary to maintain t e metallic basis in a critical moment as been admitted by bot 5ooke and 'oyd38erstone0 5 e contro8ersy re8ol8es merely ro%nd a pl%s or a min%s, and ro%nd t e more or less rational treatment o! t e ine8itable0xx8iii ? certain D%antity o! metal, insigni!icant compared @it t e total prod%ction, is admitted to be t e pi8otal point o! t e system0 6ence t e s%perb t eoretical d%alism, aside !rom t e appalling mani!estation o! t is c aracteristic t at it possesses as t e pi8otal point d%ring crises0 $o long as enlig tened economy treats Ko! capitalL e professo, it looks do@n %pon gold and sil8er @it t e greatest disdain, considering t em as t e most indi!!erent and %seless !orm o! capital0 A%t as soon as it treats o! t e banking system, e8eryt ing is re8ersed, and gold and sil8er become capital par e cellence, !or @ ose preser8ation e8ery ot er !orm o! capital and labo%r is to be sacri!iced0 A%t o@ are gold and sil8er disting%is ed !rom ot er !orms o! @ealt Q -ot by t e magnit%de o! t eir 8al%e, !or t is is determined by t e D%antity o! labo%r incorporated in t em# b%t by t e !act t at t ey represent independent incarnations, expressions o! t e social c aracter o! @ealt 0 /5 e @ealt o! society exists only as t e @ealt o! pri8ate indi8id%als, @ o are its pri8ate o@ners0 &t preser8es its social c aracter only in t at t ese indi8id%als m%t%ally exc ange D%alitati8ely di!!erent %se-8al%es !or t e satis!action o! t eir @ants0 (nder capitalist prod%ction t ey can do so only by means o! money0 5 %s t e @ealt o! t e indi8id%al is realised as social @ealt only t ro%g t e medi%m o! money0 &t is in money, in t is t ing, t at t e social nat%re o! t is @ealt is incarnated0 I '.0.1 5 is social existence o! @ealt t ere!ore ass%mes t e aspect o! a @orld beyond, o! a t ing, matter, commodity, alongside o! and external to t e real elements o! social @ealt 0 $o long as prod%ction is in a state o! !l%x t is is !orgotten0 ;redit, like@ise a social !orm o! @ealt , cro@ds o%t money and %s%rps its place0 &t is !ait in t e social c aracter o! prod%ction @ ic allo@s t e money-!orm o! prod%cts to ass%me t e aspect o! somet ing t at is only e8anescent and ideal, somet ing merely imaginati8e0 A%t as soon as credit is s aken I and t is p ase o! necessity al@ays appears in t e modern ind%strial cycle I all t e real @ealt is to be act%ally and s%ddenly trans!ormed into money, into gold and sil8er I a mad demand, @ ic , o@e8er, gro@s necessarily o%t o! t e system itsel!0 ?nd all t e gold and sil8er @ ic is s%pposed to satis!y t ese enormo%s demands amo%nts to b%t a !e@ millions in t e 8a%lts o! t e Aank0 xxix ?mong t e e!!ects o! t e gold drain, t en, t e !act t at prod%ction as social prod%ction is not really s%bHect to social control, is strikingly emp asised by t e existence o! t e social !orm o! @ealt as a t ing external to it0 5 e capitalist system o! prod%ction, in !act, as t is !eat%re in common @it !ormer systems o! prod%ction, in so !ar as t ey are based on trade in commodities and pri8ate exc ange0 A%t only in t e capitalist system o! prod%ction does t is become apparent in t e most striking and grotesD%e !orm o! abs%rd contradiction and paradox, beca%se, in t e !irst place, prod%ction !or direct %se-8al%e, !or cons%mption by t e prod%cers t emsel8es, is most completely eliminated %nder t e capitalist system, so t at @ealt exists only as a social process expressed as t e intert@ining o! prod%ction and circ%lation# and secondly, @it t e de8elopment o! t e credit system, capitalist prod%ction contin%ally stri8es to o8ercome t e metal barrier, @ ic is sim%ltaneo%sly a material and imaginati8e barrier o! @ealt and its mo8ement, b%t again and again it breaks its back on t is barrier0 &n t e crisis, t e demand is made t at all bills o! exc ange, sec%rities and commodities s all be sim%ltaneo%sly con8ertible into bank money, and all t is bank money, in t%rn, into gold0

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II. The )ate "f !change

/5 e rate o! exc ange is kno@n to be t e barometer !or t e international mo8ement o! money metals0 &! England as more payments to make to :ermany t an :ermany to England, t e price o! marks, expressed in sterling, rises in 'ondon, and t e price o! sterling, expressed in marks, !alls in 6amb%rg and Aerlin0 &! t is preponderance o! England"s payment obligations to@ards :ermany is not balanced again, !or instance, by a preponderance o! p%rc ases by :ermany in England, t e sterling price o! bills o! exc ange in marks on :ermany m%st rise to t e point @ ere it @ill pay to send metal Bgold coin or b%llionC !rom England to :ermany in payment o! obligations, instead o! sending bills o! exc ange0 5 is is t e typical co%rse o! e8ents0 &! t is export o! precio%s metal ass%mes a larger scope and lasts !or a longer period, t en t e Englis bank reser8e is a!!ected, and t e Englis money-market, partic%larly t e Aank o! England, m%st take protecti8e meas%res0 5 ese consist mainly, as @e a8e already seen, in raising t e interest rate0 W en t e drain on gold is considerable, t e money-market as a r%le becomes tig t, t at is, t e demand !or loan capital in t e !orm o! money signi!icantly exceeds t e s%pply and t e ig er interest rate !ollo@s D%ite nat%rally !rom t is# t e disco%nt rate !ixed by t e Aank o! England corresponds to t is sit%ation and asserts itsel! on t e market0 6o@e8er t ere are cases @ en t e drain on b%llion is d%e to ot er t an ordinary combinations o! b%siness transactions B!or instance, loans to !oreign states, in8estment o! capital in !oreign co%ntries, etc0C, and t e 'ondon money-market as s%c does not H%sti!y an e!!ecti8e rise in t e interest rate# t e Aank o! England m%st t en !irst Kmake money scarce,L as t e p rase goes, t ro%g ea8y loans in t e Kopen marketL and t %s arti!icially create a sit%ation @ ic H%sti!ies, or renders necessary, a rise in t e interest rate# s%c a manoe%8re becomes more di!!ic%lt !rom year to year0 I '.001 6o@ t is raising o! t e interest rate a!!ects t e rates o! exc ange is s o@n by t e !ollo@ing testimony be!ore t e ;ommittee o! t e 'o@er 6o%se concerning bank legislation in 18+> BD%oted as A0 ?0 or A0 ;0 18+>C0 Po n $t%art Mill: K<1>60 W en t ere is a state o! commercial di!!ic%lty t ere is al@ays 000 a considerable !all in t e price o! sec%rities 000 !oreigners send o8er to b%y rail@ay s ares in t is co%ntry, or Englis olders o! !oreign rail@ay s ares sell t eir !oreign rail@ay s ares abroad 000 t ere is so m%c trans!er o! b%llion pre8ented0L I K<18<0 ? large and ric class o! bankers and dealers in sec%rities, t ro%g @ om t e eD%alisation o! t e rate o! interest and t e eD%alisation o! commercial press%re bet@een di!!erent co%ntries %s%ally takes place 000 are al@ays on t e look o%t to b%y sec%rities @ ic are likely to rise0000 5 e place !or t em to b%y sec%rities @ill be t e co%ntry @ ic is sending b%llion a@ay0L I K<1820 5 ese in8estments o! capital took place to a 8ery considerable extent in 182>, to a s%!!icient extent to a8e relie8ed t e drain considerably0L

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P0 :0 6%bbard, ex-:o8ernor, and a 7irector o! t e Aank o! England since 1838: K<+2+0 5 ere are great D%antities o! E%ropean sec%rities 000 @ ic a8e a E%ropean c%rrency in all t e di!!erent money-markets, and t ose bonds, as soon as t eir 8al%e is red%ced by 1 or < per cent in one market, are immediately p%rc ased !or transmission to t ose markets @ ere t eir 8al%e is still %nimpaired0L I K<+6+0 ?re not !oreign co%ntries considerably in debt to t e merc ants o! t is co%ntryQ I 4ery largely0L I K<+660 5 ere!ore, t e cas ment o! t ose debts mig t be s%!!icient to acco%nt !or a 8ery large acc%m%lation o! capital in t is co%ntryQ I &n 182>, t e %ltimate restoration o! o%r position @as e!!ected by o%r striking o!! so many millions pre8io%sly d%e by ?merica, and so many millions d%e by )%ssia to t is co%ntry0L /?t t e same time, England o@ed t ese same co%ntries Kso and so many millionsL !or grain and also did not !ail to Kdra@ a lineL t ro%g t e greater portion o! t ese millions 8ia t e bankr%ptcy o! t e Englis debtors0 $ee t e report on Aank ?cts, 18+>, ; apter JJJ abo8e . J '.001 K<+><0 &n 182>, t e exc ange bet@een t is co%ntry and $t0 ,etersb%rg @as 8ery ig 0 W en t e :o8ernment 'etter came o%t a%t orising t e Aank to iss%e irrespecti8ely o! t e limitation o! V12,===,=== /abo8e and beyond t e gold reser8e I '.0.1, t e stip%lation @as t at t e rate o! disco%nt s o%ld be 8T0 ?t t at moment, @it t e t en rate o! disco%nt, it @as a pro!itable operation to order gold to be s ipped !rom $t0 ,etersb%rg to 'ondon and on its arri8al to lend it at 8T %p to t e mat%rity o! t e t ree mont s" bills dra@n against t e p%rc ase o! gold0L I K<+>30 &n all b%llion operations t ere are many points to be taken into consideration# t ere is t e rate o! exc ange and t e rate o! interest, @ ic is a8ailable !or t e in8estment d%ring t e period o! t e mat%rity o! t e bill /dra@n against it I '.0010L

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Rate Of Exchange With Asia

5 e !ollo@ing points are important beca%se, on t e one and, t ey s o@ o@ England reco%ps its losses @ en its rate o! exc ange @it ?sia is %n!a8o%rable, at t e expense o! ot er co%ntries, @ ose imports !rom ?sia are paid t ro%g Englis middlemen0 3n t e ot er and, t ey are important beca%se Mr0 Wilson once again makes t e !oolis attempt ere to identi!y t e e!!ects o! t e export o! precio%s metal on t e rates o! exc ange @it t e e!!ect o! t e export o! capital in general %pon t ese rates# t e export being in bot cases not as a means o! paying or b%ying, b%t !or capital in8estment0 &n t e !irst place, it goes @it o%t saying t at @ et er so many millions o! po%nds sterling are sent to &ndia in precio%s metal or iron rails, to be in8ested in rail@ays t ere, t ese are merely t@o di!!erent !orms o! trans!erring t e same amo%nt o! capital to anot er co%ntry# namely, a trans!er @ ic does not enter t e calc%lation o! ordinary mercantile b%siness, and !or @ ic t e exporting co%ntry expects no ot er ret%rn t an t e !%t%re ann%al re8en%e !rom t e income o! t ese rail@ays0 &! t is export is made in t e !orm o! precio%s metal, it @ill exert a direct in!l%ence %pon t e money-market and @it it %pon t e interest rate o! t e co%ntry exporting t is precio%s metal# i! not necessarily %nder all circ%mstances, t en %nder t e pre8io%sly o%tlined conditions, since it is precio%s metal and as s%c is directly loanable money-capital and t e basis o! t e entire money system0 $imilarly, t is export also directly a!!ects t e rate o! exc ange0 ,recio%s metal is exported only !or t e reason, and to t e extent, t at bills o! exc ange, say on &ndia, @ ic are o!!ered in t e 'ondon money-market, do not s%!!ice to make t ese extra remittances0 &n ot er @ords, t ere is a demand !or &ndian bills o! exc ange @ ic exceeds t eir s%pply, and so t e rates t%rn !or a time against England, not beca%se it is in debt to &ndia, b%t beca%se it as to send extraordinary s%ms to &ndia0 &n t e long r%n, s%c a s ipment o! precio%s metal to &ndia m%st a8e t e e!!ect o! increasing t e &ndian demand !or Englis commodities, beca%se it indirectly increases t e cons%ming po@er o! &ndia !or E%ropean goods0 A%t, i! t e capital is s ipped in t e !orm o! rails, etc0, it cannot a8e any in!l%ence on t e rates o! exc ange, since &ndia as no ret%rn payment to make !or it0 ,recisely !or t is reason, it need not a8e any in!l%ence on t e money-market0 Wilson seeks to establis t e existence o! s%c an in!l%ence by declaring t at s%c an extra expendit%re @o%ld bring abo%t an additional demand !or money accommodation and @o%ld t %s in!l%ence t e interest rate0 5 is may be t e case# b%t to maintain t at it m%st take place %nder all circ%mstances is totally @rong0 -o matter @ ere t e rails are s ipped and @ et er laid on Englis or &ndian soil, t ey represent not ing b%t a de!inite expansion o! Englis prod%ction in a partic%lar sp ere0 5o contend t at an expansion o! prod%ction, e8en @it in 8ery broad limits, cannot take place @it o%t dri8ing %p t e interest rate, is abs%rd0 Money accommodation, i.e., t e amo%nt o! b%siness transacted @ ic incl%des credit operations, may gro@# b%t t ese credit operations can increase @ ile t e interest rate remains %nc anged0 5 is @as act%ally t e case d%ring t e rail@ay mania in England in t e !orties0 5 e interest rate did not rise0 ?nd it is e8ident t at, so !ar as act%al capital is concerned, in t is case commodities, t e e!!ect on t e money-market @ill e H%st t e same, @ et er t ese commodities are destined !or !oreign co%ntries or !or domestic cons%mption0 &t co%ld only make a di!!erence @ en capital in8estments by England in !oreign co%ntries exerted a restraining in!l%ence %pon its commercial exports, i.e., exports !or @ ic payment m%st be made, t %s gi8ing rise to a ret%rn !lo@, or to t e extent t at t ese capital in8estments are already general symptoms indicating t e o8er-expansion o! credit and t e initiation o! s@indling operations0 &n t e !ollo@ing, Wilson p%ts t e D%estions and -e@marc replies0 K1>860 3n a !ormer day yo% stated, @it re!erence to t e demand !or sil8er !or t e East, t at yo% belie8ed t at t e exc anges @it &ndia @ere in !a8o%r o! t is co%ntry, not@it standing t e large amo%nt o! b%llion

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t at is contin%ally transmitted to t e East# a8e yo% any gro%nd !or s%pposing t e exc anges to be in !a8o%r o! t is co%ntryQ I .es, & a8e0000 & !ind t at t e real 8al%e o! t e exports !rom t e (nited Kingdom to &ndia in 18+1 @as V>,2<=,===# to t at is to be added t e amo%nt o! &ndia 6o%se dra!ts, t at is, t e !%nds dra@n !rom &ndia by t e East &ndia ;ompany !or t e p%rpose o! t eir o@n expendit%re0 5 ose dra!ts in t at year amo%nted to V3,<==,===, making, t ere!ore, t e total export !rom t e (nited Kingdom to &ndia V1=,6<=,===0 &n 18++000 t e act%al 8al%e o! t e export o! goods !rom t e (nited Kingdom ad risen to V1=,3+=,=== and t e &ndia 6o%se dra!ts @ere V3,>==,===, making, t ere!ore, t e total export !rom t is co%ntry V12,=+=,===0 -o@ as regards 18+1, & belie8e t ere are no means o! stating @ at @as t e real 8al%e o! t e import o! goods !rom &ndia to t is co%ntry, b%t in 18+2 and 18++ @e a8e a statement o! t e real 8al%e# in 18++, t e total real 8al%e o! t e imports o! goods !rom &ndia to t is co%ntry @as V1<,6>=,=== and t at s%m, compared @it V12,=+=,=== & t e a8e mentioned, le!t a balance in

!a8o%r o! t e (nited Kingdom, as regards t e direct trade bet@een t e t@o co%ntries, o! V1,38=,===L /A0 ?0 18+>10 5 ere%pon Wilson remarks t at t e rates o! exc ange are also a!!ected by indirect commerce0 For instance, exports !rom &ndia to ?%stralia and -ort ?merica are co8ered by dra!ts on 'ondon, and t ere!ore a!!ect t e rate o! exc ange H%st as t o%g t e commodities ad gone directly !rom &ndia to England0 F%rt ermore, @ en &ndia and ; ina are considered toget er, t e balance is against England, since ; ina as constantly to make ea8y payments to &ndia !or opi%m, and England as to make payments to ; ina, so t at t e s%ms go by t is circ%ito%s ro%te to &ndia B1>8>, 1>88C0 1>*10 Wilson no@ asks i! t e e!!ect on t e rates o! exc ange @ill not be t e same @ et er capital K@ent in t e !orm o! iron rails and locomoti8es, or @ et er it @ent in t e !orm o! coin0L -e@marc correctly ans@ers:

21<

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K5 e V1< million @ ic

a8e been sent d%ring t e last

!e@ years to &ndia !or rail@ay constr%ction ser8ed to p%rc ase an ann%ity @ ic &ndia as to pay at reg%lar inter8als to England0 KA%t as !ar as regards t e immediate operation on t e b%llion market, t e in8estments o! t e V1< million @o%ld only be operati8e as !ar as b%llion @as reD%ired to be sent o%t !or act%al money disb%rsements0L 1>*>0 /Weg%elin asks:C K&! no ret%rn is made !or t is iron BrailsC, o@ can it be said to a!!ect t e exc angesQ I & do not t ink t at t at part o! t e expendit%re @ ic is sent o%t in t e !orm o! commodities a!!ects t e comp%tation o! t e exc ange0000 5 e comp%tation o! t e exc ange bet@een t@o co%ntries is a!!ected, one mig t say, solely by t e D%antity o! obligations or bills o!!ering in one co%ntry, as compared @it t e D%antity o!!ering in t e ot er co%ntry against it# t at is t e rationale o! t e exc ange0 -o@, as regards t e transmission o! t ose V1<,===,===, t e money in t e !irst place is s%bscribed in t is co%ntry 000 no@, i! t e nat%re o! t e transaction @as s%c t at t e @ ole o! t at V1<,===,=== @as reD%ired to be laid do@n in ;alc%tta, Aombay, and Madras in treas%re 000 a s%dden demand @o%ld 8ery 8iolently operate %pon t e price o! sil8er, and %pon t e exc ange, H%st t e same as i! t e &ndia ;ompany @ere to gi8e notice tomorro@ t at t eir dra!ts @ere to be raised !rom V3,===,=== to V1<,===,===0 A%t al! o! t ose V1<,===,=== is spent 000 in b%ying commodities in t is co%ntry 000 iron rails and timber, and ot er materials it is an expendit%re in t is co%ntry o! t e capital o! t is co%ntry !or a partic%lar kind o! commodity to be sent o%t to &ndia, and t ere is an end o! it0L I K1>*80 /Weg%elin:1 A%t t e prod%ction o! t ose articles o! iron and timber necessary !or t e rail@ays prod%ces a large cons%mption o! !oreign articles, @ ic mig t a!!ect t e exc angeQ I ;ertainly0L Wilson no@ t inks t at iron represents labo%r to a large extent, and t at t e @age paid !or t is labo%r largely represents imported goods B1>**C, and t en D%estions !%rt er: K18=10 A%t speaking D%ite generally, it @o%ld a8e t e e!!ect o! t%rning t e exc anges against t is co%ntry i! yo% sent abroad t e articles @ ic @ere prod%ced by t e cons%mption o! t e imported articles @it o%t recei8ing any remittance !or t em eit er in t e s ape o! prod%ce or ot er@iseQ I 5 at principle is exactly @ at took place in t is co%ntry d%ring t e time o! t e great rail@ay expendit%re /182+10 For t ree or !o%r or !i8e years, yo% spent %pon rail@ays V3=,===,===, nearly t e @ ole o! @ ic @ent in t e payment o! @ages0 .o% s%stained in t ree years a larger pop%lation employed in constr%cting rail@ays, and locomoti8es, and carriages, and stations t an yo% employed in t e @ ole o! t e !actory districts0 5 e

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people 000 spent t ose @ages in b%ying tea and s%gar and spirits and ot er !oreign commodities# t ose commodities @ere imported# b%t it @as a !act, t at d%ring t e time t is great expendit%re @as going on t e !oreign exc anges bet@een t is co%ntry and ot er co%ntries @ere not materially deranged0 5 ere @as no e!!l%x o! b%llion, on t e contrary, t ere @as rat er an in!l%x0L 18=<0 Wilson insists t at @it an eD%alised trade balance and par rates bet@een England and &ndia t e extra s ipment o! iron and locomoti8es K@o%ld a!!ect t e exc anges @it &ndia0L -e@marc cannot see it t at @ay so long as t e rails are sent o%t as capital in8estment and &ndia as no payment to make !or t em in one !orm or anot er# e adds: K& agree @it t e principle t at no one co%ntry can a8e permanently against itsel! an ad8erse state o! exc ange @it all t e ot er co%ntries, @it @ ic it deals# an ad8erse exc ange @it anot er0L Wilson retorts @it t is tri8iality: K18=30 A%t @o%ld not a trans!er o! capital be t e same @ et er it @as sent in one !orm or anot erQ I ?s regards t e obligation it @o%ld0L I K18=20 5 e e!!ect t ere!ore o! making rail@ays in &ndia, @ et er yo% send b%llion or @ et er yo% send materials, @o%ld be t e same %pon t e capital-market ere in increasing t e 8al%e o! capital as i! t e @ ole @as sent o%t in b%llionQ &! iron prices did not rise, it @as in any case proo! t at t e K8al%eL o! KcapitalL contained in t e rails ad not been increased0 W at @e are ere concerned @it is t e 8al%e o! money-capital, i.e., t e interest rate0 Wilson @o%ld like to identi!y money-capital @it capital in general0 5 e simple !act is essentially t at 1< million @ere s%bscribed in England !or &ndian rail@ays0 5 is is a matter @ ic as not ing directly to do @it t e rates o! exc ange, and t e designation o! t e V1< million is also t e same to t e money-market0 &! t e money-market is in good s ape, it need not prod%ce any e!!ect at all on it, H%st as t e Englis rail@ay s%bscriptions in 1822 and 182+ le!t t e money-market %na!!ected0 &! t e money-market is already in some@ at di!!ic%lt straits, t e interest rate mig t indeed be a!!ected by it, b%t certainly only in an %p@ard direction, and t is, according to Wilson"s t eory, @o%ld !a8o%rably a!!ect t e rates o! exc ange !or England, t at is, it @o%ld @ork against t e tendency to export precio%s metal# i! not to &ndia, t en to some ot er co%ntry0 Mr0 Wilson H%mps !rom one t ing to anot er0 &n M%estion 18=< it is t e rates o! exc ange t at are s%pposed to be a!!ected, and &n M%estion 18=2 t e K8al%e o! capitalL I @ ic are t@o 8ery one co%ntry necessarily prod%ces a !a8o%rable exc ange @it

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di!!erent t ings0 5 e interest rate may a!!ect t e rates o! exc ange, and t e rates o! exc ange may a!!ect t e interest rate, b%t t e latter can be stable @ ile t e rates o! exc ange !l%ct%ate, and t e rates o! exc ange can be stable @ ile t e interest rate !l%ct%ates0 Wilson cannot get it t ro%g is ead t at t e mere !orm in @ ic capital is s ipped abroad makes s%c a di!!erence in t e e!!ect, i.e., t at t e di!!erence in t e !orm o! capital is o! s%c importance, and partic%larly its money!orm, @ ic r%ns 8ery m%c co%nter to enlig tened economy0 -e@marc replies to Wilson onesidedly in t at e does not indicate t at e as H%mped so s%ddenly and @it o%t reason !rom rate o! exc ange to interest rate0 -e@marc ans@ers M%estion 18=2 @it %ncertainty and eD%i8ocation: K-o do%bt, i! t ere is a demand !or V1<,===,=== to be raised, it is immaterial, as regards t e general rate o! interest, @ et er t at V1< million is reD%ired to be sent in b%llion or in materials0 & t ink, o@e8erL /a !ine transition, t is K o@e8er,L @ en e intends to say t e exact opposite1 Kit is not D%ite immaterialL /it is immaterial, b%t, ne8ert eless, it is not immaterial1 Kbeca%se in t e one case t e V6 million @o%ld be ret%rned immediately# in t e ot er case it @o%ld not be ret%rned so rapidly0 5 ere!ore it @o%ld make someL /@ at de!initenessS1 Kdi!!erence, @ et er t e V6 million @as expended in t is co%ntry or sent @ olly o%t o! it0L W at does e mean @ en e says six million @o%ld ret%rn immediatelyQ &n so !ar as t e V6 million a8e been expended in England, t ey exist in rails, locomoti8es, etc0, @ ic are s ipped to &ndia, @ ence t ey do not ret%rn# t eir 8al%e ret%rns 8ery slo@ly t ro%g amortisation, @ ereas t e six million in precio%s metal may per aps ret%rn 8ery D%ickly in kind0 &n so !ar as t e six million a8e been expended in @ages, t ey a8e been cons%med# b%t t e money %sed !or payment circ%lates in t e co%ntry t e same as e8er, or !orms a reser8e0 5 e same olds tr%e !or t e pro!its o! rail prod%cers and t at portion o! t e six million @ ic replaces t eir constant capital0 5 %s, t is ambig%o%s statement abo%t ret%rns is %sed by -e@marc only to a8oid saying directly: 5 e money as remained in t e co%ntry, and in so !ar as it ser8es as loanable money-capital t e di!!erence !or t e money-market Baside !rom t e possibility t at circ%lation co%ld a8e absorbed more coinC is only t at it is c arged to t e acco%nt o! ? instead o! A0 ?n in8estment o! t is kind, @ ere capital is trans!erred to ot er co%ntries in commodities, not in precio%s metal, can a!!ect t e rate o! exc ange Bb%t not t e rate o! exc ange @it t e co%ntry in @ ic t e exported capital is in8estedC only in so !ar as t e prod%ction o! t ese exported commodities reD%ires an additional import o! ot er !oreign commodities0 5 is prod%ction t en cannot balance o%t t e additional import0 6o@e8er, t e same t ing appens @it e8ery export on credit, no matter @ et er intended !or capital in8estment or ordinary commercial p%rposes0 Moreo8er, t is additional import can also call !ort by @ay o! reaction an additional demand !or Englis goods, !or instance, on t e part o! t e colonies or t e (nited $tates0 ,re8io%sly B1>86C, -e@marc stated t at, o@ing to dra!ts o! t e East &ndia ;ompany, exports !rom England to &ndia @ere larger t an imports0 $ir ; arles Wood cross-examines im on t is

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score0 5 is preponderance o! Englis exports to &ndia o8er imports !rom &ndia is act%ally bro%g t abo%t by imports !rom &ndia !or @ ic England does not pay any eD%i8alent0 5 e dra!ts o! t e East &ndia ;ompany Bno@ t e East &ndia go8ernmentC reser8e t emsel8es into a trib%te le8ied on &ndia0 For instance, in 18++, imports !rom &ndia to England amo%nted to V1<,6>=,===# Englis exports to &ndia amo%nted to V1=,3+=,===# balance in &ndia"s !a8o%r V<,<+=,===0 / i.e, approximately <[ million: more precisely, V<,3<=,===0 I 0d.1 K&! t at @as t e @ ole state o! t e case, t at V<,<+=,=== @o%ld a8e to be remitted in some !orm to &ndia0 A%t t en come in t e ad8ertisements !rom t e &ndia 6o%se0 5 e &ndia 6o%se ad8ertise to t is e!!ect t at t ey are prepared to grant dra!ts on t e 8ario%s presidencies in &ndia to t e extent o! V3,<+=,===0L /5 is amo%nt @as le8ied !or t e 'ondon expenses o! t e East &ndia ;ompany and !or t e di8idends to be paid to stock olders01 K?nd t at not merely liD%idates t e V<,<+=,=== @ ic arose o%t o! t e co%rse o! trade, b%t it presents V1,===,=== o! s%rpl%sL B1*1>C /A0 ?0 18+>10 K1*<<0 /Wood:1 5 en t e e!!ect o! t ose &ndia 6o%se dra!ts is not to increase t e exports to &ndia, b%t pro tanto to diminis t emQL /5 is s o%ld read: to red%ce t e necessity o! co8ering t e imports !rom &ndia by exports to t at co%ntry to t e same amo%nt01 Mr0 -e@marc explains t is by saying t at t e Aritis import Kgood go8ernmentL into &ndia !or t ese V3,>==,=== B1*<+C0 Wood, as a !ormer Minister !or &ndia, kno@s !%ll @ell t e kind o! Kgood go8ernmentL @ ic t e Aritis import to &ndia, and correctly replies @it irony: K1*<60 5 en t e export, @ ic , yo% state, is ca%sed by t e East &ndia dra!ts, is an export o! good go8ernment, and not o! prod%ce0L $ince England exports a good deal Kin t is @ayL !or Kgood go8ernmentL and as capital in8estment in !oreign co%ntries I t %s obtaining imports @ ic are completely independent o! t e ordinary r%n o! b%siness, trib%te partly !or exported Kgood go8ernmentL and partly in t e !orm o! re8en%es !rom capital in8ested in t e colonies or else@ ere, i.e., trib%te !or @ ic it does not a8e to pay any eD%i8alent I it is e8ident t at t e rates o! exc ange are not a!!ected @ en England simply cons%mes t is trib%te @it o%t exporting anyt ing in ret%rn0 6ence, it is also e8ident t at t e rates o! exc ange are not a!!ected @ en it rein8ests t is trib%te, not in England, b%t prod%cti8ely or %nprod%cti8ely in !oreign co%ntries# !or instance, @ en it sends m%nitions !or it to t e ;rimea0 Moreo8er, to t e extent t at imports !rom abroad enter into t e re8en%e o! England I o! co%rse, t ey m%st be paid !or in t e !orm o! trib%te, !or @ ic no eD%i8alent ret%rn is necessary, or by exc ange !or t is %npaid trib%te or in t e ordinary co%rse o! commerce I England can eit er cons%me t em or rein8est t em as capital0 &n neit er case are t e rates o! exc ange a!!ected, and t is is o8erlooked by t e sage Wilson0 W et er a domestic or a !oreign prod%ct constit%tes a part o! t e re8en%e I @ ereby t e latter case merely reD%ires an exc ange o! domestic !or !oreign prod%cts I t e cons%mption o! t is re8en%e, be it prod%cti8e or

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%nprod%cti8e, alters not ing in t e rates o! exc ange, e8en t o%g it may alter t e scale o! prod%ction0 5 e !ollo@ing s o%ld be read @it t e !oregoing in mind: 1*320 Wood asks -e@marc o@ t e s ipment o! @ar s%pplies to t e ;rimea @o%ld a!!ect t e rate o! exc ange @it 5%rkey0 -e@marc replies: K& do not see t at t e mere transmission o! @arlike stores @o%ld necessarily a!!ect t e exc ange, b%t certainly t e transmission o! treas%re @o%ld a!!ect t e exc ange0L &n t is case e t %s disting%is es capital in t e !orm o! money !rom capital in ot er !orms0 A%t no@ Wilson asks: K1*3+0 &! yo% make an export o! any article to a great extent, !or @ ic t ere is to be no corresponding importL /Mr0 Wilson !orgets t at t ere are 8ery considerable imports into England !or @ ic corresponding exports a8e ne8er taken place, except in t e !orm o! Kgood go8ernmentL or o! pre8io%sly exported in8estment capital# in any case imports @ ic do not enter into normal commercial mo8ement0 A%t t ese imports are again exc anged, !or instance, !or ?merican prod%cts, and t e circ%mstance t at ?merican goods are exported @it o%t corresponding imports does not alter t e !act t at t e 8al%e o! t ese imports can be cons%med @it o%t an eD%i8alent !lo@ abroad# t ey a8e been recei8ed @it o%t reciprocal exports and can t ere!ore be cons%med @it o%t entering into t e balance o! trade1, Kyo% do not disc arge t e !oreign debt yo% a8e created by yo%r importsL /b%t, i! yo% a8e pre8io%sly paid !or t ese imports, !or instance, by credit gi8en abroad, t en no debt is contracted t ereby, and t e D%estion as not ing to do @it t e international balance# it resol8es itsel! into prod%cti8e and %nprod%cti8e expendit%res, no matter @ et er t e prod%cts so cons%med are domestic or !oreign1, Kand t ere!ore yo% m%st by t at transaction a!!ect t e exc anges by not disc arging t e !oreign debt, by reason o! yo%r export a8ing no corresponding importsQ I 5 at is tr%e as regards co%ntries generally0L 5 is lect%re by Wilson amo%nts to saying t at e8ery export @it no corresponding import is sim%ltaneo%sly an import @it no corresponding export, beca%se !oreign, i.e., imported, commodities enter into t e prod%ction o! t e exported article0 5 e ass%mption is t at e8ery export o! t is kind is based on, or creates, an %npaid import and t %s pres%pposes a debt abroad0 5 is is @rong, e8en @ en t e !ollo@ing t@o circ%mstances are disregarded: 1C England recei8es certain imports !ree o! c arge !or @ ic it pays no eD%i8alent, e.g., a portion o! its &ndian imports0 &t can exc ange t ese !or ?merican imports and export t e latter @it o%t importing in ret%rn# in any case, so !ar as t e 8al%e is concerned, it as only exported somet ing t at as cost it not ing0 <C England may a8e paid !or imports, !or instance, ?merican imports, @ ic constit%te additional capital# i! it cons%mes t ese %nprod%cti8ely, !or instance, as @ar materials, t is does not constit%te any debt to@ards ?merica and does not a!!ect t e rate o! exc ange @it ?merica0

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-e@marc contradicts imsel! in -os0 1*32 and 1*3+, and Wood calls t is to is attention in -o0 1*38: K&! no portion o! t e goods @ ic are employed in t e man%!act%re o! t e articles exported @it o%t ret%rn /@ar materials1, came !rom t e co%ntry to @ ic t ose articles are sent, o@ is t e exc ange @it t at co%ntry a!!ected# s%pposing t e trade @it 5%rkey to be in an ordinary state o! eD%ilibri%m, o@ is t e exc ange bet@een t is co%ntry and 5%rkey a!!ected by t e export o! @arlike stores to t e ;rimeaQL 6ere -e@marc loses is eD%animity# e !orgets t at e as ans@ered t e same simple D%estion correctly in -o0 1*32, and says: KWe seem, & t ink, to a8e ex a%sted t e practical D%estion, and to a8e no@ attained a 8ery ele8ated region o! metap ysical disc%ssion0L /Wilson as still anot er 8ersion o! is claim t at t e rate o! exc ange is a!!ected by e8ery trans!er o! capital !rom one co%ntry to anot er, no matter @ et er in t e !orm o! precio%s metal or commodities0 Wilson kno@s, o! co%rse, t at t e rate o! exc ange is a!!ected by t e interest rate, partic%larly by t e relation o! t e rates o! interest pre8ailing in t e t@o co%ntries @ ose m%t%al rates o! exc ange are %nder disc%ssion0 &! e can no@ demonstrate t at s%rpl%ses o! capital in general, i.e., in t e !irst place, commodities o! all kinds incl%ding precio%s metal, a8e a and in in!l%encing t e interest rate, t en e is a step closer to is goal# a trans!er o! any considerable portion o! t is capital to some ot er co%ntry m%st t en c ange t e interest rate in bot co%ntries, @it t e c ange taking place in opposite directions0 5 ereby, in a secondary @ay, t e rate o! exc ange bet@een bot co%ntries is also altered0 I '. 001 6e t en says in t e 0conomist, May <<, 182>, page +>2, @ ic e edited at t e time: K-o do%bt, o@e8er, s%c ab%ndance o! capital as is indicated by large stocks o! commodities o! all kinds, incl%ding b%llion, @o%ld necessarily lead, not only to lo@ prices o! commodities in general, b%t also to a lo@er rate o! interest !or t e %se o! capital0 &! @e a8e a stock o! commodities on and, @ ic is s%!!icient to ser8e t e co%ntry !or t@o years to come, a command o8er t ose commodities @o%ld be obtained !or a gi8en period, at a m%c lo@er rate t an i! t e stocks @ere barely s%!!icient to last %s t@o mont s0 ?ll loans o! money, in @ ate8er s ape t ey are made, are simply a trans!er o! a command o8er commodities !rom one to anot er0 W ene8er, t ere!ore, commodities are

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ab%ndant, t e interest o! money m%st be lo@, and @ en t ey are scarce, t e interest o! money m%st be ig 0 ?s commodities become ab%ndant, t e n%mber o! sellers, in proportion to t e n%mber o! b%yers, increases, and, in proportion as t e D%antity is more t an is reD%ired !or immediate cons%mption, so m%st a larger portion be kept !or !%t%re %se0 (nder t ese circ%mstances, t e terms on @ ic a older becomes @illing to sell !or a !%t%re payment, or on credit, become lo@er t an i! e @ere certain t at is @ ole stock @o%ld be reD%ired @it in a !e@ @eeksL0 &n regard to t e statement, it is to be noted t at a large influ in precio%s metal can take place sim%ltaneo%sly @it a contraction in prod%ction, as is al@ays t e case in t e period !ollo@ing a crisis0 &n t e s%bseD%ent p ase, precio%s metal may come in !rom co%ntries @ ic mainly prod%ce precio%s metal# imports o! ot er commodities are generally balanced by exports d%ring t is period0 &n t ese t@o p ases, t e interest rate is lo@ and rises b%t slo@ly# @e a8e already disc%ssed t e reason !or t is0 5 is lo@ interest rate co%ld al@ays be explained @it o%t reco%rse to t e in!l%ence o! any Klarge stocks o! commodities o! all kinds0L ?nd o@ is t is in!l%ence to take placeQ 5 e lo@ price o! cotton, !or instance, renders possible t e ig pro!its o! t e spinners, etc0 -o@ @ y is t e interest rate lo@Q $%rely not beca%se t e pro!it, @ ic may be made on borro@ed capital, is ig 0 A%t simply and solely beca%se, %nder existing conditions, t e demand !or loan capital does not gro@ in proportion to t is pro!it# in ot er @ords, beca%se loan capital as a mo8ement di!!erent !rom ind%strial capital0 W at t e 0conomist @ants to pro8e is exactly t e re8erse, namely, t at t e mo8ements o! loan capital are identical @it t ose o! ind%strial capital0 &n regard to t e statement, i! @e red%ce t e abs%rd ass%mption o! stocks !or t@o years in ad8ance to t e point @ ere it begins to take on some meaning, it signi!ies t at t e market is o8erstocked0 5 is @o%ld ca%se a !all in prices0 'ess @o%ld a8e to be paid !or a bale o! cotton0 5 is @o%ld by no means H%sti!y t e concl%sion t at money !or t e p%rc ase o! t is cotton is more easily borro@ed0 5 is depends on t e state o! t e money-market0 &! money can be borro@ed more easily, it is only beca%se commercial credit is in a state reD%iring it to make less %se t an %s%al o! bank credit0 5 e commodities gl%tting t e market are eit er means o! s%bsistence or means o! prod%ction0 5 e lo@ price o! bot increases t e ind%strial capitalist"s pro!it0 W y s o%ld it depress t e interest rate, %nless it be t ro%g t e antit esis, rat er t an t e identity, bet@een t e ab%ndance o! ind%strial capital and t e demand !or money accommodationQ ;irc%mstances are s%c t at t e merc ant and ind%strial capitalist can more easily ad8ance credit to one anot er# o@ing to t is !acilitation o! commercial credit, bot ind%strialist as @ell as merc ant need less bank credit# ence t e interest rate can be lo@0 5 is lo@ interest rate as not ing to do @it t e in!l%x in precio%s metal, alt o%g bot may r%n parallel to eac ot er, and t e same ca%ses bringing abo%t lo@ prices o! imported articles may also prod%ce a s%rpl%s o! imported precio%s metal0 &! t e import market @ere really gl%tted, it @o%ld pro8e t at a decrease in t e demand !or imported articles ad taken place, and t is @o%ld be inexplicable at lo@ prices, %nless it @ere attrib%ted to a contraction o! domestic ind%strial prod%ction# b%t t is, again, @o%ld be inexplicable, so long as t ere is excessi8e importing at lo@ prices0 ? mass o! abs%rdities I in order to pro8e t at a !all in prices R a !all in t e interest rate0 Aot may sim%ltaneo%sly exist side by side0 A%t i! t ey do, it @ill be a re!lection o! t e opposition in t e directions o! t e mo8ement

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o! ind%strial capital and t e mo8ement o! loanable money-capital0 &t @ill not be a re!lection o! t eir identity0 &n regard to t e statement, it is ard to %nderstand e8en a!ter t is exposition @ y money interest s o%ld be lo@ @ en commodities are a8ailable in ab%ndance0 &! commodities are c eap, t en & may need only V1,=== instead o! t e pre8io%s V<,=== to b%y a de!inite D%antity0 A%t per aps & ne8ert eless in8est V<,===, and t %s b%y t@ice t e D%antity @ ic & co%ld a8e bo%g t !ormerly0 &n t is @ay, & expand my b%siness by ad8ancing t e same capital, @ ic & may a8e to borro@0 & b%y V<,=== @ort o! commodities, t e same as be!ore0 My demand on t e money-market t ere!ore remains t e same, e8en t o%g my demand on t e commodity-market rises @it t e !all in commodity-prices0 A%t i! t is demand !or commodities s o%ld decrease, t at is, i! prod%ction s o%ld not expand @it t e !all in commodity-prices, an e8ent @ ic @o%ld contradict all t e la@s o! t e 0conomist, t en t e demand !or loanable money-capital @o%ld decrease, alt o%g t e pro!it @o%ld increase0 A%t t is increasing pro!it @o%ld create a demand !or loan capital0 &ncidentally, a lo@ le8el o! commodity-prices may be d%e to t ree ca%ses0 First, to lack o! demand0 &n s%c a case, t e interest rate is lo@ beca%se prod%ction is paralysed and not beca%se commodities are c eap, !or t e lo@ prices are b%t a reHection o! t at paralysis0 $econd, it may be d%e to s%pply exceeding demand0 5 is may be t e res%lt o! a gl%t on t e market, etc0, @ ic may lead to a crisis and coincide @it a ig interest rate d%ring t e crisis itsel!# or, it may be t e res%lt o! a !all in t e 8al%e o! commodities, so t at t e same demand can be satis!ied at lo@er prices0 W y s o%ld t e interest rate !all in t e last caseQ Aeca%se pro!its increaseQ &! t is @ere d%e to less money-capital being reD%ired !or obtaining t e same prod%cti8e or commodity-capital, it @o%ld merely pro8e t at pro!it and interest are in8ersely proportional to eac ot er0 &n any case, t e general statement o! t e 0conomist is !alse0 'o@ money-prices !or commodities and a lo@ interest rate do not necessarily go toget er0 3t er@ise, t e interest rate @o%ld be lo@est in t e poorest co%ntries, @ ere money-prices !or prod%ce are lo@est, and ig est in t e ric est co%ntries, @ ere money-prices !or agric%lt%ral prod%cts are ig est0 &n general, t e 0conomist admits: &! t e 8al%e o! money !alls, it exerts no in!l%ence on t e interest rate0 V1== bring V1=+ t e same as e8er0 &! t e V1== are @ort less, so are t e V+ interest0 5 is relation is not a!!ected by t e appreciation or depreciation o! t e original s%m0 ;onsidered !rom t e point o! 8ie@ o! 8al%e, a de!inite D%antity o! commodities is eD%al to a de!inite s%m o! money0 &! t is 8al%e increases, it is eD%al to a larger s%m o! money0 5 e opposite is tr%e @ en it !alls0 &! t e 8al%e is eD%al to <,===, t en +T R 1==# i! it is eD%al to 1,===, t en +T R +=0 A%t t is does not alter t e interest rate in any @ay0 5 e rational part o! t is matter is merely t at greater money accommodation is reD%ired @ en it takes V<,=== to sell t e same D%antity o! commodities t an @ en only V1,=== are reD%ired0 A%t t is merely s o@s t at pro!it and interest are ere in8ersely proportional to eac ot er0 For t e lo@er t e prices o! t e components o! constant and 8ariable capital, t e ig er t e pro!it and t e lo@er t e interest0 A%t t e opposite can also be and is o!ten t e case0 For instance, cotton may be c eap beca%se no demand exists !or yarn and !abrics# and cotton may be relati8ely expensi8e beca%se a large pro!it in t e cotton ind%stry creates a great demand !or it0 3n t e ot er and, t e pro!its o! ind%strialists may be ig precisely beca%se t e price o! cotton is lo@0 6%bbard"s table pro8es t at t e interest rate and t e prices o! commodities exec%te completely independent mo8ements, @ ereas t e mo8ements o! t e interest rate ad ere closely to t ose o! t e metal reser8e and t e rates o! exc ange0 5 e 0conomist states: KW ene8er, t ere!ore, commodities are ab%ndant, t e interest o! money m%st be lo@0L ,recisely t e opposite obtains d%ring crises0 ;ommodities are s%perab%ndant, incon8ertible into money, and t ere!ore t e interest rate is ig # in anot er p ase o! t e cycle t e demand !or

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commodities is great and t ere!ore D%ick ret%rns are made, b%t at t e same time, prices are rising and beca%se o! t e D%ick ret%rns t e interest rate is lo@0 KW en t ey /t e commodities1 are scarce, t e interest o! money m%st be ig 0L 5 e opposite is again tr%e in t e slack period !ollo@ing a crisis0 ;ommodities are scarce, absol%tely speaking, not @it re!erence to demand# and t e interest rate is lo@0 &n regard to t e statement, it is pretty e8ident t at an o@ner o! commodities, pro8ided e can sell t e latter at all, @ill get rid o! t em at a lo@er price @ en t e market is gl%tted t an e @o%ld @ en t ere is a prospect o! t e existing s%pply becoming rapidly ex a%sted0 A%t @ y t e interest rate s o%ld !all beca%se o! t at is not so clear0 &! t e market is gl%tted @it imported commodities, t e interest rate may rise as a res%lt o! an increased demand on t e part o! t e o@ners !or loan capital, in order to a8oid d%mping t eir commodities on t e market0 5 e interest rate may !all, beca%se t e !l%idity o! commercial credit may keep t e demand !or bank credit relati8ely lo@0 5 e 0conomist mentions t e rapid e!!ect on rates o! exc ange in 182> o! t e raising o! t e interest rate and ot er circ%mstances exerting press%re on t e money-market0 A%t it s o%ld be borne in mind t at t e gold drain contin%ed %ntil t e end o! ?pril in spite o! t e c ange in t e rates o! exc ange# a t%rn did not take place ere %ntil early May0 3n Pan%ary 1, 182>, t e metal reser8e o! t e Aank @as V1+,=66,6*1# t e interest rate 3ZT# t ree mont s" rates o! exc ange on ,aris <+0>+# on 6amb%rg 1301=# on ?msterdam 1<03[0 3n Marc +, t e metal reser8e ad !allen to V11,+*+,+3+# t e disco%nt ad risen to 2T# t e rate o! exc ange !ell to <+06>Z on ,aris# 130*[ on 6amb%rg# and 1<0<Z on ?msterdam0 5 e drain o! gold contin%ed0 $ee t e !ollo@ing table: 182> A%llion )eser8e o! Money-Market t e Aank o! England 6ig est 5 ree-Mont )ates ,aris Marc <= 11,<31,63= ?pril 3 ?pril 1= ?pril 1> ?pril <2 May 2 May 8 1=,<26,21= *,86>,=+3 *,3<*,821 *,<13,8*= *,33>,>26 *,+88,>+* Aank disc0 2T ,, ,, +T <+06>Z <+08= 6amb%rg ?msterdam 130*` 1301= 1301=Z 1302=` 1301< 1301<` 1301+Z 1<0<Z 1<03Z 1<02Z 1<0+Z 1<06 1<06Z 1<0>`

Money 8ery scarce <+0*= Aank disc0 +0+T ,ress%re <60=<Z <60=+

&ncreasing press%re <602+ 6ig est press%re <60<>Z

&n 182>, t e total export o! precio%s metal !rom England amo%nted to V8,6=<,+*>0 3! t is to t e (nited $tates V3,<<6,211

2<1

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France

V<,2>*,8*<

6anse to@ns V*+8,>81 6olland V<2>,>23 &n spite o! t e c ange in t e rates at t e end o! Marc , t e drain o! gold contin%ed !or anot er !%ll mont , probably to t e (nited $tates0 KWe t %s seeL /says t e 0conomist, ?%g%st <, 182>, p0 *+21 K o@ rapid and striking @as t e e!!ect o! a rise in t e rate o! interest, and t e press%re @ ic ens%ed in correcting an ad8erse exc ange, and in t%rning t e tide o! b%llion back to t is co%ntry0 5 is e!!ect @as prod%ced entirely independent o! t e balance o! trade0 ? ig er rate o! interest ca%sed a lo@er price o! sec%rities, bot !oreign and Englis , and ind%ced large p%rc ases to be made on !oreign acco%nt, @ ic increased t e amo%nt o! bills to be dra@n !rom t is co%ntry, @ ile, on t e ot er and, t e ig rate o! interest and t e di!!ic%lty o! obtaining money @as s%c t at t e demand o! t ose bills !ell o!!, @ ile t eir amo%nt increased0000 For t e same ca%se orders !or imports @ere co%ntermanded, and in8estments o! Englis !%nds abroad @ere realised ere0 5 %s, !or as and bro%g t ome !or employment o! t e 1=t

example, @e read in t e 9io de Janeiro &rice Current May, "Exc ange /on England1 experienced a !%rt er decline, principally ca%sed by a press%re on t e market !or remittance o! t e proceeds o! large sales o! /AraEilian1 go8ernment stock, on Englis acco%nt0 ;apital belonging to t is co%ntry, @ ic as been in8ested in p%blic and ot er sec%rities abroad, @ en t e interest @as 8ery lo@ ere, @as t %s again bro%g t back @ en t e interest became ig 0L

England's Balance Of Trade

&ndia alone as to pay + million in trib%te !or Kgood go8ernment,L interest and di8idends on Aritis capital, etc0, not co%nting t e s%ms sent ome ann%ally by o!!icials as sa8ings !rom t eir salaries, or by Englis merc ants as part o! t eir pro!it to be in8ested in England0 E8ery Aritis colony contin%ally as to make large remittances !or t e same reason0 Most o! t e banks in

2<<

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?%stralia, t e West &ndies, and ;anada, a8e been !o%nded @it Englis capital, and t e di8idends are payable in England0 &n t e same @ay, England o@ns many !oreign sec%rities I E%ropean, -ort ?merican and $o%t ?merican I on @ ic it dra@s interest0 &n addition to t is it as interests in !oreign rail@ays, canals, mines, etc0, @it corresponding di8idends0 )emittance on all t ese items is made almost excl%si8ely in prod%cts o8er and abo8e t e amo%nt o! Englis exports0 3n t e ot er and @ at is sent !rom England to o@ners o! Englis sec%rities abroad and !or cons%mption by Englis men abroad, is insigni!icant in comparison0 5 e D%estion, so !ar as it concerns t e balance o! trade and t e rates o! exc ange, is Kat any partic%lar moment one o! time0L K,ractically speaking 000 England gi8es long credits %pon er exports, @ ile t e imports are paid !or in ready money0 ?t partic%lar moments t is di!!erence o! practice as a considerable e!!ect %pon t e exc anges0 ?t a time @ en o%r exports are 8ery considerably increasing, e0g0, 18+=, a contin%al increase o! in8estment o! Aritis capital m%st be going on 000 in t is @ay remittances o! 18+= may be made against goods exported in 182*0 A%t i! t e exports o! 18+= exceed t ose o! 182* by more t an 6 million, t e practical e!!ect m%st e t at more money is sent abroad, to t is amo%nt, t an ret%rned in t e same year0 ?nd in t is @ay an e!!ect is prod%ced on t e rates o! exc ange and t e rate o! interest0 W en, on t e contrary, o%r trade is depressed a!ter a commercial crisis, and @ en o%r exports are m%c red%ced, t e remittances d%e !or t e past years o! larger exports greatly exceed t e 8al%e o! o%r imports# t e exc anges become correspondingly in o%r !a8o%r, capital rapidly acc%m%lates at ome, and t e rate o! interest becomes less0L BEconomist, Pan%ary 11, 18+1 /p0 3=10C 5 e !oreign rates o! exc ange can c ange: 1C &n conseD%ence o! t e immediate balance o! payments, no matter @ at t e ca%se I a p%rely mercantile one, or capital in8estment abroad, or go8ernment expendit%res !or @ars, etc0, in so !ar as cas payments t ereby are made to !oreign co%ntries0 <C &n conseD%ence o! money depreciation I @ et er metal or paper I in a partic%lar co%ntry0 5 is is p%rely nominal0 &! V1 s o%ld represent only al! as m%c money as !ormerly, it @o%ld nat%rally be co%nted as 1<0+ !rancs instead o! <+ !rancs0 3C W en it is a matter o! a rate o! exc ange bet@een co%ntries, o! @ ic one %ses sil8er and t e ot er gold as Kmoney,L t e rate o! exc ange depends %pon t e relati8e !l%ct%ations o! t e 8al%e o!

2<3

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t ese t@o metals, since t ese necessarily alter t e parity bet@een t em0 5 is is ill%strated by t e rates o! exc ange in 18+=# t ey @ere %n!a8o%rable to England, alt o%g t at co%ntry"s export rose enormo%sly0 .et no drain o! gold took place0 5 is @as a res%lt o! a momentary rise in t e 8al%e o! sil8er as against gold0 B$ee 0conomist, -o8ember 3=, 18+= /pp0 131*-13<=10C ,arity !or t e rate o! exc ange o! V1 is: ,aris, <+ !rancs <= cent0# 6amb%rg, 13 marks banko 1=0+ s illings# ?msterdam, 11 !lorins *> cent0 5o t e extent t at t e ,aris rate o! exc ange exceeds <+0<= !rancs, it becomes more !a8o%rable to t e Englis debtor o! France, or t e b%yer o! Frenc commodities0 &n bot cases e needs !e@er po%nds sterling in order to accomplis is p%rpose0 I &n remoter co%ntries, @ ere precio%s metal is not easily obtained @ en bills o! exc ange are scarce and ins%!!icient !or remittances to be made to England, t e nat%ral e!!ect is to dri8e %p t e prices o! s%c prod%cts as are generally s ipped to England since a greater demand arises !or t em, in order to send t em to England in place o! bills o! exc ange# t is is o!ten t e case in &ndia0 ?n %n!a8o%rable rate o! exc ange, or e8en a drain on gold, can take place @ en t ere is a great ab%ndance o! money in England, t e interest rate is lo@ and t e price !or sec%rities is ig 0 &n t e co%rse o! 1828 England recei8ed large D%antities o! sil8er !rom &ndia, since good bills o! exc ange @ere rare and mediocre ones @ere not readily accepted in conseD%ence o! t e crisis o! 182> and t e general lack o! credit in b%siness @it &ndia0 ?ll t is sil8er ad barely arri8ed be!ore it !o%nd its @ay to t e continent, @ ere t e re8ol%tion led to t e !ormation o! many oards0 5 e b%lk o! t e same sil8er made t e trip back to &ndia in 18+=, since t e rate o! exc ange no@ made t is pro!itable0 5 e monetary system is essentially a ;at olic instit%tion, t e credit system essentially ,rotestant0 K5 e $cotc ate gold0L &n t e !orm o! paper t e monetary existence o! commodities is only a social one0 &t is 'aith t at brings sal8ation0 Fait in money-8al%e as t e immanent spirit o! commodities, !ait in t e mode o! prod%ction and its predestined order, !ait in t e indi8id%al agents o! prod%ction as mere personi!ications o! sel!-expanding capital0 A%t t e credit system does not emancipate itsel! !rom t e basis o! t e monetary system any more t an ,rotestantism as emancipated itsel! !rom t e !o%ndations o! ;at olicism0

Chapter 3". Pre-Capitalist Relationships

&nterest-bearing capital, or, as @e may call it in its antiD%ated !orm, %s%rer"s capital, belongs toget er @it its t@in brot er, merc ant"s capital, to t e antedil%8ian !orms o! capital, @ ic long precede t e capitalist mode o! prod%ction and are to be !o%nd in t e most di8erse economic !ormations o! society0 5 e existence o! %s%rer"s capital merely reD%ires t at at least a portion o! prod%cts s o%ld be trans!ormed into commodities, and t at money s o%ld a8e de8eloped in its 8ario%s !%nctions along @it trade in commodities0 5 e de8elopment o! %s%rer"s capital is bo%nd %p @it t e de8elopment o! merc ant"s capital and especially t at o! money-dealing capital0 &n ancient )ome, beginning @it t e last years o! t e )ep%blic, @ en man%!act%ring stood !ar belo@ its a8erage le8el o! de8elopment in t e ancient @orld, merc ant"s capital, money-dealing capital, and %s%rer"s capital de8eloped to t eir ig est point @it in t e ancient !orm0 We a8e seen BEnglis edition: 4ol0 &, pp0 13=-320 I 0d.C t at oarding necessarily appears along @it money0 A%t t e pro!essional oarder does not become important %ntil e is trans!ormed into a %s%rer0 5 e merc ant borro@s money in order to make a pro!it @it it, in order to %se it as capital, t at is, to expend it0 6ence in earlier !orms o! society t e money-lender stands in t e same relation to im as to t e modern capitalist0 5 is speci!ic relation @as also experienced by t e ;at olic %ni8ersities0 K5 e %ni8ersities o! ?lcali, $alamanca, &ngolstadt, Freib%rg in Areisga%, Mayence, ;ologne, 5rj8es, one a!ter anot er recogniEed t e legality o! interest !or commercial loans0 5 e !irst !i8e o! t ese approbations @ere deposited in t e arc i8es o! t e ;ons%late o! t e city o! 'yons and p%blis ed in t e appendix to t e 4rait2 de l5usure et des int7rWts , by Ar%yset-,ont %s, 'yons0L BM0 ?%gier, ,e Cr2dit public, etc., ,aris, 182<, p0 <=60C &n all t e !orms in @ ic sla8e economy Bnot t e patriarc al kind, b%t t at o! later :recian and )oman timesC ser8es as a means o! amassing @ealt , @ ere money t ere!ore is a means o! appropriating t e labo%r o! ot ers t ro%g t e p%rc ase o! sla8es, land, etc0, money can be expanded as capital, i0e0, bear interest, !or t e 8ery reason t at it can be so in8ested0 5 e c aracteristic !orms, o@e8er, in @ ic %s%rer"s capital exists in periods antedating capitalist prod%ction are o! t@o kinds0 & p%rposely say c aracteristic !orms0 5 e same !orms repeat t emsel8es on t e basis o! capitalist prod%ction, b%t as mere s%bordinate !orms0 5 ey are t en no longer t e !orms @ ic determine t e c aracter o! interest-bearing capital0 5 ese t@o !orms are: !irst, %s%ry by lending money to extra8agant members o! t e %pper classes, partic%larly lando@ners# secondly, %s%ry by lending money to small prod%cers @ o possess t eir o@n conditions o! labo%r I t is incl%des t e artisan, b%t mainly t e peasant, since partic%larly %nder pre-capitalist conditions, in so !ar as t ey permit o! small independent indi8id%al prod%cers, t e peasant class necessarily constit%tes t e o8er@ elming maHority o! t em0

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Aot t e r%in o! ric lando@ners t ro%g %s%ry and t e impo8eris ment o! t e small prod%cers lead to t e !ormation and concentration o! large amo%nts o! money-capital0 A%t to @ at extent t is process does a@ay @it t e old mode o! prod%ction, as appened in modern E%rope, and @ et er it p%ts t e capitalist mode o! prod%ction in its stead, depends entirely %pon t e stage o! istorical de8elopment and t e attendant circ%mstances0 (s%rer"s capital as t e c aracteristic !orm o! interest-bearing capital corresponds to t e predominance o! small-scale prod%ction o! t e sel!-employed peasant and small master cra!tsman0 W en t e labo%rer is con!ronted by t e conditions o! labo%r and by t e prod%ct o! labo%r in t e s ape o! capital, as %nder t e de8eloped capitalist mode o! prod%ction, e as no occasion to borro@ any money as a prod%cer0 W en e does any money borro@ing, e does so, !or instance, at t e pa@ns op to sec%re personal necessities0 A%t @ ere8er t e labo%rer is t e o@ner, @ et er act%al or nominal, o! is conditions o! labo%r and is prod%ct, e stands as a prod%cer in relation to t e money-lender"s capital, @ ic con!ronts im as %s%rer"s capital0 -e@man expresses t e matter insipidly @ en e says t e banker is respected, @ ile t e %s%rer is ated and despised, beca%se t e banker lends to t e ric , @ ereas t e %s%rer lends to t e poor0 BF0 W0 -e@man, ,ectures on &olitical 0conomy, 'ondon, 18+1, p0 220C 6e o8erlooks t e !act t at a di!!erence bet@een t@o modes o! social prod%ction and t eir corresponding social orders lies at t e eart o! t e matter and t at t e sit%ation cannot be explained by t e distinction bet@een ric and poor0 Moreo8er, t e %s%ry @ ic s%cks dry t e small prod%cer goes and in and @it t e %s%ry @ ic s%cks dry t e ric o@ner o! a large estate0 ?s soon as t e %s%ry o! t e )oman patricians ad completely r%ined t e )oman plebeians, t e small peasants, t is !orm o! exploitation came to an end and a p%re sla8e economy replaced t e small-peasant economy0 &n t e !orm o! interest, t e entire s%rpl%s abo8e t e barest means o! s%bsistence Bt e amo%nt t at later becomes @ages o! t e prod%cersC can be cons%med by %s%ry Bt is later ass%mes t e !orm o! pro!it and gro%nd-rentC, and ence it is ig ly abs%rd to compare t e le8el o! t is interest, @ ic assimilates all t e s%rpl%s-8al%e excepting t e s are claimed by t e state, @it t e le8el o! t e modern interest rate, @ ere interest constit%tes at least normally only a part o! t e s%rpl%s-8al%e0 $%c a comparison o8erlooks t at t e @age-@orker prod%ces and gi8es to t e capitalist @ o employs im, pro!it, interest and gro%nd-rent, i0e0, t e entire s%rpl%s-8al%e0 ;arey makes t is abs%rd comparison in order to s o@ o@ ad8antageo%s t e de8elopment o! capital, and t e !all in t e interest rate t at accompanies it, are !or t e labo%rer0 F%rt ermore, @ ile t e %s%rer, not content @it sD%eeEing t e s%rpl%s-labo%r o%t o! is 8ictim, grad%ally acD%ires possession e8en o! is 8ery conditions o! labo%r, land, o%se, etc0, and is contin%ally engaged in t %s expropriating im, it is again !orgotten t at, on t e ot er and, t is complete expropriation o! t e labo%rer !rom is conditions o! labo%r is not a res%lt @ ic t e capitalist mode o! prod%ction seeks to ac ie8e, b%t rat er t e establis ed condition !or its point o! depart%re0 5 e @age-sla8e, H%st like t e real sla8e, cannot become a creditor"s sla8e d%e to is position I at least in is capacity as prod%cer# t e @age-sla8e, it is tr%e, can become a creditor"s sla8e in is capacity as cons%mer0 (s%rer"s capital in t e !orm @ ereby it indeed appropriates all o! t e s%rpl%s-labo%r o! t e direct prod%cers, @it o%t altering t e mode o! prod%ction# @ ereby t e o@ners ip or possession by t e prod%cers o! t e conditions o! labo%r and small-scale prod%ction corresponding to t is I is its essential prereD%isite# @ ereby, in ot er @ords, capital does not directly s%bordinate labo%r to itsel!, and does not, t ere!ore, con!ront it as ind%strial capital I t is %s%rer"s capital impo8eris es t e mode o! prod%ction, paralyses t e prod%cti8e !orces instead o! de8eloping t em, and at t e same time perpet%ates t e miserable conditions in @ ic t e social prod%cti8ity o! labo%r is not de8eloped at t e expense o! labo%r itsel!, as in t e capitalist mode o! prod%ction0 (s%ry t %s exerts, on t e one and, an %ndermining and destr%cti8e in!l%ence on ancient and !e%dal @ealt and ancient and !e%dal property0 3n t e ot er and, it %ndermines and r%ins smallpeasant and small-b%rg er prod%ction, in s ort, all !orms in @ ic t e prod%cer still appears as t e o@ner o! is means o! prod%ction0 (nder t e de8eloped capitalist mode o! prod%ction, t e

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labo%rer is not t e o@ner o! t e means o! prod%ction, i0e0, t e !ield @ ic e c%lti8ates, t e ra@ materials @ ic e processes, etc0 A%t %nder t is system separation o! t e prod%cer !rom t e means o! prod%ction re!lects an act%al re8ol%tion in t e mode o! prod%ction itsel!0 5 e isolated labo%rers are bro%g t toget er in large @orks ops !or t e p%rpose o! carrying o%t separate b%t interconnected acti8ities# t e tool becomes a mac ine0 5 e mode o! prod%ction itsel! no longer permits t e dispersion o! t e instr%ments o! prod%ction associated @it small property# nor does it permit t e isolation o! t e labo%rer imsel!0 (nder t e capitalist mode o! prod%ction %s%ry can no longer separate t e prod%cer !rom is means o! prod%ction, !or t ey a8e already been separated0 (s%ry centraliEes money @ealt @ ere t e means o! prod%ction are dispersed0 &t does not alter t e mode o! prod%ction, b%t attac es itsel! !irmly to it like a parasite and makes it @retc ed0 &t s%cks o%t its blood, ener8ates it and compels reprod%ction to proceed %nder e8er more pitiable conditions0 6ence t e pop%lar atred against %s%rers, @ ic @as most prono%nced in t e ancient @orld @ ere o@ners ip o! means o! prod%ction by t e prod%cer imsel! @as at t e same time t e basis !or political stat%s, t e independence o! t e citiEen0 5o t e extent t at sla8ery pre8ails, or in so !ar as t e s%rpl%s prod%ct is cons%med by t e !e%dal lord and is retin%e, @ ile eit er t e sla8e-o@ner or t e !e%dal lord !all into t e cl%tc es o! t e %s%rer, t e mode o! prod%ction still remains t e same# it only becomes arder on t e labo%rer0 5 e indebted sla8e older or !e%dal lord becomes more oppressi8e beca%se e is imsel! more oppressed0 3r e !inally makes @ay !or t e %s%rer, @ o becomes a landed proprietor or a sla8eolder imsel!, like t e knig ts in ancient )ome0 5 e place o! t e old exploiter, @ ose exploitation @as more or less patriarc al beca%se it @as largely a means o! political po@er, is taken by a ard, money mad par8en%0 A%t t e mode o! prod%ction itsel! is not altered t ereby0 (s%ry as a re8ol%tionary e!!ect in all pre-capitalist modes o! prod%ction only in so !ar as it destroys and dissol8es t ose !orms o! property on @ ose solid !o%ndation and contin%al reprod%ction in t e same !orm t e political organiEation is based0 (nder ?sian !orms, %s%ry can contin%e a long time, @it o%t prod%cing anyt ing more t an economic decay and political corr%ption0 3nly @ ere and @ en t e ot er prereD%isites o! capitalist prod%ction are present does %s%ry become one o! t e means assisting in establis ment o! t e ne@ mode o! prod%ction by r%ining t e !e%dal lord and small-scale prod%cer, on t e one and, and centraliEing t e conditions o! labo%r into capital, on t e ot er0 &n t e Middle ?ges no co%ntry ad a general rate o! interest0 5 e ; %rc !orbade, !rom t e o%tset, all lending at interest0 'a@s and co%rts o!!ered little protection !or loans0 &nterest @as so m%c t e ig er in indi8id%al cases0 5 e limited circ%lation o! money, t e need to make most payments in cas , compelled people to borro@ money, and all t e more so @ en t e exc ange b%siness as still %nde8eloped0 5 ere!ore large di8ergences bot in interest rates and t e conceptions o! %s%ry0 &n t e time o! ; arlemagne it @as considered %s%rio%s to c arge 1==T0 &n 'inda% on 'ake ;onstance, some local b%rg ers took <16 WT in 13280 &n 9%ric , t e ;ity ;o%ncil decreed t at 23X T s o%ld be t e legal interest rate0 &n &taly 2=T ad to

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be paid sometimes, alt o%g t e %s%al rate !rom t e 1<t to t e 12t cent%ry did not exceed <=T0 4erona ordered t at 1<ZT be t e legal rate0 Emperor Friedric && !ixed t e rate at 1=T, b%t only !or Pe@s0 6e did not deign to speak !or ; ristians0 &n t e :erman ) ine pro8inces, 1=T @as t e r%le as early as t e 13t cent%ry0 B6%llmann, Geschichte des StXdtewesens, &&, $0 ++-+>0C (s%rer"s capital employs t e met od o! exploitation c aracteristic o! capital yet @it o%t t e latter"s mode o! prod%ction0 5 is condition also repeats itsel! @it in bo%rgeois economy, in back@ard branc es o! ind%stry or in t ose branc es @ ic resist t e transition to t e modern mode o! prod%ction0 For instance, i! @e @is to compare t e Englis interest rate @it t e &ndian, @e s o%ld not take t e interest rate o! t e Aank o! England, b%t rat er, e0g0, t at c arged by lenders o! small mac inery to small prod%cers in domestic ind%stry0 (s%ry, in contradistinction to cons%ming @ealt , is istorically important, inasm%c as it is in itsel! a process generating capital0 (s%rer"s capital and merc ant"s @ealt promote t e !ormation o! moneyed @ealt independent o! landed property0 5 e less prod%cts ass%me t e c aracter o! commodities, and t e less intensi8ely and extensi8ely exc ange-8al%e as taken old o! prod%ction, t e more does money appear as act%al @ealt as s%c , as @ealt in general I in contrast to its limited representation in %se-8al%es0 5 is is t e basis o! oarding0 ?side !rom money as @orld-money and as oard, it is, in partic%lar, t e !orm o! means o! payment @ ereby it appears as t e absol%te !orm o! commodities0 ?nd it is especially its !%nction as a means o! payment @ ic de8elops interest and t ereby money-capital0 W at sD%andering and corr%pting @ealt desires is money as s%c , money as a means o! b%ying e8eryt ing Balso as a means o! paying debtsC0 5 e small prod%cer needs money abo8e all !or making payments0 B5 e trans!ormation o! ser8ices and taxes in kind to landlords and t e state into money-rent and money-taxes plays a great role ere0C &n eit er case, money is needed as s%c 0 3n t e ot er and, it is in %s%ry t at oarding !irst becomes reality and t at t e oarder !%l!ills is dream0 W at is so%g t !rom t e o@ner o! a oard is not capital, b%t money as s%c # b%t by means o! interest e trans!orms t is oard o! money into capital, t at is, into a means o! appropriating s%rpl%s labo%r in part or in its entirety, and similarly sec%ring a old on a part o! t e means o! prod%ction t emsel8es, e8en t o%g t ey may nominally remain t e property o! ot ers0 (s%ry li8es in t e pores o! prod%ction, as it @ere, H%st as t e gods o! Epic%r%s li8ed in t e space bet@een @orlds0 Money is so m%c arder to obtain, t e less t e commodity-!orm constit%tes t e general !orm o! prod%cts0 6ence t e %s%rer kno@s no ot er barrier b%t t e capacity o! t ose @ o need money to pay or to resist0 &n small-peasant and small-b%rg er prod%ction money ser8es as a means o! p%rc ase, mainly, @ ene8er t e means o! prod%ction o! t e labo%rer B@ o is still predominantly t eir o@ner %nder t ese modes o! prod%ctionC are lost to im eit er by accident or t ro%g extraordinary %p ea8als, or at least are not replaced in t e normal co%rse o! reprod%ction0 Means o! s%bsistence and ra@ materials constit%te an essential part o! t ese reD%irements o! prod%ction0 &! t ese become more expensi8e, it may make it impossible to replace t em o%t o! t e ret%rns !or t e prod%ct, H%st as ordinary crop !ail%res may pre8ent t e peasant !rom replacing is seed in kind0 5 e same @ars t ro%g @ ic t e )oman patricians r%ined t e plebe Hails by compelling t em to ser8e as soldiers and @ ic pre8ented t em !rom reprod%cing t eir conditions o! labo%r, and t ere!ore made pa%pers o! t em Band pa%periEation, t e crippling or loss o! t e prereD%isites o! reprod%ction is ere t e predominant !ormC t ese same @ars !illed t e store-rooms and co!!ers o! t e patricians @it looted copper, t e money o! t at time0 &nstead o! directly gi8ing plebeians

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t e necessary commodities, i0e0, grain, orses, and cattle, t ey loaned t em t is copper !or @ ic t ey ad no %se t emsel8es, and took ad8antage o! t is sit%ation to exact enormo%s %s%rio%s interest, t ereby t%rning t e plebeians into t eir debtor sla8es0 7%ring t e reign o! ; arlemagne, t e Frankis peasants @ere like@ise r%ined by @ars, so t at t ey !aced no c oice b%t to become ser!s instead o! debtors0 &n t e )oman Empire, as is kno@n, extreme %nger !reD%ently res%lted in t e sale o! c ildren and also in !ree men selling t emsel8es as sla8es to t e ric 0 $o m%c !or general t%rning-points0 &n indi8id%al cases t e maintenance or loss o! t e means o! prod%ction on t e part o! small prod%cers depends on a t o%sand contingencies, and e8ery one o! t ese contingencies or losses signi!ies impo8eris ment and becomes a cre8ice into @ ic a parasitic %s%rer may creep0 5 e mere deat o! is co@ may render t e small peasant incapable o! rene@ing is reprod%ction on its !ormer scale0 6e t en !alls into t e cl%tc es o! t e %s%rer, and once in t e %s%rer"s po@er e can ne8er extricate imsel!0 5 e really important and c aracteristic domain o! t e %s%rer, o@e8er, is t e !%nction o! money as a means o! payment0 E8ery payment o! money, gro%nd-rent, trib%te, tax, etc0, @ ic becomes d%e on a certain date, carries @it it t e need to sec%re money !or s%c a p%rpose0 6ence !rom t e days o! ancient )ome to t ose o! modern times, @ olesale %s%ry relies %pon tax-collectors, fermiers g2n2rau , receveurs g2n2rau 0 5 en, t ere de8elops @it commerce and t e generaliEation o! commodity- prod%ction t e separation, in time, o! p%rc ase and payment0 5 e money as to be paid on a de!inite date0 6o@ t is can lead to circ%mstances in @ ic t e moneycapitalist and %s%rer, e8en no@adays, merge into one is s o@n by modern money crises0 5 is same %s%ry, o@e8er, becomes one o! t e principal means o! !%rt er de8eloping t e necessity !or money as a means o! payment I by dri8ing t e prod%cer e8er more deeply into debt and destroying is %s%al means o! payment, since t e b%rden o! interest alone makes is normal reprod%ction impossible0 ?t t is point, %s%ry spro%ts %p o%t o! money as a means o! payment and extends t is !%nction o! money as its 8ery o@n domain0 5 e credit system de8elops as a reaction against %s%ry0 A%t t is s o%ld not be mis%nderstood, nor by any means interpreted in t e manner o! t e ancient @riters, t e c %rc !at ers, '%t er or t e early socialists0 &t signi!ies no more and no less t an t e s%bordination o! interest-bearing capital to t e conditions and reD%irements o! t e capitalist mode o! prod%ction0 3n t e @ ole, interest-bearing capital %nder t e modern credit system is adapted to t e conditions o! t e capitalist mode o! prod%ction0 (s%ry as s%c does not only contin%e to exist, b%t is e8en !reed, among nations @it a de8eloped capitalist prod%ction, !rom t e !etters imposed %pon it by all pre8io%s legislation0 &nterest-bearing capital retains t e !orm o! %s%rer"s capital in relation to persons or classes, or in circ%mstances @ ere borro@ing does not, nor can, take place in t e sense corresponding to t e capitalist mode o! prod%ction# @ ere borro@ing takes place as a res%lt o! indi8id%al need, as at t e pa@ns op# @ ere money is borro@ed by @ealt y spendt ri!ts !or t e p%rpose o! sD%andering# or @ ere t e prod%cer is a non-capitalist prod%cer, s%c as a small !armer or cra!tsman, @ o is t %s still, as t e immediate prod%cer, t e o@ner o! is o@n means o! prod%ction# !inally @ ere t e capitalist prod%cer imsel! operates on s%c a small scale t at e resembles t ose sel!-employed prod%cers0 W at disting%is es interest-bearing capital I in so !ar as it is an essential element o! t e capitalist mode o! prod%ction I !rom %s%rer"s capital is by no means t e nat%re or c aracter o! t is capital itsel!0 &t is merely t e altered conditions %nder @ ic it operates, and conseD%ently also t e totally trans!ormed c aracter o! t e borro@er @ o con!ronts t e money-lender0 E8en @ en a man @it o%t !ort%ne recei8es credit in is capacity o! ind%strialist or merc ant, it occ%rs @it t e expectation t at e @ill !%nction as capitalist and appropriate %npaid labo%r @it t e borro@ed capital0 6e recei8es credit in is capacity o! potential capitalist0 5 e circ%mstance t at a man @it o%t !ort%ne b%t possessing energy, solidity, ability and b%siness ac%men may become a capitalist in t is manner I and t e commercial 8al%e o! eac indi8id%al is pretty acc%rately estimated %nder t e capitalist mode o! prod%ction I is greatly admired by apologists o! t e

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capitalist system0 ?lt o%g t is circ%mstance contin%ally brings an %n@elcome n%mber o! ne@ soldiers o! !ort%ne into t e !ield and into competition @it t e already existing indi8id%al capitalists, it also rein!orces t e s%premacy o! capital itsel!, expands its base and enables it to recr%it e8er ne@ !orces !or itsel! o%t o! t e s%bstrat%m o! society0 &n a similar @ay, t e circ%mstance t at t e ;at olic ; %rc in t e Middle ?ges !ormed its ierarc y o%t o! t e best brains in t e land, regardless o! t eir estate, birt or !ort%ne, @as one o! t e principal means o! consolidating ecclesiastical r%le and s%ppressing t e laity0 5 e more a r%ling class is able to assimilate t e !oremost minds o! a r%led class, t e more stable and dangero%s becomes its r%le0 5 e initiators o! t e modern credit system take as t eir point o! depart%re not an anat ema against interest-bearing capital in general, b%t on t e contrary, its explicit recognition0 We are not re!erring ere to s%c reactions against %s%ry @ ic attempted to protect t e poor against it, like t e Monts1de1pi2t2 B13+= in $arlins in Franc e-;omtF, later in ,er%gia and $a8ona in &taly, 12== and 12>*C0 5 ese are note@ort y mainly beca%se t ey re8eal t e irony o! istory, @ ic t%rns pio%s @is es into t eir 8ery opposite d%ring t e process o! realiEation0 ?ccording to a moderate estimate, t e Englis @orking-class pays 1==T to t e pa@ns ops, t e modern s%ccessors o! Monts1de1pi2t2 xxx We are also not re!erring to t e credit !antasies o! s%c men as 7r0 6%g ; amberleyne or Po n Ariscoe, @ o attempted d%ring t e last decade o! t e 1>t cent%ry to emancipate t e Englis aristocracy !rom %s%ry by means o! a !armers" bank %sing paper money based on real estate0 xxxi 5 e credit associations establis ed in t e 1<t and 12t cent%ries in 4enice and :enoa arose !rom t e need !or marine commerce and t e @ olesale trade associated @it it to emancipate t emsel8es !rom t e domination o! o%tmoded %s%ry and t e monopoliEation o! t e money b%siness0 W ile t e act%al banks !o%nded in t ose city-rep%blics ass%med sim%ltaneo%sly t e s ape o! p%blic credit instit%tions !rom @ ic t e state recei8ed loans on !%t%re tax re8en%es, it s o%ld not be !orgotten t at t e merc ants !o%nding t ose associations @ere t emsel8es prominent citiEens o! t ose states and as m%c interested in emancipating t eir go8ernment as t ey @ere in emancipating t emsel8es !rom t e exactions o! %s%rers, xxxii and at t e same time in getting tig ter and more sec%re control o8er t e state0 6ence, @ en t e Aank o! England @as to be establis ed, t e 5ories also protested: KAanks are rep%blican instit%tions0 Flo%ris ing banks existed in 4enice, :enoa, ?msterdam, and 6amb%rg0 A%t @ o e8er eard o! a Aank o! France or $painQL 5 e Aank o! ?msterdam, in 16=*, @as not epoc -making in t e de8elopment o! t e modern credit system any more t an t at o! 6amb%rg in 161*0 &t @as p%rely a bank !or deposits0 5 e c ecks iss%ed by t e bank @ere indeed merely receipts !or t e deposited coined and %ncoined precio%s metal, and circ%lated only @it t e endorsement o! t e acceptors0 A%t in 6olland commercial credit and dealing in money de8eloped and in and @it commerce and man%!act%re, and interest-bearing capital @as s%bordinated to ind%strial and commercial capital by t e co%rse o! de8elopment itsel!0 5 is co%ld already be seen in t e lo@ interest rate0 6olland, o@e8er, @as considered in t e 1>t cent%ry t e model o! economic de8elopment, as England is no@0 5 e monopoly o! old-style %s%ry, based on po8erty, collapsed in t at co%ntry o! its o@n @eig t0 7%ring t e entire 18t cent%ry t ere is t e cry, @it 6olland re!erred to as an example, !or a comp%lsory red%ction o! t e rate o! interest Band legislation acts accordinglyC, in order to s%bordinate interest-bearing capital to commercial and ind%strial capital, instead o! t e re8erse0 5 e main spokesman !or t is mo8ement is $ir Posia ; ild, t e !at er o! ordinary Englis pri8ate banking0 6e declaims against t e monopoly o! %s%rers in m%c t e same @ay as t e @ olesale clot ing man%!act%rers, Moses g $on, do @ en leading t e lig t against t e monopoly o!

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Kpri8ate tailors0L 5 is same Posia ; ild is sim%ltaneo%sly t e !at er o! Englis stock-Hobbing0 5 %s, t is a%tocrat o! t e East &ndia ;ompany de!ends its monopoly in t e name o! !ree trade0 4ers%s 5 omas Manley)Dnterest of Money Mista-en I 5 omas Manley @as not t e a%t or o! t is book0 &t @as p%blis ed anonymo%sly in 'ondon in 16680 I 0d.C e says: K?s t e c ampion o! t e timid and trembling band o! %s%rers e erects is main batteries at t at point @ ic & a8e declared to be t e @eakest e denies pointblank t at t e lo@ rate o! interest is t e ca%se o! @ealt and 8o@s t at it is merely its e!!ect0L B 4rait2s sur le Commerce, etc., 166*, trad0 ?msterdam et Aerlin, 1>+20C K&! it is commerce t at enric es a co%ntry, and i! a lo@ering o! interest increases commerce, t en a lo@ering o! interest or a restriction o! %s%ry is do%btless a !r%it!%l primary ca%se o! t e @ealt o! a nation0 &t is not at all abs%rd to say t at t e same t ing may be sim%ltaneo%sly a ca%se %nder certain circ%mstances, and an e!!ect %nder ot ersL Bl0 c0, p0 1++C0 K5 e egg is t e ca%se o! t e en, and t e en is t e ca%se o! t e egg0 5 e lo@ering o! interest may ca%se an increase o! @ealt , and t e increase o! @ealt may ca%se a still greater red%ction o! interestL Bl0 c0, p0 1+6C0 K& am t e de!ender o! ind%stry and my opponent de!ends laEiness and slot L Bp0 1>*C0 5 is 8iolent battle against %s%ry, t is demand !or t e s%bordination o! interest-bearing capital to ind%strial capital, is b%t t e erald o! t e organic creations t at establis t ese prereD%isites o! capitalist prod%ction in t e modern banking system, @ ic on t e one and robs %s%rer"s capital o! its monopoly by concentrating all idle money reser8es and t ro@ing t em on t e money market, and on t e ot er and limits t e monopoly o! t e precio%s metal itsel! by creating creditmoney0 5 e same opposition to %s%ry, t e demand !or t e emancipation o! commerce, ind%stry and t e state !rom %s%ry, @ ic are obser8ed ere in t e case o! ; ild, @ill be !o%nd in all @ritings on banking in England d%ring t e last t ird o! t e 1>t and t e early 18t cent%ries0 We also !ind colossal ill%sions abo%t t e mirac%lo%s e!!ects o! credit, abolition o! t e monopoly o! precio%s metal, its displacement by paper, etc0 5 e $cotsman William ,aterson, !o%nder o! t e Aank o! England and t e Aank o! $cotland, is by all odds 'a@ t e First0 ?gainst t e Aank o! England Kall goldsmit s and pa@nbrokers set %p a o@l o! rage0L BMaca%lay, (istory of 0ngland, &4, p02**0C

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K7%ring t e !irst ten years t e Aank ad to str%ggle @it great di!!ic%lties# great !oreign !e%ds# its notes @ere only accepted !ar belo@ t eir nominal 8al%e 000 t e goldsmit sL Bin @ ose ands t e trade in precio%s metals ser8ed as a basis o! a primiti8e banking b%sinessC K@ere Healo%s o! t e Aank, beca%se t eir b%siness @as diminis ed, t eir disco%nts @ere lo@ered, t eir transactions @it t e go8ernment ad passed to t eir opponents0L B30 Francis, l0 c0, p0 >30C E8en be!ore t e establis ment o! t e Aank o! England a plan @as proposed in 1683 !or a -ational Aank o! ;redit, @ ic ad !or its p%rpose, among ot ers, Kt at tradesmen, @ en t ey a8e a considerable elp o! t is bank, D%antity o! goods, may, by t e

deposit t eir goods, by raising a credit on t eir o@n dead stock, employ t eir ser8ants, and increase t eir trade, till t ey get a good market instead o! selling t em at a lossL /P0 Francis, l0 c0, pp0 3*-2=10 ?!ter many endea8ors t is Aank o! ;redit @as establis ed in 7e8ons ire 6o%se on Ais opsgate $treet0 &t made loans to ind%strialists and merc ants on t e sec%rity o! deposited goods to t e amo%nt o! t ree-D%arters o! t eir 8al%e, in t e !orm o! bills o! exc ange0 &n order to make t ese bills o! exc ange capable o! circ%lating, a n%mber o! people in eac branc o! b%siness @ere organiEed into a society, !rom @ ic e8ery possessor o! s%c bills @o%ld be able to obtain goods @it t e same !acility as i! e @ere to o!!er t em cas payment0 5 is bank"s b%siness did not !lo%ris 0 &ts mac inery @as too complicated, and t e risk too great in case o! a commodity depreciation0 &! @e go by t e act%al content o! t ose records @ ic accompany and t eoretically promote t e !ormation o! t e modern credit system in England, @e s all not !ind anyt ing in t em b%t I as one o! its conditions I t e demand !or a s%bordination o! interest-bearing capital and o! loanable means o! prod%ction in general to t e capitalist mode o! prod%ction0 3n t e ot er and, i! @e simply cling to t e p raseology, @e s all be !reD%ently s%rprised by t e agreement I incl%ding t e mode o! expression @it t e ill%sions o! t e !ollo@ers o! $aint-$imon abo%t banking and credit0 P%st as in t e @ritings o! t e p ysiocrats t e cultivateur does not stand !or t e act%al tiller o! t e soil, b%t !or t e big !armer, so t e travailleur @it $aint-$imon, and contin%ing on t ro%g is disciples, does not stand !or t e labo%rer, b%t !or t e ind%strial and commercial capitalist0 KNn travailleur a besoin d5aides, de seconds, d5ouvriersP il les cherche intelligents, habiles, d2vou2sI il les met a l5oeuvre, et leurs travau sont productifs.L B /En!antin1 ? travailleur B@orkerC needs elpers, s%pporters, labo%rers# e looks !or s%c as are

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intelligent, able, de8oted# e p%ts t em to @ork, and t eir labo%r is prod%cti8e0L B9eligion saint1 simonienne, 0conomie politi3ue et &oliti3ue, ,aris, 1831, p0 1=20C0 &n !act, one s o%ld bear in mind t at only in is last @ork, ,e $ouveau Christianisme, $aint$imon speaks directly !or t e @orking-class and declares t eir emancipation to be t e goal o! is e!!orts0 ?ll is !ormer @ritings are, indeed, mere encomi%ms o! modern bo%rgeois society in contrast to t e !e%dal order, or o! ind%strialists and bankers in contrast to mars als and H%ristic la@-man%!act%rers o! t e -apoleonic era0 W at a di!!erence compared @it t e contemporaneo%s @ritings o! 3@enS xxxiii For t e !ollo@ers o! $aint-$imon, t e ind%strial capitalist like@ise remains t e travailleur par e cellence, as t e abo8e-D%oted passage indicates0 ?!ter reading t eir @ritings critically, one @ill not be s%rprised t at t eir credit and bank !antasies materialiEed in t e credit mobilier, !o%nded by an ex-!ollo@er o! $aint-$imon, Emile ,Freire0 5 is !orm, incidentally, co%ld become dominant only in a co%ntry like France, @ ere neit er t e credit system nor large-scale ind%stry ad reac ed t e modern le8el o! de8elopment0 5 is @as not at all possible in England and ?merica0 5 e embryo o! Cr7dit mobili#er is already contained in t e !ollo@ing passages !rom Doctrine de Saint1Simon. 0 position. &remiere ann2e, ;<F<1FA, 3me ed0, ,aris, 18310 &t is %nderstandable t at bankers can lend money more c eaply t an t e capitalists and pri8ate %s%rers0 5 ese bankers are, t ere!ore, Kable to s%pply tools to t e ind%strialists !ar more c eaply, t at is, at lo@er interest, t an t e real estate o@ners and capitalists, @ o may be more easily mistaken in t eir c oice o! borro@ersL Bp0 <=<C0 A%t t e a%t ors t emsel8es add in a !ootnote: K5 e ad8antage t at @o%ld accr%e !rom t e mediation o! bankers bet@een t e idle ric and t e travailleurs is o!ten co%nterbalanced, or e8en canceled, by t e opport%nities o!!ered in o%r disorganiEed society to egoism, @ ic may mani!est itsel! in 8ario%s !orms o! !ra%d and c arlatanism0 5 e bankers o!ten @orm t eir @ay bet@een t e tra8aille%rs and idle ric p%rpose o! exploiting bot !or t e to t e detriment o!

society0L 4ravailleur ere means capitaliste industriel0 &ncidentally, it is @rong to regard t e means at t e command o! t e modern banking system merely as t e means o! idle people0 &n t e !irst place, it is t e portion o! capital @ ic ind%strialists and merc ants temporarily old in t e !orm o! idle money, as a money reser8e or as capital to be in8ested0 6ence it is idle capital, b%t not capital o! t e idle0 &n t e second place, it is t e portion o! all re8en%e and sa8ings in general @ ic is to be temporarily or permanently acc%m%lated0 Aot are essential to t e nat%re o! t e banking system0 A%t it s o%ld al@ays be borne in mind t at, in t e !irst place, money I in t e !orm o! precio%s metal I remains t e !o%ndation !rom @ ic t e credit system, by its 8ery nat%re, can never detac itsel!0 $econdly, t at t e credit system pres%pposes t e monopoly o! social means o! prod%ction

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by pri8ate persons Bin t e !orm o! capital and landed propertyC, t at it is itsel!, on t e one and, an immanent !orm o! t e capitalist mode o! prod%ction, and on t e ot er, a dri8ing !orce in its de8elopment to its ig est and %ltimate !orm0 5 e banking system, so !ar as its !ormal organiEation and centraliEation is concerned, is t e most arti!icial and most de8eloped prod%ct t%rned o%t by t e capitalist mode o! prod%ction, a !act already expressed in 16*> in Some 4houghts of the Dnterests of 0ngland 0 5 is acco%nts !or t e immense po@er o! an instit%tion s%c as t e Aank o! England o8er commerce and ind%stry, alt o%g t eir act%al mo8ements remain completely beyond its pro8ince and it is passi8e to@ard t em0 5 e banking system possesses indeed t e !orm o! %ni8ersal book-keeping and distrib%tion o! means o! prod%ction on a social scale, b%t solely t e !orm0 We a8e seen t at t e a8erage pro!it o! t e indi8id%al capitalist, or o! e8ery indi8id%al capital, is determined not by t e s%rpl%slabo%r appropriated at !irst and by eac capital, b%t by t e D%antity o! total s%rpl%s-labo%r appropriated by t e total capital, !rom @ ic eac indi8id%al capital recei8es its di8idend only proportional to its aliD%ot part o! t e total capital0 5 is social c aracter o! capital is !irst promoted and @ olly realiEed t ro%g t e !%ll de8elopment o! t e credit and banking system0 3n t e ot er and t is goes !art er0 &t places all t e a8ailable and e8en potential capital o! society t at is not already acti8ely employed at t e disposal o! t e ind%strial and commercial capitalists so t at neit er t e lenders nor %sers o! t is capital are its real o@ners or prod%cers0 &t t %s does a@ay @it t e pri8ate c aracter o! capital and t %s contains in itsel!, b%t only in itsel!, t e abolition o! capital itsel!0 Ay means o! t e banking system t e distrib%tion o! capital as a special b%siness, a social !%nction, is taken o%t o! t e ands o! t e pri8ate capitalists and %s%rers0 A%t at t e same time, banking and credit t %s become t e most potent means o! dri8ing capitalist prod%ction beyond its o@n limits, and one o! t e most e!!ecti8e 8e icles o! crises and s@indle0 5 e banking system s o@s, !%rt ermore, by s%bstit%ting 8ario%s !orms o! circ%lating credit in place o! money, t at money is in reality not ing b%t a partic%lar expression o! t e social c aracter o! labo%r and its prod%cts, @ ic , o@e8er, as antit etical to t e basis o! pri8ate prod%ction, m%st al@ays appear in t e last analysis as a t ing, a special commodity, alongside ot er commodities0 Finally, t ere is no do%bt t at t e credit system @ill ser8e as a po@er!%l le8er d%ring t e transition !rom t e capitalist mode o! prod%ction to t e mode o! prod%ction o! associated labo%r# b%t only as one element in connection @it ot er great organic re8ol%tions o! t e mode o! prod%ction itsel!0 3n t e ot er and, t e ill%sions concerning t e mirac%lo%s po@er o! t e credit and banking system, in t e socialist sense, arise !rom a complete lack o! !amiliarity @it t e capitalist mode o! prod%ction and t e credit system as one o! its !orms0 ?s soon as t e means o! prod%ction cease being trans!ormed into capital B@ ic also incl%des t e abolition o! pri8ate property in landC, credit as s%c no longer as any meaning0 5 is, incidentally, @as e8en %nderstood by t e !ollo@ers o! $aint-$imon0 3n t e ot er and, as long as t e capitalist mode o! prod%ction contin%es to exist, interest-bearing capital, as one o! its !orms, also contin%es to exist and constit%tes in !act t e basis o! its credit system0 3nly t at sensational @riter, ,ro%d on, @ o @anted to perpet%ate commodity-prod%ction and abolis money, xxxi8 @as capable o! dreaming %p t e monstro%s crjdit grat%it, t e ostensible realiEation o! t e pio%s @is o! t e petty-bo%rgeois estate0 &n 9eligion saint1simonienne, 2conomie politi3ue et &oliti3ue, @e read on page 2+: K;redit ser8es t e p%rpose, in a society in @ ic some o@n t e instr%ments o! ind%stry @it o%t t e ability or @ill to employ t em, and @ ere ot er ind%strio%s people a8e no instr%ments o! labo%r, o! trans!erring t ese instr%ments in t e easiest manner possible !rom

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t e ands o! t e !ormer, t eir o@ners, to t e ands o! t e ot ers @ o kno@ o@ to %se t em0 -ote t at t is de!inition regards credit as a res%lt o! t e @ay in @ ic property is constit%ted0L 5 ere!ore, credit disappears @it t is constit%tion o! property0 We read, !%rt ermore, on page *8, t at t e present banks Kconsider it t eir b%siness to !ollo@ t e mo8ement initiated by transactions taking place o%tside o! t eir domain, b%t not t emsel8es to pro8ide an imp%lse to t is mo8ement# in ot er @ords, t e banks per!orm t e role o! capitalists in relation to t e tra8aille%rs, @ om t ey loan money0L 5 e notion t at t e banks t emsel8es s o%ld take o8er t e management and disting%is t emsel8es Kt ro%g t e n%mber and %se!%lness o! t eir managed establis ments and o! promoted @orksL Bp0 1=1C contains t e Cr7dit mobilier in embryo0 &n t e same @ay, ; arles ,ecD%e%r demands t at t e banks B@ ic t e !ollo@ers o! $aint-$imon call a Syst2me general des ban3uesC Ks o%ld r%le prod%ction0L ,ecD%e%r is essentially a !ollo@er o! $aint-$imon, b%t m%c more radical0 6e @ants Kt e credit instit%tion 000 to control t e entire mo8ement o! national prod%ction0L I K5ry to create a national credit instit%tion, @ ic @it o%t, s all ad8ance t e @ ere@it al to needy people o! talent and merit, o@e8er, !orcibly tying t ese borro@ers toget er t ro%g close solidarity in prod%ction and cons%mption, b%t on t e contrary enabling t em to determine t eir o@n exc ange and prod%ction0 &n t is @ay, yo% @ill only accomplis @ at t e pri8ate banks already accomplis no@, t at is, anarc y, disproportion bet@een prod%ction and cons%mption, t e s%dden r%in o! one person, and t e s%dden enric ment o! anot er# so t at yo%r instit%tion @ill ne8er get any !art er t an prod%cing a certain amo%nt o! bene!its !or one person, corresponding to an eD%i8alent amo%nt o! mis!ort%ne to be end%red by anot er 000 and yo% @ill a8e only pro8ided t e @agelabo%rers assisted by yo% @it t e means to compete

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@it one anot er H%st as t eir capitalist masters no@ do0L B; 0 ,ecD%e%r, 4h2orie $ouvelle 2conomie sociale et &oliti3ue, ,aris, 182<, p0 2320C We a8e seen t at merc ant"s capital and interest-bearing capital are t e oldest !orms o! capital0 A%t it is in t e nat%re o! t ings t at interest-bearing capital ass%mes in pop%lar conception t e !orm o! capital par e cellence0 &n merc ant"s capital t ere takes place t e @ork o! t e middleman, no matter @ et er considered as c eating, labo%r, or anyt ing else0 A%t in t e case o! interestbearing capital t e sel!-reprod%cing c aracter o! capital, t e sel!-expanding 8al%e, t e prod%ction o! s%rpl%s 8al%e, appears p%rely as an occ%lt property0 5 is acco%nts !or t e !act t at e8en some political economists, partic%larly in co%ntries @ ere ind%strial capital is not yet !%lly de8eloped, as in France, cling to interest-bearing capital as t e !%ndamental !orm o! capital and regard gro%nd-rent, !or example, merely as a modi!ied !orm o! it, since t e loan-!orm also predominates ere0 &n t is @ay, t e internal organisation o! t e capitalist mode o! prod%ction is completely mis%nderstood, and t e !act is entirely o8erlooked t at land, like capital, is loaned only to capitalists0 3! co%rse, means o! prod%ction in kind, s%c as mac ines and b%siness o!!ices, can also be loaned instead o! money0 A%t t ey t en represent a de!inite s%m o! money, and t e !act t at in addition to interest a part is paid !or @ear and tear is d%e to t eir %se-8al%e, i0e0, t e speci!ic nat%ral !orm o! t ese elements o! capital0 5 e decisi8e !actor ere is again @ et er t ey are loaned to direct prod%cers, @ ic @o%ld pres%ppose t e non-existence o! t e capitalist mode o! prod%ction-at least in t e sp ere in @ ic t is occ%rs I or @ et er t ey are loaned to ind%strial capitalists, @ ic is precisely t e ass%mption based %pon t e capitalist mode o! prod%ction0 &t is still more irrele8ant and meaningless to drag t e lending o! o%ses, etc0, !or indi8id%al %se into t is disc%ssion0 5 at t e @orking-class is also s@indled in t is !orm, and to an enormo%s extent, is sel! e8ident# b%t t is is also done by t e retail dealer, @ o sells means o! s%bsistence to t e @orker0 5 is is secondary exploitation, @ ic r%ns parallel to t e primary exploitation taking place in t e prod%ction process itsel!0 5 e distinction bet@een selling and loaning is D%ite immaterial in t is case and merely !ormal, and, as already indicated, B,resent edition: pp0 32+-+=0 I Ed0C cannot appear as essential to anyone, %nless e be @ olly %n!amiliar @it t e act%al nat%re o! t e problem0 (s%ry, like commerce, exploits a gi8en mode o! prod%ction0 &t does not create it, b%t is related to it o%t@ardly0 (s%ry tries to maintain it directly, so as to exploit it e8er ane@# it is conser8ati8e and makes t is mode o! prod%ction only more pitiable0 5 e less elements o! prod%ction enter into t e prod%ction process as commodities, and emerge !rom it as commodities, t e more does t eir origination !rom money appear as a separate act0 5 e more insigni!icant t e role played by circ%lation in t e social reprod%ction, t e more %s%ry !lo%ris es0 5 at money @ealt de8elops as a special kind o! @ealt , means in respect to %s%rer"s capital t at it possesses all its claims in t e !orm o! money claims0 &t de8elops t at m%c more in a gi8en co%ntry, t e more t e main body o! prod%ction is limited to nat%ral ser8ices, etc0, t at is, to %se8al%es0 (s%ry is a po@er!%l le8er in de8eloping t e preconditions !or ind%strial capital in so !ar as it plays t e !ollo@ing do%ble role, !irst, b%ilding %p, in general, an independent money @ealt alongside t at o! t e merc ant, and, secondly, appropriating t e conditions o! labo%r, t at is, r%ining t e o@ners o! t e old conditions o! labo%r0

Interest In The Middle Ages

K&n t e Middle ?ges t e pop%lation @as p%rely agric%lt%ral0 (nder s%c a go8ernment as @as t e

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!e%dal system t ere can be b%t little tra!!ic, and ence b%t little pro!it0 6ence t e la@s against %s%ry @ere H%sti!ied in t e Middle ?ges0 Aesides, in an agric%lt%ral co%ntry a person seldom @ants to borro@ money except e be red%ced to po8erty or distress0000 &n t e reign o! 6enry 4&&&, interest @as limited to 1= per cent0 Pames & red%ced it to 8 per cent 000 ; arles && red%ced it to 6 per cent# in t e reign o! M%een ?nne, it @as red%ced to + per cent0000 &n t ose times, t e lenders 000 ad, in !act, t o%g not a legal, yet an act%al monopoly, and ence it @as necessary t at

t ey, like ot er monopolists, s o%ld be placed %nder restraint0 &n o%r times, it is t e rate o! pro!it @ ic reg%lates t e rate o! interest0 &n t ose times, it @as t e rate o! interest @ ic reg%lated t e rate o! pro!it0 &! t e money-lender c arged a ig rate o! interest to t e merc ant, t e merc ant m%st a8e c arged a ig er rate o! pro!it on is goods0 6ence, a large s%m o! money @o%ld be taken !rom t e pockets o! t e p%rc asers to be p%t into t e pockets o! t e moneylenders0L B:ilbart, (istory and &rinciples of Gan-ing, pp0 163, 162, 16+0C K& a8e been told t at 1= g%lden are no@ taken as in ann%ally at e8ery 'eipEig Fair, B5 e a%t or

mind t e loan o! 1== g%lden @it interest payable in t ree installments at t e 'eipEig Fair, eld t ree times ann%ally: Easter and $t0 Mic ael"s 7ayC t at is, 3= on eac %ndred, some add t e -e%enb%rg Fair, t %s making 2= per %ndred# @ et er t at is so, & don"t kno@0 For s ameS W at @ill be t e in!ernal o%tcome o! t isQ 000 W oe8er no@ as 1== !lorins at 'eipEig takes 2= ann%ally, @ ic is t e same as de8o%ring one peasant or b%rg er eac year0 &! one as 1,=== !lorins, e takes 2== ann%ally @ ic means de8o%ring a knig t or a ric nobleman per year0 &! one as 1=,===

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!lorins,

e takes 2,=== per year, @ ic

means

de8o%ring a ric co%nt eac year0 &! one as 1==,=== !lorins, as t e big merc ants m%st possess, e takes 2=,=== ann%ally, @ ic means de8o%ring one a!!l%ent prince eac year0 &! one as 1,===,=== !lorins, e takes 2==,=== ann%ally, @ ic means de8o%ring one mig ty king e8ery year0 ?nd e does not risk eit er is person or is @ares, does not @ork, sits near is !ire-place and roasts apples# so mig t a lo@ly robber sit at ome and de8o%r a @ ole @orld in ten years0L BM%oted !rom Gcher vom Haufhandel und "ucher 8om Pa re 1+<2, '%t er"s "er-e, Wittenberg, 1+8*, 5eil 6, $0 31<0C KFi!teen years ago & took pen in and against %s%ry @ en it ad spread so alarmingly t at & co%ld scarcely ope !or any impro8ement0 $ince t en it as become so arrogant t at it deigns not to be classed as 8ice, sin, or s ame, b%t ac ie8es praise as p%re 8irt%e and ono%r, as t o%g it @ere per!orming a great !a8o%r and ; ristian ser8ice !or t e people0 W at @ill elp deli8er %s no@ t at s ame as t%rned into ono%r and 8ice into 8irt%eQL BMartin '%t er, +n die &farherrn wider den "ucher #u predigen, Wittenberg, 1+2=0C KPe@s, 'ombards, %s%rers and extortioners @ere o%r !irst bankers, o%r primiti8e tra!!ickers in money, t eir c aracter little s ort o! in!amo%s000 5 ey @ere Hoined by 'ondon goldsmit s0 ?s a body 000 o%r primiti8e bankers 000 @ere a 8ery bad set, t ey @ere gripping %s%rers, iron- earted extortioners0L B70 6ardcastle, Gan-s and Gan-ers, <nd ed0, 'ondon, 1823, pp0 1*, <=0C K5 e example s o@n by 4eniceL Bin establis ing a bankC K@as t %s D%ickly imitated# all sea-coast to@ns, and in general all to@ns @ ic ad earned !ame t ro%g t eir independence and commerce, !o%nded

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t eir !irst banks0 5 e ret%rn 8oyage o! t eir s ips, @ ic o!ten @as o! long d%ration, ine8itably led to t e c%stom o! lending on credit0 5 is @as !%rt er intensi!ied by t e disco8ery o! ?merica and t e ens%ing trade @it t at continent0L B5 is is t e main point0C K5 e c artering o! s ips made large loans necessary-a proced%re already obtaining in ancient ?t ens and :reece0 &n 13=8, t e 6anse to@n o! Ar%ges possessed an ins%rance company0 BM0 ?%gier, l0 c0, pp0 <=<, <=30C 5o @ at extent t e granting o! loans to lando@ners, and t %s to t e pleas%re-seeking @ealt y in general, still pre8ailed in t e last t ird o! t e 1>t cent%ry, e8en in England, be!ore t e de8elopment o! modern credit, may be seen, among ot ers, in t e @orks o! $ir 7%dley -ort 0 6e @as not only one o! t e !irst Englis merc ants, b%t also one o! t e most prominent t eoretical economists o! is time: K5 e moneys employed at interest in t is nation, are not near t e tent part, disposed to trading people, @ ere@it to manage t eir trades# b%t are !or t e most part lent !or t e s%pplying o! l%x%ry, and to s%pport t e expense o! persons, @ o t o%g great o@ners o! lands, yet spend !aster t an t eir lands bring in# and being loat to sell, c oose rat er to mortgage t eir estates0L BDiscourses upon 4rade, 'ondon, 16*1, pp06->0C ,oland in t e 18t cent%ry: KWarsa@ carried on a large b%stling b%siness in bills o! exc ange @ ic , o@e8er, ad as its principal basis and aim t e %s%ry o! its bankers0 &n order to sec%re money, @ ic t ey co%ld lend to spendt ri!t gentry at 8T and more, t ey so%g t and obtained abroad open exc ange credit, t at is, credit t at ad no commodity trade as its basis, b%t @ ic t e !oreign dra@ee contin%ed to accept as long as t e ret%rns !rom t ese manip%lations did not !ail to come in0 6o@e8er, t ey paid ea8ily !or t is t ro%g bankr%ptcies o! men like 5apper and ot er ig ly respected Warsa@ bankers0L BP0 :0 Aesc , 4heoretisch1pra-tische Darstellung der (andlung, etc 0, 3rd ed0, 6amb%rg, 18=8, 4ol0 &&, pp0 <3<, <330C

Advantages Derived By The h!rch "rom The #rohi$ition Of Interest

K5aking interest ad been interdicted by t e ; %rc 0 A%t selling property !or t e p%rpose o! !inding s%cco%r in distress ad not been !orbidden0 &t ad not e8en been pro ibited to trans!er property to t e

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money-lender as sec%rity !or a certain term, %ntil a debtor repaid is loan, lea8ing t e money-lender !ree to enHoy t e %s%!r%ct o! t e property as a re@ard !or is abstinence !rom is money0000 5 e ; %rc itsel!, and its associated comm%nes and pia corpora, deri8ed m%c pro!it !rom t is practice, partic%larly d%ring t e cr%sades0 5 is bro%g t a 8ery large portion o! national @ealt into possession o! t e so-called "dead and," all t e more so beca%se t e Pe@s @ere barred !rom engaging in s%c %s%ry, t e possession o! s%c !ixed liens not being concealable0000 Wit o%t t e ban on interest c %rc es and cloisters @o%ld ne8er become so a!!l%entL Bl0 c0, p0 ++C0 a8e

Part !I. Transfor)ation of Surplus Profit into .roun" #ent

Chapter 3$. 5ntroduction
5 e analysis o! landed property in its 8ario%s istorical !orms is beyond t e scope o! t is @ork0 We s all be concerned @it it only in so !ar as a portion o! t e s%rpl%s-8al%e prod%ced by capital !alls to t e s are o! t e lando@ner0 We ass%me, t en, t at agric%lt%re is dominated by t e capitalist mode o! prod%ction H%st as man%!act%re is# in ot er @ords, t at agric%lt%re is carried on by capitalists @ o di!!er !rom ot er capitalists primarily in t e manner in @ ic t eir capital, and t e @age-labo%r set in motion by t is capital, are in8ested0 $o !ar as @e are concerned, t e !armer prod%ces @ eat, etc0, in m%c t e same @ay as t e man%!act%rer prod%ces yarn or mac ines0 5 e ass%mption t at t e capitalist mode o! prod%ction as encompassed agric%lt%re implies t at it r%les o8er all sp eres o! prod%ction and bo%rgeois society, i0e0, t at its prereD%isites, s%c as !ree competition among capitals, t e possibility o! trans!erring t e latter !rom one prod%ction sp ere to anot er, and a %ni!orm le8el o! t e a8erage pro!it, etc0, are !%lly mat%red0 5 e !orm o! landed property @ ic @e s all consider ere is a speci!ically istorical one a !orm transformed t ro%g t e in!l%ence o! capital and o! t e capitalist mode o! prod%ction, eit er o! !e%dal lando@ners ip, or o! small-peasant agric%lt%re as a means o! li8eli ood, in @ ic t e possession o! t e land and t e soil constit%tes one o! t e prereD%isites o! prod%ction !or t e direct prod%cer, and in @ ic is ownership o! land appears as t e most ad8antageo%s condition !or t e prosperity o! his mode o! prod%ction0 P%st as t e capitalist mode o! prod%ction in general is based on t e expropriation o! t e conditions o! labo%r !rom t e labo%rers, so does it in agric%lt%re pres%ppose t e expropriation o! t e r%ral labo%rers !rom t e land and t eir s%bordination to a capitalist, @ o carries on agric%lt%re !or t e sake o! pro!it0 5 %s, !or t e p%rpose o! o%r analysis, t e obHection t at ot er !orms o! landed property and o! agric%lt%re a8e existed, or still exist, is D%ite irrele8ant0 $%c an obHection can only apply to t ose economists @ o treat t e capitalist mode o! prod%ction in agric%lt%re, and t e !orm o! landed property corresponding to it, not as istorical b%t rat er as eternal categories0 For o%r p%rposes it is necessary to st%dy t e modern !orm o! landed property, beca%se o%r task is to consider t e speci!ic conditions o! prod%ction and circ%lation @ ic arise !rom t e in8estment o! capital in agric%lt%re0 Wit o%t t is, o%r analysis o! capital @o%ld not be complete0 We t ere!ore con!ine o%rsel8es excl%si8ely to t e in8estment o! capital in agric%lt%re itsel!, t at is, in prod%cing t e principal agric%lt%ral crop @ ic !eeds a gi8en people0 We can %se @ eat !or t is p%rpose, beca%se it is t e principal means o! s%bsistence in modern capitalistically de8eloped nations0 B3r, instead o! agric%lt%re, @e can %se mining beca%se t e la@s are t e same !or bot 0C 3ne o! t e big contrib%tions o! ?dam $mit @as to a8e s o@n t at gro%nd-rent !or capital in8ested in t e prod%ction o! s%c agric%lt%ral prod%cts as !lax and dye-st%!!s, and in independent cattle-raising, etc0, is determined by t e gro%nd-rent obtained !rom capital in8ested in t e prod%ction o! t e principal article o! s%bsistence0 /$mit , +n Dn3uiry into the $ature and Causes of the "ealth of $ations, ?berdeen, 'ondon, 1828, pp0 1=+-160 I 0d01 &n !act, no !%rt er progress as been made in t is regard since t en0 ?ny limitations or additions @o%ld belong in an independent st%dy o! landed property, not ere0 6ence, @e s all not speak o! landed property e professo I in so !ar as it does not re!er to land destined !or @ eat prod%ction I b%t s all merely re!er to it on occasion by @ay o! ill%stration0

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&t s o%ld be noted !or t e sake o! completeness t at @e also incl%de @ater, etc0, in t e term land, in so !ar as it belongs to someone as an accessory to t e land0 'anded property is based on t e monopoly by certain persons o8er de!inite portions o! t e globe, as excl%si8e sp eres o! t eir pri8ate @ill to t e excl%sion o! all ot ers0 xxx8 Wit t is in mind, t e problem is to ascertain t e economic 8al%e, t at is, t e realisation o! t is monopoly on t e basis o! capitalist prod%ction0 Wit t e legal po@er o! t ese persons to %se or mis%se certain portions o! t e globe, not ing is decided0 5 e %se o! t is po@er depends @ olly %pon economic conditions, @ ic are independent o! t eir @ill0 5 e legal 8ie@ itsel! only means t at t e lando@ner can do @it t e land @ at e8ery o@ner o! commodities can do @it is commodities0 ?nd t is 8ie@, t is legal 8ie@ o! !ree pri8ate o@ners ip o! land, arises in t e ancient @orld only @it t e dissol%tion o! t e organic order o! society, and in t e modern @orld only @it t e de8elopment o! capitalist prod%ction0 &t as been imported by E%ropeans to ?sia only ere and t ere0 &n t e section dealing @it primiti8e acc%m%lation BA%c &, Kap0 JJ&4 /Englis edition: ,art 4&&&0 I 0d10C, @e sa@ t at t is mode o! prod%ction pres%pposes, on t e one and, t e separation o! t e direct prod%cers !rom t eir position as mere accessories to t e land Bin t e !orm o! 8assals, ser!s, sla8es, etc0C, and, on t e ot er and, t e expropriation o! t e mass o! t e people !rom t e land0 5o t is extent t e monopoly o! landed property is a istorical premise, and contin%es to remain t e basis o! t e capitalist mode o! prod%ction, H%st as in all pre8io%s modes o! prod%ction @ ic are based on t e exploitation o! t e masses in one !orm or anot er0 A%t t e !orm o! landed property @it @ ic t e incipient capitalist mode o! prod%ction is con!ronted does not s%it it0 &t !irst creates !or itsel! t e !orm reD%ired by s%bordinating agric%lt%re to capital0 &t t %s trans!orms !e%dal landed property, clan property, small peasant property in mark comm%nes I no matter o@ di8ergent t eir H%ristic !orms may be I into t e economic !orm corresponding to t e reD%irements o! t is mode o! prod%ction0 3ne o! t e maHor res%lts o! t e capitalist mode o! prod%ction is t at, on t e one and, it trans!orms agric%lt%re !rom a mere empirical and mec anical sel!-perpet%ating process employed by t e least de8eloped part o! society into t e conscio%s scienti!ic application o! agronomy, in so !ar as t is is at all !easible %nder conditions o! pri8ate property# xxx8i t at it di8orces landed property !rom t e relations o! dominion and ser8it%de, on t e one and, and, on t e ot er, totally separates land as an instr%ment o! prod%ction !rom landed property and lando@ner I !or @ om t e land merely represents a certain money assessment @ ic e collects by 8irt%e o! is monopoly !rom t e ind%strial capitalist, t e capitalist !armer# it dissol8es t e connection bet@een lando@ners ip and t e land so t oro%g ly t at t e lando@ner may spend is @ ole li!e in ;onstantinople, @ ile is estates lie in $cotland0 'anded property t %s recei8es its p%rely economic !orm by discarding all its !ormer political and social embellis ments and associations, in brie! all t ose traditional accessories, @ ic are deno%nced, as @e s all see later, as %seless and abs%rd s%per!l%ities by t e ind%strial capitalists t emsel8es, as @ell as t eir t eoretical spokesmen, in t e eat o! t eir str%ggle @it landed property0 5 e rationalising o! agric%lt%re, on t e one and, @ ic makes it !or t e !irst time capable o! operating on a social scale, and t e red%ction ad absurdum o! property in land, on t e ot er, are t e great ac ie8ements o! t e capitalist mode o! prod%ction0 'ike all o! its ot er istorical ad8ances, it also attained t ese by !irst completely impo8eris ing t e direct prod%cers0 Ae!ore @e proceed to t e problem itsel!, se8eral more preliminary remarks are necessary to a8oid mis%nderstanding0 5 e prereD%isites !or t e capitalist mode o! prod%ction t ere!ore are t e !ollo@ing: 5 e act%al tillers o! t e soil are @age labo%rers employed by a capitalist, t e capitalist !armer @ o is engaged in agric%lt%re merely as a partic%lar !ield o! exploitation !or capital, as in8estment !or is capital in a partic%lar sp ere o! prod%ction0 5 is capitalist !armer pays t e lando@ner, t e o@ner o! t e land exploited by im, a s%m o! money at de!inite periods !ixed by contract, !or instance, ann%ally BH%st as t e borro@er o! money-capital pays a !ixed interestC, !or t e rig t to in8est is capital in t is speci!ic sp ere o! prod%ction0 5 is s%m o! money is called gro%nd-rent, no matter

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@ et er it is paid !or agric%lt%ral land, b%ilding lots, mines, !is ing gro%nds, or !orests, etc0 &t is paid !or t e entire time !or @ ic t e lando@ner as contracted to rent is land to t e capitalist !armer0 :ro%nd-rent, t ere!ore, is ere t at !orm in @ ic property in land is realised economically, t at is, prod%ces 8al%e0 6ere, t en, @e a8e all t ree classes I @age-labo%rers, ind%strial capitalists, and lando@ners constit%ting toget er, and in t eir m%t%al opposition, t e !rame@ork o! modern society0 ;apital may be !ixed in t e land, incorporated in it eit er in a transitory manner, as t ro%g impro8ements o! a c emical nat%re, !ertilisation, etc0, or more permanently, as in drainage canals, irrigation @orks, le8eling, !arm b%ildings, etc0 Else@ ere & a8e called t e capital t %s applied to land la terre1capital0xxx8ii &t belongs to t e category o! !ixed capital0 5 e interest on capital incorporated in t e land and t e impro8ements t %s made in it as an instr%ment o! prod%ction can constit%te a part o! t e rent paid by t e capitalist !armer to t e lando@ner, xxx8iii b%t it does not constit%te t e act%al gro%nd-rent, @ ic is paid !or t e %se o! t e land as s%c I be it in a nat%ral or c%lti8ated state0 &n a systematic treatment o! landed property, @ ic is not @it in o%r scope, t is part o! t e lando@ner"s re8en%e @o%ld a8e to be disc%ssed at lengt 0 A%t a !e@ @ords abo%t it @ill s%!!ice ere0 5 e more transitory capital in8estments, @ ic accompany t e ordinary prod%ction processes in agric%lt%re, are all made @it o%t exception by t e capitalist !armer0 5 ese in8estments, like c%lti8ation proper in general, impro8e t e land, xxxix increase its o%tp%t, and trans!orm t e land !rom mere material into land-capital @ en t e c%lti8ation is carried on more or less rationally, i0e0, @ en it is not red%ced to a br%tal spoliation o! t e soil, as @as in 8og%e, e0g0, among t e !ormer sla8e- olders in t e (nited $tates# o@e8er, t e gentlemen lando@ners sec%re t emsel8es against s%c practice by contract0 ? c%lti8ated !ield is @ort more t an an %nc%lti8ated one o! t e same nat%ral D%ality0 5 e more permanent !ixed capital in8estments, @ ic are incorporated in t e soil and %sed %p in a longer period o! time, are also in t e main, and in some sp eres o!ten excl%si8ely, made by t e capitalist !armer0 A%t as soon as t e time stip%lated by contract as expired I and t is is one o! t e reasons @ y @it t e de8elopment o! capitalist prod%ction t e lando@ners seek to s orten t e contract period as m%c as possible I t e impro8ements incorporated in t e soil become t e property o! t e lando@ner as an inseparable !eat%re o! t e s%bstance, t e land0 &n t e ne@ contract made by t e lando@ner e adds t e interest !or capital incorporated in t e land to t e gro%nd-rent itsel!0 ?nd e does t is @ et er e no@ leases t e land to t e capitalist !armer @ o made t ese impro8ements or to some ot er !armer0 6is rent is t %s in!lated# and s o%ld e @is to sell is land B@e s all see immediately o@ its price is determinedC, its 8al%e is no@ ig er0 6e sells not merely t e land b%t t e impro8ed land, t e capital incorporated in t e land !or @ ic e paid not ing0 M%ite aside !rom t e mo8ements o! gro%nd-rent itsel!, ere lies one o! t e secrets o! t e increasing enric ment o! lando@ners, t e contin%o%s in!lation o! t eir rents, and t e constantly gro@ing money-8al%e o! t eir estates along @it progress in economic de8elopment0 5 %s t ey pocket a prod%ct o! social de8elopment created @it o%t t eir elp I fruges consumere nati0 /6orace, 0pistles, Aook &, 0pistles F, F@0 I 0d10 A%t t is is at t e same time one o! t e greatest obstacles to a rational de8elopment o! agric%lt%re, !or t e tenant !armer a8oids all impro8ements and o%tlays !or @ ic e cannot expect complete ret%rns d%ring t e term o! is lease0 We !ind t is sit%ation deno%nced as s%c an obstacle again and again, not only in t e 18t cent%ry by Pames ?nderson, t e act%al disco8erer o! t e modern t eory o! rent /3n P0 ?nderson"s t eory o! rent see K0 Marx, 4heorien ber den Mehrwert BK0 MarxNF0 Engels,"er-e, Aand <6, <0 5eil, $0 1=3-=+, 11=-12, 132-3*C0 I 0d01 I @ o @as also a practical capitalist !armer and an ad8anced agronomist !or is time I b%t also in o%r o@n day by opponents o! t e present constit%tion o! landed property in England0 ?0?0 Walton, in is (istory of the ,anded 4enures of Great Gritain and Dreland , 'ondon, 186+, says on t is score Bpp0*6, *>C:

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K?ll t e e!!orts o! t e n%mero%s agric%lt%ral associations t ro%g o%t t e co%ntry m%st !ail to prod%ce any 8ery extensi8e or really appreciable res%lts in t e real ad8ancement o! agric%lt%ral impro8ement, so long as s%c impro8ements mean in a !ar ig er degree increased 8al%e to t e estate and rent-roll o! t e landlord, t an bettering t e condition o! t e tenant !armer or t e labo%rer0 5 e !armers, generally, are as @ell a@are as eit er t e landlord or is agent, or e8en t e president o! t e ?gric%lt%ral ?ssociation, t at good drainage, plenty o! man%re, and good management, combined @it t e increased employment o! labo%r, to t oro%g ly cleanse and @ork t e land, @ill prod%ce @onder!%l res%lts bot in impro8ement and prod%ction0 5o do all t is, o@e8er, considerable o%tlay is reD%ired, and t e !armers are also a@are, t at o@e8er m%c t ey may impro8e t e land or en ance its 8al%e, t e landlords @ill, in t e long r%n, reap t e principal bene!it, in ig er rents and t e increased 8al%e o! t eir estates0000 5 ey are s re@d eno%g to obser8e @ at t ose oratorsL /lando@ners and t eir agents speaking at agric%lt%ral !esti8ities1, Kby some sing%lar inad8ertence, omit to tell t em Inamely, t at t e lion"s s are o! any impro8ements t ey may make is s%re to go into t e pockets o! t e landlords in t e long r%n0000 6o@e8er m%c t e !ormer tenant may a8e impro8ed t e !arm, is s%ccessor @ill !ind t at t e landlord @ill al@ays increase t e rent in proportion to t e increased 8al%e o! t e land !rom !ormer impro8ements0L &n agric%lt%re proper t is process does not yet appear D%ite as plainly as @ en t e land is %sed !or b%ilding p%rposes0 Ay !ar t e largest portion o! land %sed in England !or b%ilding p%rposes b%t not sold as a !ree old is leased by t e lando@ners !or ** years or, i! possible, !or a s orter term0 ?!ter t e lapse o! t is period t e b%ildings !all into t e ands o! t e lando@ner toget er @it t e land itsel!0 K5 eyL /t e tenants1 Kare bo%nd to deli8er %p t e o%se at t e expiration o! t e lease, in good tenantable

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condition, to t e great landlord, a!ter a8ing paid an exorbitant gro%nd-rent %p to t e expiration o! t e lease0 -o sooner is t e lease expired, t an t e agent or s%r8eyor @ill come and examine yo%r o%se, and see t at yo% p%t it into good repair, and t en take possession o! it, and annex it to is lord"s domains0000 5 e !act is, i! t is system is permitted to be in !%ll operation !or any considerable period longer, t e @ ole o! t e o%se property in t e kingdom @ill be in t e ands o! t e great landlords, as @ell as t e land0 5 e @ ole o! t e West End o! 'ondon, nort and so%t !rom 5emple Aar, may be said to belong to abo%t al! a doEen great landlords, all let at enormo%s rents, and @ ere t e leases a8e not D%ite expired t ey are !ast !alling d%e0 5 e same may be said eit er more or less o! e8ery to@n in t e kingdom0 -or does t is grasping system o! excl%sion and monopoly stop e8en ere0 -early t e @ ole o! t e dock accommodation in o%r seaport to@ns is by t e same process o! %s%rpation in t e ands o! t e great le8iat ans o! t e landL B10 c0, pp0*<-*3C0 and Wales in 1861 gi8es t e total pop%lation as <=,=66,<<2 and t e n%mber o! landlords as 36,=3<, t e proportion o! o@ners to t e n%mber o! o%ses and to pop%lation @o%ld look completely di!!erent i! t e large landlords @ere placed on one side and t e small ones on t e ot er0 5 is ill%stration o! o@ners ip in b%ildings is important0 &n t e !irst place, it clearly s o@s t e di!!erence bet@een act%al gro%nd-rent and interest on !ixed capital incorporated in t e land, @ ic may constit%te an addition to gro%nd-rent0 &nterest on b%ildings, like t at on capital incorporated in t e land by t e tenant in agric%lt%re, !alls into t e ands o! t e ind%strial capitalist, t e b%ilding spec%lator, or t e tenant, so long as t e lease lasts, and as in itsel! not ing to do @it gro%nd-rent, @ ic m%st be paid on stated dates ann%ally !or t e %se o! t e land0 $econdly, it s o@s t at capital incorporated in t e land by ot ers %ltimately passes into t e ands o! t e landlord toget er @it t e land, and t at t e interest !or it in!lates is rent0 $ome @riters, acting eit er as spokesmen o! landlordism and taking %p t e c%dgels against t e attacks o! bo%rgeois economists, or in an endea8o%r to trans!orm t e capitalist system o! prod%ction !rom a system o! contradictions into one o! K armonies,L like ;arey, a8e tried to represent gro%nd-rent, t e speci!ic economic expression o! landed property, as identical @it interest0 5 is @o%ld eliminate t e opposition bet@een landlords and capitalists0 5 e opposite met od @as employed in t e early stages o! capitalist prod%ction0 &n t ose days, landed property @as still regarded by pop%lar conception as t e pristine and respectable !orm o! pri8ate property, @ ile interest on capital @as decried as %s%ry0 7%dley -ort , 'ocke and ot ers, t ere!ore,

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represented interest on capital as a !orm analogo%s to gro%nd-rent, H%st as 5%rgot ded%ced t e H%sti!ication !or interest !rom t e existence o! gro%nd-rent0 I ?side !rom t e !act t at gro%nd-rent may, and does, exist in its p%re !orm @it o%t any addition !or interest on capital incorporated in t e land, t ose more recent @riters !orget t at, in t is @ay, t e landlord not only recei8es interest on ot er persons" capital t at costs im not ing, b%t also pockets t is capital o! ot ers @it o%t recompense0 5 e H%sti!ication o! landed property, like t at o! all ot er !orms o! property corresponding to a certain mode o! prod%ction, is t at t e mode o! prod%ction itsel! is a transient istorical necessity, and t is incl%des t e relations o! prod%ction and exc ange @ ic stem !rom it0 &t is tr%e, as @e s all see later, t at landed property di!!ers !rom ot er kinds o! property in t at it appears s%per!l%o%s and arm!%l at a certain stage o! de8elopment, e8en !rom t e point o! 8ie@ o! t e capitalist mode o! prod%ction0 :ro%nd-rent may in anot er !orm be con!%sed @it interest and t ereby its speci!ic c aracter o8erlooked0 :ro%nd-rent ass%mes t e !orm o! a certain s%m o! money, @ ic t e landlord dra@s ann%ally by leasing a certain plot on o%r planet0 We a8e seen t at e8ery partic%lar s%m o! money may be capitalised, t at is, considered as t e interest on an imaginary capital0 For instance, i! t e a8erage rate o! interest is +T, t en an ann%al gro%nd-rent o! V<== may be regarded as interest on a capital o! V2,===0 :ro%nd-rent so capitalised constit%tes t e p%rc ase price or 8al%e o! t e land, a category @ ic like t e price o! labo%r is prima facie irrational, since t e eart is not t e prod%ct o! labo%r and t ere!ore as no 8al%e0 A%t on t e ot er and, a real relation in prod%ction is concealed be ind t is irrational !orm0 &! a capitalist b%ys land yielding a rent o! V<== ann%ally and pays V2,=== !or it, t en e dra@s t e a8erage ann%al interest o! +T on is capital o! V2,===, H%st as i! e ad in8ested t is capital in interest-bearing papers or loaned it directly at +T interest0 &t is t e expansion o! a capital o! V2,=== at +T0 3n t is ass%mption, e @o%ld reco8er t e p%rc ase price o! is estate t ro%g its re8en%es in t@enty years0 &n England, t ere!ore, t e p%rc ase price o! land is calc%lated in so many years" p%rc ase @ ic is merely anot er @ay o! expressing t e capitalisation o! gro%nd-rent0 &t is in !act t e p%rc ase price-not o! t e land, b%t o! t e gro%nd-rent yielded by it I calc%lated in accordance @it t e %s%al interest rate0 A%t t is capitalisation o! rent ass%mes t e existence o! rent, @ ile rent cannot in8ersely be deri8ed and explained !rom its o@n capitalisation0 &ts existence, independent o! its sale, is rat er t e startingpoint !or t e inD%iry0 &t !ollo@s, t en, t at t e price o! land may rise or !all in8ersely as t e interest rate rises or !alls i! @e ass%me gro%nd-rent to be a constant magnit%de0 &! t e ordinary interest rate s o%ld !all !rom +T to 2T, t en t e ann%al gro%nd-rent o! V<== @o%ld represent t e ann%al realisation !rom a capital o! V+,=== instead o! V2,===0 5 e price o! t e same piece o! land @o%ld t %s a8e risen !rom V2,=== to V+,===, or !rom <= years" to <+ years" p%rc ase0 5 e con8erse @o%ld take place in t e opposite case0 5 is is a mo8ement o! t e price o! land @ ic is independent o! t e mo8ement o! gro%nd-rent itsel! and reg%lated only by t e interest rate0 A%t as @e a8e seen t at t e rate o! pro!it as a tendency to !all in t e co%rse o! social progress, and, t ere!ore, t e interest rate as t e same tendency, so !ar as it is reg%lated by t e rate o! pro!it# and t at, !%rt ermore, t e interest rate s o@s a tendency to !all in conseD%ence o! t e gro@t o! loanable capital, apart !rom t e in!l%ence o! t e rate o! pro!it, it !ollo@s t at t e price o! land as a tendency to rise, e8en independently o! t e mo8ement o! gro%nd-rent and t e prices o! t e prod%cts o! t e land, o! @ ic rent constit%tes a part0 5 e con!%sion o! gro%nd-rent itsel! @it t e interest !orm @ ic it ass%mes !or t e b%yer o! t e land I a con!%sion res%lting !rom complete lack o! !amiliarity @it t e nat%re o! gro%nd-rent I m%st necessarily lead to t e most abs%rd concl%sions0 $ince landed property is considered in all ancient co%ntries as a partic%larly genteel !orm o! property, and its p%rc ase also as an eminently sa!e capital in8estment, t e interest rate at @ ic gro%nd-rent is bo%g t is generally lo@er t an t at o! ot er long-term in8estments o! capital, so t at a b%yer o! real estate dra@s, !or instance, only 2T on is p%rc ase price, @ ereas e @o%ld dra@ +T !or t e same capital in ot er

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in8estments0 &n ot er @ords, e pays more capital !or gro%nd-rent t an e @o%ld !or t e same ann%al amo%nt o! income !rom ot er in8estments0 5 is leads Mr0 5 iers to concl%de in is generally 8ery poor @ork on ,a &ropri7t7 Ba reprint o! is speec in t e Frenc -ational ?ssembly in 182* directed against ,ro%d onC /,ro%d on"s speec @as p%blis ed in K Compte rendu des seances de l5+ssembl7e $ationale,L 5ome &&, ,aris, 182*, pp0 666->10 I 0d01 t at gro%nd-rent is lo@, @ ereas it merely pro8es t at its p%rc ase price is ig 0 5 e !act t at capitalised gro%nd-rent appears as t e price or 8al%e o! land, so t at land, t ere!ore, is bo%g t and sold like any ot er commodity, ser8es some apologists as a H%sti!ication !or landed property since t e b%yer pays an eD%i8alent !or it, t e same as !or ot er commodities# and t e maHor portion o! landed property as c anged ands in t is @ay0 5 e same reason in t at case @o%ld also ser8e to H%sti!y sla8ery, since t e ret%rns !rom t e labo%r o! t e sla8e, @ om t e sla8eolder as bo%g t, merely represent t e interest on t e capital in8ested in t is p%rc ase0 5o deri8e a H%sti!ication !or t e existence o! gro%nd-rent !rom its sale and p%rc ase means in general to H%sti!y its existence by its existence0 ?s important as it may be !or a scienti!ic analysis o! gro%nd-rent I t at is, t e independent and speci!ic economic !orm o! landed property on t e basis o! t e capitalist mode o! prod%ction I st%dy it in its p%re !orm !ree o! all distorting and ob!%scating irrele8ancies, it is H%st as important !or an %nderstanding o! t e practical e!!ects o! landed property e8en !or a t eoretical compre ension o! a m%ltit%de o! !acts @ ic contradict t e concept and nat%re o! gro%nd-rent and yet appear as modes o! existence o! gro%nd-rent I to learn t e so%rces @ ic gi8e rise to s%c m%ddling in t eory0 &n practice, nat%rally, e8eryt ing appears as gro%nd-rent t at is paid as lease money by tenant to landlord !or t e rig t to c%lti8ate t e soil0 -o matter @ at t e composition o! t is trib%te and no matter @ at its so%rces, it as t is in common @it t e act%al gro%nd-rent I t at t e monopoly o! t e so-called landed proprietor o! a portion o! o%r planet enables im to le8y s%c trib%te and impose s%c an assessment0 &t as t is in common @it t e act%al gro%nd-rent I t at it determines t e price o! land, @ ic , as @e a8e indicated earlier, is not ing b%t t e capitalised income !rom t e lease o! t e land0 We a8e already seen t at interest !or t e capital incorporated in t e land may constit%te s%c an extraneo%s component o! gro%nd-rent, a component @ ic m%st become a contin%ally gro@ing extra c arge on t e total rent o! a co%ntry as economic de8elopment progresses0 A%t aside !rom t is interest, it is possible t at t e lease money may conceal in part, and in certain cases in its entirety, i0e0, in complete absence o! t e act%al gro%nd-rent @ en t e land is, t ere!ore, act%ally @ort less I a ded%ction !rom t e a8erage pro!it or !rom t e normal @ages, or bot 0 5 is portion, @ et er o! pro!it or @ages, appears ere as gro%nd-rent, beca%se instead o! !alling to t e ind%strial capitalist or t e @age-@orker, as @o%ld normally be t e case, it is paid to t e landlord in t e !orm o! lease money0 Economically speaking, neit er t e one nor t e ot er o! t ese portions constit%tes gro%nd-rent# b%t, in practice, it constit%tes t e landlord"s re8en%e, an economic realisation o! is monopoly, m%c as act%al gro%nd-rent, and it as H%st as determining an in!l%ence on land prices0 We are not speaking no@ o! conditions in @ ic gro%nd-rent, t e manner o! expressing landed property in t e capitalist mode o! prod%ction, !ormally exists @it o%t t e existence o! t e capitalist mode o! prod%ction itsel!, i0e0, @it o%t t e tenant imsel! being an ind%strial capitalist, nor t e type o! is management being a capitalist one0 $%c is t e case, e0g0, in Dreland0 5 e tenant t ere is generally a small !armer0 W at e pays to t e landlord in t e !orm o! rent !reD%ently absorbs not merely a part o! is pro!it, t at is, is o@n s%rpl%s labo%r Bto @ ic e is entitled as possessor o! is o@n instr%ments o! labo%rC, b%t also a part o! is normal @age, @ ic e @o%ld ot er@ise recei8e !or t e same amo%nt o! labo%r0 Aesides, t e landlord, @ o does not ing at all !or t e impro8ement o! t e land, also expropriates is small capital, @ ic t e tenant !or t e most part incorporates in t e land t ro%g is o@n labo%r0 5 is is precisely @ at a

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%s%rer @o%ld do %nder similar circ%mstances, @it H%st t e di!!erence t at t e %s%rer @o%ld at least risk is o@n capital in t e operation0 5 is contin%al pl%nder is t e core o! t e disp%te o8er t e &ris 5enancy )ig ts Aill0 5 e main p%rpose o! t is Aill is to compel t e landlord @ en ordering is tenant o!! t e land to indemni!y t e latter !or is impro8ements on t e land, or !or is capital incorporated in t e land0 ,almerston %sed to @a8e t is demand aside @it t e cynical ans@er# K5 e 6o%se o! ;ommons is a o%se o! landed proprietors0L -or are @e re!erring to exceptional circ%mstances in @ ic t e landlord may en!orce a ig rental I e8en in co%ntries @it capitalist prod%ction I t at stands in no relation to t e yield !rom t e soil0 3! s%c a nat%re, !or example, is t e leasing o! small patc es o! land to labo%rers in Englis !actory districts, eit er as small gardens or !or amate%r spare-time !arming0 B)eports o! &nspectors o! Factories0C We are re!erring to gro%nd-rent in co%ntries @it de8eloped capitalist prod%ction0 ?mong Englis tenants, !or instance, t ere are a n%mber o! small capitalists @ o are destined and compelled by ed%cation, training, tradition, competition, and ot er circ%mstances to in8est t eir capital as tenants in agric%lt%re0 5 ey are !orced to be satis!ied @it less t an t e a8erage pro!it, and to t%rn o8er part o! it to t e landlords as rent0 5 is is t e only condition %nder @ ic t ey are permitted to in8est t eir capital in t e land, in agric%lt%re0 $ince landlords e8ery@ ere exert considerable, and in England e8en o8er@ elming, in!l%ence on legislation, t ey are able to exploit t is sit%ation !or t e p%rpose o! 8ictimising t e entire class o! tenants0 For instance, t e ;orn 'a@s o! 181+ I a bread tax, admittedly imposed %pon t e co%ntry to sec%re !or t e idle landlords a contin%ation o! t eir abnormally increased rentals d%ring t e anti-Pacobin @ar I ad indeed t e e!!ect, excl%ding cases o! a !e@ extraordinarily ric ar8ests, o! maintaining prices o! agric%lt%ral prod%cts abo8e t e le8el to @ ic t ey @o%ld a8e !allen ad corn imports been %nrestricted0 A%t t ey did not a8e t e e!!ect o! maintaining prices at t e le8el decreed by t e la@making landlords to ser8e as normal prices in s%c manner as to constit%te t e legal limit !or imports o! !oreign corn0 A%t t e lease olds @ere contracted in an atmosp ere created by t ese normal prices0 ?s soon as t e ill%sion @as dispelled, a ne@ la@ @as passed, containing ne@ normal prices, @ ic @ere as m%c t e impotent expression o! a greedy landlord"s !antasy as t e old ones0 &n t is @ay, tenants @ere de!ra%ded !rom 181+ %p to t e t irties0 6ence t e standing problem o! agric%lt%ral distress d%ring t is entire period0 6ence t e expropriation and t e r%in o! a @ ole generation o! tenants d%ring t is period and t eir replacement by a ne@ class o! capitalists0 xl ? m%c more general and important !act, o@e8er, is t e depression o! t e act%al !arm-labo%rer"s @age belo@ its normal a8erage, so t at part o! it is ded%cted to become part o! t e lease money and t %s, in t e g%ise o! gro%nd-rent, it !lo@s into t e pocket o! t e landlord rat er t an t e labo%rer0 5 is is, !or example, D%ite generally t e case in England and $cotland, @it t e exception o! a !e@ !a8o%rably sit%ated co%nties0 5 e inD%iries into t e le8el o! @ages by t e parliamentary in8estigating committees, @ ic @ere appointed be!ore t e passage o! t e ;orn 'a@s in England I so !ar t e most 8al%able and almost %nexploited contrib%tions to t e istory o! @ages in t e 1*t cent%ry, and at t e same time a pillory erected !or t emsel8es by t e Englis aristocracy and bo%rgeoisie I pro8ed con8incingly and beyond a do%bt t at t e ig rates o! rent, and t e corresponding rise in land prices d%ring t e anti-Pacobin @ar, @ere d%e in part to no ot er ca%se b%t ded%ctions !rom @ages and t eir depression to a le8el t at @as e8en belo@ t e p ysical minim%m reD%irement# in ot er @ords, to part o! t e normal @age being anded o8er to t e landlords0 4ario%s circ%mstances, s%c as t e depreciation o! money and t e manip%lation o! t e ,oor 'a@s in t e agric%lt%ral districts, ad made t is operation possible at a time @ en t e incomes o! t e tenants @ere enormo%sly increasing and t e landlords @ere amassing !ab%lo%s ric es0 &ndeed, one o! t e main arg%ments o! bot tenants and landlords !or t e introd%ction o!

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d%ties on corn @as t at it @as p ysically impossible to depress !arm labo%rers" @ages any lo@er0 5 is state o! a!!airs as not signi!icantly c anged, and in England, as in all E%ropean co%ntries, a portion o! t e normal @age is absorbed by gro%nd-rent H%st as e8er0 W en ;o%nt $ a!tesb%ry, t en 'ord ?s ley, one o! t e p ilant ropic aristocrats, @as so extraordinarily mo8ed by t e condition o! Englis !actory operati8es and acted as t eir spokesman in ,arliament d%ring t e agitation !or a ten- o%r day, t e spokesmen o! t e ind%strialists took t eir re8enge by p%blis ing @age statistics o! agric%lt%ral labo%rers in t e 8illages belonging to im Bsee A%c &, Kap0 JJ&&&, +, e /Englis edition: ; JJ4 + e I Ed1CBK 4he Gritish +gricultural &roletariat LC, @ ic clearly s o@ed t at a portion o! t e gro%nd-rent o! t is p ilant ropist consisted o! loot !ilc ed !or im by is tenants o%t o! t e @ages o! agric%lt%ral labo%rers0 5 is p%blication is also interesting !or t e !act t at its re8elations may bra8ely take t eir place beside t e @orst expos%res made by t e committees in 1812 and 181+0 ?s soon as circ%mstances !orce a temporary increase in t e @age o! agric%lt%ral labo%rers a cry goes %p !rom t e capitalist tenant !armers t at raising @ages to t e normal le8el, as done in ot er branc es o! ind%stry, @o%ld be impossible and @o%ld r%in t em, %nless gro%nd-rent @ere red%ced at t e same time0 5 erein lies t e con!ession t at %nder t e ead o! gro%nd-rent t ere is a ded%ction o! t e labo%rers" @ages @ ic is anded o8er to t e landlords0 For instance, !rom 182* to 18+* t e @ages o! agric%lt%ral labo%rers rose in England t ro%g a combination o! momento%s e8ents: t e exod%s !rom &reland, @ ic c%t o!! t e s%pply o! agric%lt%ral labo%rers coming !rom t ere# an extraordinary absorption o! t e agric%lt%ral pop%lation by !actories# a @ar-time demand !or soldiers# an exceptionally large emigration to ?%stralia and t e (nited $tates B;ali!orniaC, and ot er circ%mstances @ ic need not be d@elt %pon ere0 ?t t e same time, a8erage prices o! grain !ell by more t an 16T d%ring t is period, @it t e exception o! t e poor agric%lt%ral years 18+2 to 18+60 5 e tenant !armers clamo%red !or a red%ction in rents0 5 ey @ere s%ccess!%l in indi8id%al cases, b%t on t e @ ole !ailed to ac ie8e t is demand0 5 ey ad reco%rse to a red%ction o! prod%ction costs, among ot er t ings by t e mass prod%ction o! steam-engines and ne@ mac inery, @ ic to some extent replaced orses and p%s ed t em o%t o! t e economy, b%t also bro%g t abo%t, in part, an arti!icial o8er-pop%lation by t ro@ing agric%lt%ral day-labo%rers o%t o! @ork, and t ereby ca%sed a ne@ drop in @ages0 ?nd t is took place in spite o! t e o8erall relati8e decrease in agric%lt%ral pop%lation d%ring t at decade as compared @it t e gro@t o! total pop%lation, and in spite o! an absol%te decrease in agric%lt%ral pop%lation in some p%rely agric%lt%ral districts0 xli 5 %s Fa@cett, t en pro!essor o! political economy at ;ambridge /@ o died in 1882 @ ile ,ostmaster :eneral1, stated at t e $ocial $cience ;ongress on 3ctober 1<, 186+: K5 e labo%rers @ere beginning to emigrate, and t e !armers @ere already beginning to complain t at t ey @o%ld not be able to pay s%c ig rents as t ey a8e been acc%stomed to pay, beca%se labo%r @as becoming dearer in conseD%ence o! emigration0L 6ere, t en, ig gro%nd-rent is directly identi!ied @it lo@ @ages0 ?nd in so !ar as t e le8el o! land prices is determined by t is circ%mstance-increasing rent I a rise in t e 8al%e o! land is identical @it a depreciation o! labo%r, t e ig price o! land is identical @it t e lo@ price o! labo%r0 5 e same is tr%e o! France0 K5 e rental rises beca%se t e prices o! bread, @ine, meat, 8egetables and !r%it rise, on t e one and, @ ile, on t e ot er and, t e price o! labo%r remains

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%nc anged0 &! t e older people examine t e acco%nts o! t eir !at ers, taking %s back abo%t 1== years, t ey @ill !ind t at t e price o! a day"s labo%r in r%ral France @as t e same as it is no@0 5 e price o! meat as trebled since t en0000 W o is t e 8ictim o! t is re8ol%tionQ &s it t e ric man, @ o is t e proprietor o! an estate, or t e poor man @ o @orks itQ 000 5 e increase in rental is e8idence o! a p%blic disaster0L BDu M7canisime de la Soci7t7 en 'rance et en +ngleterre, by M0 )%bic on, <nd ed0, ,aris, 183>, p0 1=10C &ll%strations o! rent representing ded%ctions, on t e one and, !rom a8erage pro!it and, on t e ot er, !rom a8erage @ages: Morton, /6ere Marx D%otes Po n 'ockart Morton0 I 0d01 real estate agent and agric%lt%ral mec anic @ o @as pre8io%sly D%oted, states t at it as been obser8ed in many localities t at rent !or large estates is lo@er t an !or small ones beca%se Kt e competition is %s%ally greater !or t e latter t an !or t e !ormer, and as !e@ small !armers are able to t%rn t eir attention to any ot er b%siness t an t at o! !arming, t eir anxiety to get a s%itable occ%pation leads t em in many instances to gi8e more rent t an t eir H%dgement can appro8e o!0L BPo n '0 Morton, 4he 9esources of 0states, 'ondon, 18+8, p0 1160C 6o@e8er, t is di!!erence is s%pposed to be grad%ally disappearing in England# t is e attrib%tes largely to t e emigration precisely o! t e class o! small tenants0 5 e same Morton ill%strates @it an example in @ ic clearly t e @age o! t e tenant imsel!, and e8en more s%rely t at o! is labo%rers, s%!!ers a ded%ction !or gro%nd-rent0 5 is takes place in t e case o! lease olds @it less t an >= to 8= acres B3=-32 a0C @ ere a t@o- orse plo%g cannot be maintained0 K(nless t e tenant @orks @it is o@n ands as laborio%sly as any labo%rer, is !arm @ill not keep im0 &! e entr%sts t e per!ormance o! is @ork to @orkmen @ ile e contin%es merely to obser8e t em, t e c ances are, t at at no distant period, e @ill !ind e is %nable to pay is rentL B10 c0, p0 128C0 Morton concl%des, t ere!ore, t at %nless t e tenants o! a certain locality are 8ery poor, t e lease olds s o%ld not be smaller t an >= acres, so t at t e tenants may keep t@o or t ree orses0

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Extraordinary sagacity on t e part o! Monsie%r 'Fonce de 'a8ergne, Membre de l5Dnstitut et de la Soci7t7 Centrale d5+griculture. &n is Economie )%rale de l"?ngleterre BD%oted !rom t e Englis translation, 'ondon, 18++C, e makes t e !ollo@ing comparison o! t e ann%al ad8antage deri8ed !rom cattle @ ic is employed in France b%t not in England @ ere it is replaced by orses Bp02<C: F)?-;E Milk Meat V2 E-:'?-7 Milk million V16 million Meat V16 million V<= million

'abo%r V8 million 535?': V<8 million

'abo%r I 535?': V36 million

A%t t e greater total !or England is obtained ere beca%se according to is o@n testimony milk is t@ice as expensi8e in England as in France @ ereas e ass%mes t e same prices !or meat in bot co%ntries Bp03+C# t ere!ore, Englis milk prod%ction s rinks to V8 million and t e total to V<8 million, @ ic is t e same as in France0 &t is indeed rat er too m%c @ en Mr0 'a8ergne allo@s t e D%antities and price di!!erences to enter sim%ltaneo%sly into is calc%lations so t at @ en England prod%ces certain articles more dearly t an France I t is appears to be an ad8antage o! Englis agric%lt%re, @ ereas at best it signi!ies a larger pro!it !or t e tenants and landlords0 5 at Mr0 'a8ergne is not only !amiliar @it t e economic ac ie8ements o! Englis agric%lt%re, b%t also s%bscribes to t e preH%dices o! t e Englis tenants and landlords, is s o@n on page 28: K3ne great dra@back attends cereals generally 000 t ey ex a%st t e soil @ ic bears t em0L -ot only does Mr0 'a8ergne belie8e t at ot er plants do not do so, b%t also belie8es t at !odder crops and root crops enric t e soil: KForage plants deri8e !rom t e atmosp ere t e principal elements o! t eir gro@t , @ ile t ey gi8e to t e soil more t an t ey take !rom it# t %s bot directly and by t eir con8ersion into animal man%re contrib%ting in t@o @ays to repair t e misc ie! done by cereals and ex a%sting crops generally# one principle, t ere!ore, is t at t ey s o%ld at least alternate @it t ese crops# in t is consists t e -or!olk rotationL Bpp0 +=, +1C0 -o @onder t at Mr0 'a8ergne, @ o belie8es t ese Englis r%stic !airy-tales, also belie8es t at t e @ages o! Englis !arm labo%rers a8e lost t eir !ormer abnormality since t e d%ties on corn a8e been li!ted0 B$ee @ at as been pre8io%sly said on t is point0 A%c &, Kap0 JJ&&&, +, pp0>=2 to ><*0 /Englis edition: ; 0 JJ4, +, pp0 6>3-*60 I 0d01 A%t let %s also listen to Mr0 Po n Arig t"s speec in Airming am, 7ecember 12, 186+0 ?!ter mentioning t e + million !amilies entirely %nrepresented in ,arliament, e contin%es:

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K5 ere is among t em one million, or rat er more t an one million, in t e (nited Kingdom @ o are classed in t e %n!ort%nate list o! pa%pers0 5 ere is anot er million H%st abo8e pa%perism, b%t al@ays in peril lest t ey s o%ld become pa%pers0 5 eir condition and prospects are not more !a8o%rable t an t at0 -o@ look at t e ignorant and lo@er strata o! t is portion o! t e comm%nity0 'ook to t eir abHect condition, to t eir po8erty, to t eir s%!!ering, to t eir %tter opelessness o! any good0 W y, in t e (nited $tates I e8en in t e $o%t ern $tates d%ring t e reign o! sla8ery e8ery -egro ad an idea t at t ere @as a day o! H%bilee !or im0 A%t to t ese people I to t is class o! t e lo@est strata in t is co%ntry I & am ere to state t at t ere is neit er t e belie! o! anyt ing better nor scarcely an aspiration a!ter it0 6a8e yo% read a paragrap @ ic lately appeared in t e ne@spapers abo%t Po n ;ross, a 7orsets ire labo%rerQ 6e @orked six days in t e @eek, ad an excellent c aracter !rom is employer !or @ om e ad @orked t@enty-!o%r years at t e rate o! eig t s illings per @eek0 Po n ;ross ad a !amily o! se8en c ildren to pro8ide !or o%t o! t ese @ages in is o8el I !or a !eeble @i!e and an in!ant c ild0 6e took I legally, & belie8e e stole I a @ooden %rdle o! t e 8al%e o! sixpence0 For t is o!!ence e @as tried be!ore t e magistrates and sentenced to 12 or <= days" imprisonment0000 & can tell yo% t at many t o%sands o! cases like t at o! Po n ;ross are to be !o%nd t ro%g o%t t e co%ntry, and especially in t e so%t , and t at t eir condition is s%c t at it erto t e most anxio%s in8estigator as been %nable to sol8e t e mystery as to o@ t ey keep body and so%l toget er0 -o@ cast yo%r eye o8er t e co%ntry and look at t ese !i8e million o! !amilies and t e desperate condition o! t is strata o! t em0 &s it not tr%e t at t e %nen!ranc ised nation may be said to toil and toil and

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kno@ing almost no restQ ;ompare it @it t e r%ling class I b%t i! & do & s all be c arged @it comm%nism0000 A%t compare t is great toiling and %nen!ranc ised nation @it t e section @ o may be considered t e go8erning classes0 'ook at its @ealt # look at its ostentation I look at its l%x%ry0 Ae old its @eariness I !or t ere is @eariness amongst t em, b%t it is t e @eariness o! satiety I and see o@ t ey r%s !rom place to place, as it @ere, to disco8er some ne@ pleas%re0L BMorning Star, 7ecember 12, 186+0C &t is s o@n in @ at !ollo@s o@ s%rpl%s-labo%r, and conseD%ently s%rpl%s-prod%ct, is generally con!%sed @it gro%nd-rent t at D%alitati8ely and D%antitati8ely speci!ically determined, at least on t e basis o! t e capitalist mode o! prod%ction, part o! t e s%rpl%s-prod%ct0 5 e nat%ral basis o! s%rpl%s-labo%r in general, t at is, a nat%ral prereD%isite @it o%t @ ic s%c labo%r cannot be per!ormed, is t at -at%re m%st s%pply I in t e !orm o! animal or 8egetable prod%cts o! t e land, in !is eries, etc0 I t e necessary means o! s%bsistence %nder conditions o! an expendit%re o! labo%r @ ic does not cons%me t e entire @orking day0 5 is nat%ral prod%cti8ity o! agric%lt%ral labo%r B@ ic incl%des ere t e labo%r o! simple gat ering, %nting, !is ing and cattle-raisingC is t e basis o! all s%rpl%s-labo%r, as all labo%r is primarily and initially directed to@ard t e appropriation and prod%ction o! !ood0 B?nimals also s%pply at t e same time skins !or @armt in colder climates# also ca8e-d@ellings, etc0C 5 e same con!%sion bet@een s%rpl%s-prod%ct and gro%nd-rent is !o%nd di!!erently expressed by Mr0 7o8e0 /,0 7o8e, 4he 0lements of &olitical Science, Edinb%rg , 18+2, pp0<62, <>30 I 0d01 3riginally agric%lt%ral and ind%strial labo%r @ere not separated# t e latter @as an adH%nct o! t e !ormer0 5 e s%rpl%s-labo%r and t e s%rpl%s-prod%ct o! t e land-c%lti8ating tribe, o%se comm%ne, or !amily incl%ded bot agric%lt%ral and ind%strial labo%r0 Aot @ent and in and0 6%nting, !is ing and agric%lt%re @ere impossible @it o%t s%itable tools0 Wea8ing, spinning, etc0, @ere !irst carried on as an agrarian side line0 We a8e pre8io%sly s o@n t at H%st as t e labo%r o! an indi8id%al @orkman breaks %p into necessary and s%rpl%s labo%r, t e aggregate labo%r o! t e @orking-class may be so di8ided t at t e portion @ ic prod%ces t e total means o! s%bsistence !or t e @orking-class Bincl%ding t e means o! prod%ction reD%ired !or t is p%rposeC per!orms t e necessary labo%r !or t e @ ole o! society0 5 e labo%r per!ormed by t e remainder o! t e @orking-class may t en be regarded as s%rpl%s labo%r0 A%t t e necessary labo%r consists by no means only o! agric%lt%ral labo%r, b%t also o! t at labo%r @ ic prod%ces all ot er prod%cts necessarily incl%ded in t e a8erage cons%mption o! t e labo%rer0 F%rt ermore, !rom t e social standpoint, some per!orm only necessary labo%r beca%se ot ers per!orm only s%rpl%s labo%r, and 8ice 8ersa0 &t is b%t a di8ision o! labo%r bet@een t em0 5 e same olds !or t e di8ision o! labo%r bet@een agric%lt%ral and ind%strial labo%rers in general0 5 e p%rely ind%strial c aracter o! labo%r, on t e one and, corresponds to t e p%rely agric%lt%ral c aracter on t e ot er0 5 is p%rely agric%lt%ral labo%r is by no means nat%ral, b%t is rat er a prod%ct I and a 8ery modern one at t at, @ ic as not yet been ac ie8ed e8ery@ ere I o! social de8elopment and corresponds to a 8ery de!inite stage o! t e de8elopment o! prod%ction0 P%st as a portion o! agric%lt%ral labo%r is materialised in prod%cts @ ic eit er minister only to l%x%ry or ser8e as ra@ materials in ind%stry, b%t by no means ser8e as !ood, let alone as !ood !or t e masses, so on t e ot er and a portion o! ind%strial labo%r is materialised in prod%cts @ ic ser8e as necessary means o! cons%mption !or bot agric%lt%ral and nonagric%lt%ral labo%rers0 &t is

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a mistake, !rom a social point o! 8ie@, to regard t is ind%strial labo%r as s%rpl%s-labo%r0 &t is, in part, as m%c necessary labo%r as t e necessary portion o! t e agric%lt%ral labo%r0 &t is also b%t a !orm rendered independent o! a part o! ind%strial labo%r @ ic @as !ormerly nat%rally connected @it agric%lt%ral labo%r, a necessary m%t%al s%pplement to t e speci!ically agric%lt%ral labo%r no@ separated !rom it0 BFrom a p%rely material point o! 8ie@, +== mec anical @ea8ers, e0g0, prod%ce s%rpl%s-!abrics to a !ar greater degree, t at is, more t an is reD%ired !or t eir o@n clot ing0C Finally, it s o%ld be borne in mind in considering t e 8ario%s !orms o! mani!estation o! gro%ndrent, t at is, t e lease money paid %nder t e eading o! gro%nd-rent to t e landlord !or t e %se o! t e land !or p%rposes o! prod%ction or cons%mption, t at t e price o! t ings @ ic a8e in t emsel8es no 8al%e, i0e0, are not t e prod%ct o! labo%r, s%c as land, or @ ic at least cannot be reprod%ced by labo%r, s%c as antiD%es and @orks o! art by certain masters, etc0, may be determined by many !ort%ito%s combinations0 &n order to sell a t ing, not ing more is reD%ired t an its capacity to be monopolised and alienated0 5 ere are t ree main errors to be a8oided in st%dying gro%nd-rent, and @ ic obsc%re its analysis0 1C ;on!%sing t e 8ario%s !orms o! rent pertaining to di!!erent stages o! de8elopment o! t e social prod%ction process0 W ate8er t e speci!ic !orm o! rent may be, all types a8e t is in common: t e appropriation o! rent is t at economic !orm in @ ic landed property is realised, and gro%nd-rent, in t%rn, pres%pposes t e existence o! landed property, t e o@ners ip o! certain portions o! o%r planet by certain indi8id%als0 5 e o@ner may be an indi8id%al representing t e comm%nity, as in ?sia, Egypt, etc0# or t is landed property may be merely incidental to t e o@ners ip o! t e immediate prod%cers t emsel8es by some indi8id%al as %nder sla8ery or ser!dom# or it may be a p%rely pri8ate o@ners ip o! -at%re by non-prod%cers, a mere title to land# or, !inally, it may be a relations ip to t e land @ ic , as in t e case o! colonists and small peasants o@ning land, seems to be directly incl%ded I in t e isolated and not socially de8eloped labo%r I in t e appropriation and prod%ction o! t e prod%cts o! partic%lar plots o! land by t e direct prod%cers0 5 is common element in t e 8ario%s !orms o! rent, namely t at o! being t e economic realisation o! landed property, o! legal !iction by grace o! @ ic certain indi8id%als a8e an excl%si8e rig t to certain parts o! o%r planet I makes it possible !or t e di!!erences to escape detection0 <C ?ll gro%nd-rent is s%rpl%s-8al%e, t e prod%ct o! s%rpl%s-labo%r0 &n its %nde8eloped !orm as rent in kind it is still directly t e s%rpl%s-prod%ct itsel!0 6ence, t e mistaken idea t at t e rent corresponding to t e capitalist mode o! prod%ction I @ ic is al@ays a s%rpl%s o8er and abo8e pro!it, i0e0, abo8e a 8al%e portion o! commodities @ ic itsel! consists o! s%rpl%s-8al%e Bs%rpl%slabo%rC I t at t is special and speci!ic component o! s%rpl%s-8al%e is explained by merely explaining t e general conditions !or t e existence o! s%rpl%s-8al%e and pro!it in general0 5 ese conditions are: t e direct prod%cers m%st @ork beyond t e time necessary !or reprod%cing t eir o@n labo%r-po@er, !or t eir o@n reprod%ction0 5 ey m%st per!orm s%rpl%s-labo%r in general0 5 is is t e s%bHecti8e condition0 5 e obHecti8e condition is t at t ey m%st be able to per!orm s%rpl%slabo%r0 5 e nat%ral conditions m%st be s%c t at a part o! t eir a8ailable labo%r-time s%!!ices !or t eir reprod%ction and sel!-maintenance as prod%cers, t at t e prod%ction o! t eir necessary means o! s%bsistence s all not cons%me t eir @ ole labo%r-po@er0 5 e !ertility o! -at%re establis es a limit ere, a starting-point, a basis0 3n t e ot er and, t e de8elopment o! t e social prod%cti8e po@er o! t eir labo%r !orms t e ot er limit0 Examined more closely, since t e prod%ction o! means o! s%bsistence is t e 8ery !irst condition o! t eir existence and o! all prod%ction in general, labo%r %sed in t is prod%ction, t at is, agric%lt%ral labo%r in t e broadest economic sense, m%st be !r%it!%l eno%g so as not to absorb t e entire a8ailable labo%r-time in t e prod%ction o! means o! s%bsistence !or t e direct prod%cers, t at is, agric%lt%ral s%rpl%s-labo%r and t ere!ore agric%lt%ral s%rpl%s-prod%ct m%st be possible0 7e8eloped !%rt er, t e total

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agric%lt%ral labo%r, bot necessary and s%rpl%s labo%r, o! a segment o! society m%st s%!!ice to prod%ce t e necessary s%bsistence !or t e @ ole o! society, t at is, !or non-agric%lt%ral labo%rers too0 5 is means t ere!ore t at t e maHor di8ision o! labo%r bet@een agric%lt%ral and ind%strial m%st be possible# and similarly bet@een tillers o! t e soil prod%cing means o! s%bsistence and t ose prod%cing ra@ materials0 ?lt o%g t e labo%r o! t e direct prod%cers o! means o! s%bsistence breaks %p into necessary and s%rpl%s labo%r as !ar as t ey t emsel8es are concerned, it represents !rom t e social standpoint only t e necessary labo%r reD%ired to prod%ce t e means o! s%bsistence0 &ncidentally, t e same is tr%e !or all di8ision o! labo%r @it in society as a @ ole, as distinct !rom t e di8ision o! labo%r @it in indi8id%al @orks ops0 &t is t e labo%r necessary !or t e prod%ction o! partic%lar articles, !or t e satis!action o! some partic%lar need o! society !or t ese partic%lar articles0 &! t is di8ision is proportional, t en t e prod%cts o! 8ario%s gro%ps are sold at t eir 8al%es Bat a later stage o! de8elopment t ey are sold at t eir prices o! prod%ctionC, or at prices @ ic are certain modi!ications o! t ese 8al%es or prices o! prod%ction determined by general la@s0 &t is indeed t e e!!ect o! t e la@ o! 8al%e, not @it re!erence to indi8id%al commodities or articles, b%t to eac total prod%ct o! t e partic%lar social sp eres o! prod%ction made independent by t e di8ision o! labo%r# so t at not only is no more t an t e necessary labo%r-time %sed %p !or eac speci!ic commodity, b%t only t e necessary proportional D%antity o! t e total social labo%r-time is %sed %p in t e 8ario%s gro%ps0 For t e condition remains t at t e commodity represents %se-8al%e0 A%t i! t e %se-8al%e o! indi8id%al commodities depends on @ et er t ey satis!y a partic%lar need t en t e %se-8al%e o! t e mass o! t e social prod%ct depends on @ et er it satis!ies t e D%antitati8ely de!inite social need !or eac partic%lar kind o! prod%ct in an adeD%ate manner, and @ et er t e labo%r is t ere!ore proportionately distrib%ted among t e di!!erent sp eres in keeping @it t ese social needs, @ ic are D%antitati8ely circ%mscribed0 B5 is point is to be noted in t e distrib%tion o! capital among t e 8ario%s sp eres o! prod%ction0C 5 e social need, t at is, t e %se-8al%e on a social scale, appears ere as a determining !actor !or t e amo%nt o! total social labo%r-time @ ic is expended in 8ario%s speci!ic sp eres o! prod%ction0 A%t it is merely t e same la@ @ ic is already applied in t e case o! single commodities, namely, t at t e %se-8al%e o! a commodity is t e basis o! its exc ange8al%e and t %s o! its 8al%e0 5 is point as a bearing %pon t e relations ip bet@een necessary and s%rpl%s labo%r only in so !ar as a 8iolation o! t is proportion makes it impossible to realise t e 8al%e o! t e commodity and t %s t e s%rpl%s-8al%e contained in it0 For instance# let %s ass%me t at proportionally too m%c cotton goods a8e been prod%ced, alt o%g only t e labo%r-time necessary %nder t e pre8ailing conditions is incorporated in t is total clot prod%ction0 A%t in general too m%c social labo%r as been expended in t is partic%lar line# in ot er @ords, a portion o! t is prod%ct is %seless0 &t is t ere!ore sold solely as i! it ad been prod%ced in t e necessary proportion0 5 is D%antitati8e limit to t e D%ota o! social labo%r-time a8ailable !or t e 8ario%s partic%lar sp eres o! prod%ction is b%t a more de8eloped expression o! t e la@ o! 8al%e in general, alt o%g t e necessary labo%r-time ass%mes a di!!erent meaning ere0 3nly H%st so m%c o! it is reD%ired !or t e satis!action o! social needs0 5 e limitation occ%rring ere is d%e to t e %se 8al%e0 $ociety can %se only so m%c o! its total labo%r-time !or t is partic%lar kind o! prod%ct %nder pre8ailing conditions o! prod%ction0 A%t t e s%bHecti8e and obHecti8e conditions o! s%rpl%s labo%r and s%rpl%s-8al%e in general a8e not ing to do @it t e partic%lar !orm o! eit er t e pro!it or t e rent0 5 ese conditions apply to s%rpl%s-8al%e as s%c , no matter @ at special !orm it may ass%me0 6ence t ey do not explain gro%nd-rent0 3C &t is precisely in t e economic realisation o! landed property, in t e de8elopment o! gro%ndrent, t at t e !ollo@ing c aracteristic pec%liarity comes to t e !ore, namely t at its amo%nt is by no means determined by t e actions o! its recipient, b%t is determined rat er by t e independent de8elopment o! social labo%r in @ ic t e recipient takes no part0 &t may easily appen, t ere!ore, t at somet ing is regarded as a pec%liarity o! rent Band o! t e prod%cts o! agric%lt%re in generalC, @ ic is really a common !eat%re o! all branc es o! prod%ction and all t eir prod%cts @ ere t e

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basis is commodity-prod%ction I and, in partic%lar, capitalist prod%ction, @ ic is in its entirety commodity prod%ction0 5 e amo%nt o! gro%nd-rent Band @it it t e 8al%e o! landC gro@s @it social de8elopment as a res%lt o! t e total social labo%r0 3n t e one and, t is leads to an expansion o! t e market and o! t e demand !or prod%cts o! t e soil, and, on t e ot er, it stim%lates t e demand !or land itsel!, @ ic is a prereD%isite o! competiti8e prod%ction in all lines o! b%siness acti8ity, e8en t ose @ ic are not agric%lt%ral0 More exactly I i! one considers only t e act%al agric%lt%ral rent I rent, and t ereby t e 8al%e o! t e land, de8elops @it t e market !or t e prod%cts o! t e soil, and t %s @it t e increase in t e non-agric%lt%ral pop%lation, @it its need and demand !or means o! s%bsistence and ra@ materials0 &t is in t e nat%re o! capitalist prod%ction to contin%ally red%ce t e agric%lt%ral pop%lation as compared @it t e non-agric%lt%ral, beca%se in ind%stry Bin t e strict senseC t e increase o! constant capital in relation to 8ariable capital goes and in and @it an absol%te increase, t o%g relati8e decrease, in 8ariable capital# on t e ot er and, in agric%lt%re t e 8ariable capital reD%ired !or t e exploitation o! a certain plot o! land decreases absol%tely# it can t %s only increase to t e extent t at ne@ land is taken into c%lti8ation, b%t t is again reD%ires as a prereD%isite a still greater gro@t o! t e non-agric%lt%ral pop%lation0 &n !act, @e are not dealing ere @it a c aracteristic pec%liarity o! agric%lt%re and its prod%cts0 3n t e contrary, t e same applies to all ot er branc es o! prod%ction and prod%cts @ ere t e basis is commodity-prod%ction and its absol%te !orm, capitalist prod%ction0 5 ese prod%cts are commodities, or %se-8al%es, @ ic a8e an exc ange-8al%e t at is to be realised, to be con8erted into money, only in so !ar as ot er commodities !orm an eD%i8alent !or t em, t at is, ot er prod%cts con!ront t em as commodities and 8al%es# t %s, in so !ar as t ey are not prod%ced as immediate means o! s%bsistence !or t e prod%cers t emsel8es, b%t as commodities, as prod%cts @ ic become %se-8al%es only by t eir trans!ormation into exc ange8al%es BmoneyC, by t eir alienation0 5 e market !or t ese commodities de8elops t ro%g t e social di8ision o! labo%r# t e di8ision o! prod%cti8e labo%rs m%t%ally trans!orms t eir respecti8e prod%cts into commodities, into eD%i8alents !or eac ot er, making t em m%t%ally ser8e as markets0 5 is is in no @ay pec%liar to agric%lt%ral prod%cts0 )ent can de8elop as money-rent only on t e basis o! commodity prod%ction, in partic%lar capitalist prod%ction, and it de8elops to t e same extent t at agric%lt%ral prod%ction becomes commodity prod%ction, t at is, to t e same extent t at non-agric%lt%ral prod%ction de8elops independently o! agric%lt%ral prod%ction, !or to t at degree t e agric%lt%ral prod%ct becomes commodity, exc ange-8al%e, and 8al%e0 &n so !ar as commodity-prod%ction and t %s t e prod%ction o! 8al%e de8elops @it capitalist prod%ction so does t e prod%ction o! s%rpl%s-8al%e and s%rpl%s prod%ct0 A%t in t e same proportion as t e latter de8elops, landed property acD%ires t e capacity o! capt%ring an e8er-increasing portion o! t is s%rpl%s-8al%e by means o! its land monopoly and t ereby, o! raising t e 8al%e o! its rent and t e price o! t e land itsel!0 5 e capitalist still per!orms an acti8e !%nction in t e de8elopment o! t is s%rpl%s-8al%e and s%rpl%sprod%ct0 A%t t e lando@ner need only appropriate t e gro@ing s are in t e s%rpl%s-prod%ct and t e s%rpl%s-8al%e, @it o%t a8ing contrib%ted anyt ing to t is gro@t 0 5 is is t e c aracteristic pec%liarity o! is position, and not t e !act t at t e 8al%e o! t e prod%cts o! t e land, and t %s o! t e land itsel!, increases to t e degree t at t e market !or t em expands, t e demand gro@s and @it it t e @orld o! commodities @ ic con!ronts t e prod%cts o! t e land I in ot er @ords, t e mass o! non-agric%lt%ral commodity prod%cers and non-agric%lt%ral commodity-prod%ction0 A%t since t is takes place @it o%t any action on is part, it appears to im as somet ing %niD%e t at t e mass o! 8al%e, t e mass o! s%rpl%s-8al%e, and t e trans!ormation o! a portion o! s%rpl%s 8al%e into gro%nd-rent s o%ld depend %pon t e social prod%ction process, on t e de8elopment o! commodity-prod%ction in general0 For t is reason, 7o8e, !or instance, tries to e8ol8e rent !rom t is0 6e says t at rent does not depend %pon t e mass o! t e agric%lt%ral prod%ct, b%t %pon its 8al%e, /,0 7o8e, 4he 0lements of &olitical Science , Edinb%rg , 18+2, p0<>*0 I 0d01 o@e8er, t is

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depends %pon t e mass and prod%cti8ity o! t e non-agric%lt%ral pop%lation0 A%t it is also tr%e o! e8ery ot er prod%ct t at it can only de8elop as a commodity partly as t e mass and partly as t e 8ariety o! ot er commodities @ ic !orm eD%i8alents !or its increase0 5 is as already been demonstrated in connection @it t e general presentation o! 8al%e0 /Englis edition: 4ol0 &, p0 880 I 0d01 3n t e one and, t e exc angeability o! a prod%ct in general depends on t e m%ltiplicity o! commodities existing in addition to it0 3n t e ot er and, on it depends in partic%lar t e D%antity in @ ic t is prod%ct can be prod%ced as a commodity0 -o prod%cer, @ et er ind%strial or agric%lt%ral, @ en considered by imsel! alone, prod%ces 8al%e or commodities0 6is prod%ct becomes a 8al%e and a commodity only in t e context o! de!inite social interrelations0 &n t e !irst place, in so !ar as it appears as t e expression o! social labo%r, ence in so !ar as t e indi8id%al prod%cer"s labo%r-time co%nts as a part o! t e social labo%r-time in general# and, secondly, t is social c aracter o! is labo%r appears impressed %pon is prod%ct t ro%g its pec%niary c aracter and t ro%g its general exc angeability determined by its price0 5 ere!ore, i!, on t e one and, s%rpl%s-8al%e or, still more narro@ly, t e s%rpl%s-prod%ct in general is explained instead o! rent, t e mistake is made, on t e ot er and, o! ascribing excl%si8ely to agric%lt%ral prod%cts a c aracteristic @ ic belongs to all prod%cts in t eir capacity as commodities and 8al%es0 5 is is 8%lgarised still more by t ose @ o pass !rom t e general determination o! 8al%e o8er to t e rea1isation o! t e 8al%e o! a speci!ic commodity0 E8ery commodity can realise its 8al%e only in t e process o! circ%lation, and @ et er it realises its 8al%e, or to @ at extent it does so, depends on pre8ailing market conditions0 &t is not a sing%larity o! gro%nd-rent, t en, t at agric%lt%ral prod%cts de8elop into, and as, 8al%es, i0e0, t at t ey con!ront ot er commodities as commodities, and t at non-agric%lt%ral prod%cts con!ront t em as commodities# or t at t ey de8elop as speci!ic expressions o! social labo%r0 5 e sing%larity o! gro%nd-rent is rat er t at toget er @it t e conditions in @ ic agric%lt%ral prod%cts de8elop as 8al%es BcommoditiesC, and toget er @it t e conditions in @ ic t eir 8al%es are realised, t ere also gro@s t e po@er o! landed property to appropriate an increasing portion o! t ese 8al%es, @ ic @ere created @it o%t its assistance# and so an increasing portion o! s%rpl%s8al%e is trans!ormed into gro%nd-rent0

Chapter 3&. 'ifferential Rent= +eneral Re ar%s

&n t e analysis o! gro%nd-rent @e s all begin @it t e ass%mption t at prod%cts paying s%c a rent, prod%cts in @ ic a portion o! t e s%rpl%s-8al%e, and t ere!ore also a portion o! t e total price, resol8es itsel! into gro%nd-rent, i0e0, t at agric%lt%ral as @ell as mining prod%cts are sold at t eir prices o! prod%ction like all ot er commodities0 B&t s%!!ices !or o%r p%rposes to con!ine o%rsel8es to agric%lt%ral and mining prod%cts0C &n ot er @ords, t eir selling prices are made %p o! t e elements o! t eir cost Bt e 8al%e o! cons%med constant and 8ariable capitalC pl%s a pro!it determined by t e general rate o! pro!it and calc%lated on t e total ad8anced capital, @ et er cons%med or not0 We ass%me, t en, t at a8erage selling prices o! t ese prod%cts are eD%al to t eir prices o! prod%ction0 5 e D%estion no@ arises o@ it is possible !or gro%nd-rent to de8elop %nder t ese conditions, i0e0, o@ it is possible !or a portion o! t e pro!it to become trans!ormed into gro%nd-rent, so t at a portion o! t e commodity-price !alls to t e landlord0 &n order to demonstrate t e general c aracter o! t is !orm o! gro%nd-rent, let %s ass%me t at most o! t e !actories o! a certain co%ntry deri8e t eir po@er !rom steam-engines, @ ile a smaller n%mber deri8e it !rom nat%ral @ater!alls0 'et %s !%rt er ass%me t at t e price o! prod%ction in t e !ormer amo%nts to 11+ !or a D%antity o! commodities @ ic a8e cons%med a capital o! 1==0 5 e 1+T pro!it is calc%lated not solely on t e cons%med capital o! 1==, b%t on t e total capital employed in t e prod%ction o! t is commodity-8al%e0 We a8e pre8io%sly s o@n t at t is price o! prod%ction is not determined by t e indi8id%al cost-price o! e8ery single ind%strial prod%cer, b%t by t e a8erage cost-price o! t e commodity %nder a8erage conditions o! capital in t e entire sp ere o! prod%ction0 &t is, in !act, t e market-price o! prod%ction, t e a8erage market-price as distinct !rom its oscillations0 &t is in general in t e !orm o! t e market-price, and, !%rt ermore, in t e !orm o! t e reg%lating market-price, or market-price o! prod%ction, t at t e nat%re o! t e 8al%e o! commodities asserts itsel!, its determination not by t e labo%r-time necessary in t e case o! any indi8id%al prod%cer !or t e prod%ction o! a certain D%antity o! commodities, or o! some indi8id%al commodity, b%t by t e socially necessary labo%r-time# t at is, by t e labo%r-time, reD%ired !or t e prod%ction o! t e socially necessary total D%antity o! commodity 8arieties on t e market %nder t e existing a8erage conditions o! social prod%ction ?s de!inite !ig%res are immaterial in t is case, @e s all ass%me !%rt ermore t at t e cost-price in !actories r%n on @ater-po@er is only *= instead o! 1==0 $ince t e reg%lating market-price o! prod%ction o! t is D%antity o! commodities R 11+, @it a pro!it o! 1+T, t e man%!act%rers @ o operate t eir mac ines on @ater po@er @ill also sell t eir commodities at 11+, i0e0, t e a8erage price reg%lating t e market-price0 5 eir pro!it @o%ld t en be <+ instead o! 1+# t e reg%lating price o! prod%ction @o%ld allo@ t em a s%rpl%s-pro!it o! 1=T not beca%se t ey sell t eir commodities abo8e t e price o! prod%ction, b%t beca%se t ey sell t em at t e price o! prod%ction, beca%se t eir commodities are prod%ced, or t eir capital operates, %nder exceptionally !a8o%rable conditions, i0e0, %nder conditions @ ic are more !a8o%rable t an t e a8erage pre8ailing in t is sp ere0 5@o t ings become e8ident at once: 'irst, t e s%rpl%s-pro!it o! t e prod%cers @ o %se a nat%ral @ater!all as moti8e po@er is to begin @it in t e same class @it all s%rpl%s-pro!it Band @e a8e already analysed t is category @ en disc%ssing prices o! prod%ctionC @ ic is not t e !ort%ito%s res%lt o! transactions in t e circ%lation process, o! t e !ort%ito%s !l%ct%ations in market-prices0 5 is s%rpl%s-pro!it, t en, is like@ise eD%al to t e di!!erence bet@een t e indi8id%al price o! prod%ction o! t ese !a8o%red prod%cers and t e general social price o! prod%ction reg%lating t e market in t is entire prod%ction sp ere0 5 is di!!erence is eD%al to t e excess o! t e general price o! prod%ction o! t e commodities o8er t eir indi8id%al price o! prod%ction0 5 e t@o reg%lating limits o! t is excess are, on t e one and, t e

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indi8id%al cost-price, and t %s t e indi8id%al price o! prod%ction, and, on t e ot er and, t e general price o! prod%ction0 5 e 8al%e o! commodities prod%ced @it @ater-po@er is smaller beca%se a smaller total D%antity o! labo%r is reD%ired !or t eir prod%ction, i0e0, less labo%r I in materialised !orm I enters into t e constant capital as part o! t e latter0 5 e labo%r employed ere is more prod%cti8e, its indi8id%al prod%cti8e po@er is greater t an t at employed in t e maHority o! !actories o! t e same kind0 &ts greater prod%cti8e po@er is s o@n in t e !act t at in order to prod%ce t e same D%antity o! commodities, it reD%ires a smaller D%antity o! constant capital, a smaller D%antity o! materialised labo%r, t an t e ot ers0 &t also reD%ires less li8ing labo%r, beca%se t e @ater-@ eel need not be eated0 5 is greater indi8id%al prod%cti8eness o! employed labo%r red%ces t e 8al%e, b%t also t e cost-price and t ereby t e price o! prod%ction o! t e commodity0 For t e indi8id%al ind%strial capitalist t is expresses itsel! in a lo@er cost-price !or is commodities0 6e as to pay !or less materialised labo%r, and also less @ages !or less li8ing labo%r-po@er employed0 $ince t e cost-price o! is commodities is lo@er, is indi8id%al price o! prod%ction is also lo@er0 6is cost-price is *= instead o! 1==0 6is indi8id%al price o! prod%ction @o%ld t ere!ore be only 1=3Z instead o! 11+ B1==:11+ R *=:1=3ZC 5 e di!!erence bet@een is indi8id%al price o! prod%ction and t e general price o! prod%ction is limited by t e di!!erence bet@een is indi8id%al cost- price and t e general cost-price0 5 is is one o! t e magnit%des @ ic !orm t e limits to is s%rpl%s-pro!it0 5 e ot er is t e magnit%de o! t e general price o! prod%ction into @ ic t e general rate o! pro!it enters as one o! t e reg%lating !actors0 Were coal to become c eaper, t e di!!erence bet@een is indi8id%al cost-price and t e general cost-price @o%ld decrease, and @it it is s%rpl%s-pro!it0 $ o%ld e be compelled to sell is commodities at t eir indi8id%al 8al%e, or at t e price o! prod%ction determined by t eir indi8id%al 8al%e, t en t e di!!erence @o%ld disappear0 &t is, on t e one and, a res%lt o! t e !act t at t e commodities are sold at t eir general market-price, t e price bro%g t abo%t by t e eD%alisation o! indi8id%al prices t ro%g competition, and, on t e ot er, a res%lt o! t e !act t at t e greater indi8id%al prod%cti8ity o! labo%r set in motion by im does not bene!it t e labo%rer, b%t t e employer, as does all prod%cti8ity o! labo%r, t at it appears as t e prod%cti8eness o! capital0 $ince t e le8el o! t e general price o! prod%ction is one o! t e limits o! t is s%rpl%s-pro!it, t e le8el o! t e general rate o! pro!it being one o! its !actors, t is s%rpl%s-pro!it can only arise !rom t e di!!erence bet@een t e general and t e indi8id%al price o! prod%ction, and conseD%ently !rom t e di!!erence bet@een t e general and t e indi8id%al rate o! pro!it0 ?n excess abo8e t is di!!erence pres%pposes t e sale o! prod%cts abo8e, not at, t e price o! prod%ction reg%lated by t e market0 Secondly, t %s !ar, t e s%rpl%s-pro!it o! t e man%!act%rer %sing nat%ral @ater-po@er instead o! steam does not di!!er in any @ay !rom any ot er s%rpl%s-pro!it0 ?ll normal s%rpl%s-pro!it, t at is, all s%rpl%s-pro!it not d%e to !ort%ito%s sales or market-price !l%ct%ations is determined by t e di!!erence bet@een t e indi8id%al price o! prod%ction o! t e commodities o! a partic%lar capital and t e general price o! prod%ction, @ ic reg%lates t e market-prices o! t e commodities prod%ced by t e capital in t is sp ere o! prod%ction in general, or, in ot er @ords, t e marketprices o! commodities o! t e total capital in8ested in t is sp ere o! prod%ction0 A%t no@ @e come to t e di!!erence0 5o @ at circ%mstance does t e ind%strial capitalist in t e present case o@e is s%rpl%s-pro!it, t e s%rpl%s res%lting !or im personally !rom t e price o! prod%ction reg%lated by t e general rate o! pro!itQ 6e o@es it in t e !irst instance to a nat%ral !orce I t e moti8e po@er o! t e @ater!all I @ ic is !o%nd readily a8ailable in -at%re and is not itsel! a prod%ct o! labo%r like t e coal @ ic trans!orms @ater into steam0 5 e coal, t ere!ore, as 8al%e, m%st be paid !or by an eD%i8alent, and as a cost0 5 e @ater!all is a nat%ral prod%ction agent in t e prod%ction o! @ ic no labo%r enters0

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A%t t is is not all0 5 e man%!act%rer @ o operates @it steam also employs nat%ral !orces @ ic cost im not ing yet make t e labo%r more prod%cti8e and increase t e s%rpl%s-8al%e and t ereby t e pro!it, inasm%c as t ey t %s c eapen t e man%!act%re o! t e means o! s%bsistence reD%ired !or t e labo%rers0 5 ese nat%ral !orces are t %s D%ite as m%c monopolised by capital as t e social nat%ral !orces o! labo%r arising !rom co-operation, di8ision o! labo%r, etc0 5 e man%!act%rer pays !or coal, b%t not !or t e capacity o! @ater to alter its p ysical state, to t%rn into steam, not !or t e elasticity o! t e steam, etc0 5 is monopolisation o! nat%ral !orces, t at is, o! t e increase in labo%r-po@er prod%ced by t em, is common to all capital operating @it steam-engines0 &t may increase t at portion o! t e prod%ct o! labo%r @ ic represents s%rpl%s-8al%e in relation to t at portion @ ic is trans!ormed into @ages0 &n so !ar as it does t is, it raises t e general rate o! pro!it, b%t it does not create any s%rpl%s-pro!it, !or t is consists o! t e excess o! indi8id%al pro!it o8er a8erage pro!it0 5 e !act t at t e application o! a nat%ral !orce, a @ater!all, creates s%rpl%spro!it in t is case, cannot t ere!ore be d%e solely to t e circ%mstance t at t e increased prod%cti8ity o! labo%r ere res%lts !rom t e application o! a nat%ral !orce0 3t er modi!ying circ%mstances are necessary0 ;on8ersely0 5 e mere application o! nat%ral !orces in ind%stry may in!l%ence t e le8el o! t e general rate o! pro!it beca%se it a!!ects t e D%antity o! labo%r reD%ired to prod%ce t e necessary means o! s%bsistence0 A%t in itsel! it does not create any de8iation !rom t e general rate o! pro!it, and t is is precisely t e point in @ ic @e are interested ere0 F%rt ermore, t e s%rpl%s-pro!it @ ic some indi8id%al capital ot er@ise realises in a partic%lar sp ere o! prod%ction I !or de8iations o! t e rates o! pro!it in 8ario%s sp eres o! prod%ction are contin%ally balanced o%t into an a8erage rate I is d%e, aside !rom !ort%ito%s de8iations, to a red%ction in cost-price, in prod%ction costs0 5 is red%ction arises eit er !rom t e !act t at capital is %sed in greater t an a8erage D%antities, so t at fau frais o! prod%ction are red%ced, @ ile t e general ca%ses increasing t e prod%cti8eness o! labo%r Bcooperation, di8ision o! labo%r, etc0C can become e!!ecti8e to a ig er degree, @it more intensity, beca%se t eir !ield o! acti8ity as become larger# or it may arise !rom t e !act t at, aside !rom t e amo%nt o! !%nctioning capital, better met ods o! labo%r, ne@ in8entions, impro8ed mac inery, c emical man%!act%ring secrets, etc0, in s ort, ne@ and impro8ed, better t an a8erage means o! prod%ction and met ods o! prod%ction are %sed0 5 e red%ction in cost-price and t e s%rpl%s-pro!it arising !rom it are ere t e res%lt o! t e manner in @ ic t e !%nctioning capital is in8ested0 5 ey res%lt eit er !rom t e !act t at t e capital is concentrated in t e ands o! one person in extraordinarily large D%antities Ba condition t at is cancelled o%t as soon as eD%al magnit%des o! capital are %sed on t e a8erageC, or !rom t e !act t at a certain magnit%de o! capital !%nctions in a partic%larly prod%cti8e manner Ba condition t at disappears as soon as t e exceptional met od o! prod%ction becomes general or is s%rpassed by a still more de8eloped oneC0 5 e ca%se o! t e s%rpl%s-pro!it, t en, arises ere !rom t e capital itsel! B@ ic incl%des t e labo%r set in motion by itC @ et er it be d%e to t e greater magnit%de o! capital employed or to its more e!!icient application# and, as a matter o! !act, t ere is no partic%lar reason @ y all capital in t e same prod%ction sp ere s o%ld not be in8ested in t e same manner0 3n t e contrary, t e competition bet@een capitals tends to cancel t ese di!!erences more and more0 5 e determination o! 8al%e by t e socially necessary labo%r-time asserts itsel! t ro%g t e c eapening o! commodities and t e comp%lsion to prod%ce commodities %nder t e same !a8o%rable conditions0 A%t matters are di!!erent @it t e s%rpl%s-pro!it o! an ind%strial capitalist @ o makes %se o! t e @ater!all0 5 e increased prod%cti8eness o! t e labo%r %sed by im comes neit er !rom t e capital and labo%r itsel!, nor !rom t e mere application o! some nat%ral !orce di!!erent !rom capital and labo%r b%t incorporated in t e capital0 &t arises !rom t e greater nat%ral prod%cti8eness o! labo%r bo%nd %p @it t e application o! a !orce o! -at%re, b%t not a !orce o! -at%re t at is at t e command o! all capital in t e same sp ere o! prod%ction, as !or example t e elasticity o! steam0 &n ot er @ords, its application is not to be taken !or granted @ ene8er capital is generally in8ested in

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t is sp ere o! prod%ction0 3n t e contrary, it is a monopolisable !orce o! -at%re @ ic , like t e @ater!all, is only at t e command o! t ose @ o a8e at t eir disposal partic%lar portions o! t e eart and its app%rtenances0 &t is by no means @it in t e po@er o! capital to call into existence t is nat%ral premise !or a greater prod%cti8ity o! labo%r in t e same manner as any capital may trans!orm @ater into steam0 &t is !o%nd only locally in -at%re and, @ ere8er it does not exist, it cannot be establis ed by a de!inite in8estment o! capital0 &t is not bo%nd to goods @ ic labo%r can prod%ce, s%c as mac ines and coal, b%t to speci!ic nat%ral conditions pre8ailing in certain portions o! land0 5 ose man%!act%rers @ o o@n @ater!alls excl%de t ose @ o do not !rom %sing t is nat%ral !orce, beca%se land, and partic%larly land endo@ed @it @ater-po@er, is scarce0 5 is does not pre8ent t e amo%nt o! @ater-po@er a8ailable !or ind%strial p%rposes !rom being increased, e8en t o%g t e n%mber o! nat%ral @ater!alls in a gi8en co%ntry is limited0 5 e @ater!all may be arnessed by man in order to !%lly exploit its moti8e !orce0 &! s%c exists, t e @ater-@ eel may be impro8ed so as to make %se o! as m%c o! t e @ater-po@er as possible# @ ere t e ordinary @ eel is not s%itable !or t e @ater-s%pply, t%rbines may be %sed, etc0 5 e possession o! t is nat%ral !orce constit%tes a monopoly in t e ands o! its o@ner# it is a condition !or an increase in t e prod%cti8eness o! t e in8ested capital t at cannot be establis ed by t e prod%ction process o! t e capital itsel!# xlii t is nat%ral !orce, @ ic can be monopolised in t is manner, is al@ays bo%nd to t e land0 $%c a nat%ral !orce does not belong to t e general conditions o! t e sp ere o! prod%ction in D%estion, nor to t ose conditions o! t e latter @ ic may be generally establis ed0 -o@ let %s ass%me t at t e @ater!alls, along @it t e land to @ ic t ey belong, are eld by indi8id%als @ o are regarded as o@ners o! t ese portions o! t e eart , i0e0, @ o are lando@ners0 5 ese o@ners pre8ent t e in8estment o! capital in t e @ater!alls and t eir exploitation by capital0 5 ey can permit or !orbid s%c %tilisation0 A%t a @ater!all cannot be created by capital o%t o! itsel!0 5 ere!ore, t e s%rpl%s-pro!it @ ic arises !rom t e employment o! t is @ater!all is not d%e to capital, b%t to t e %tilisation o! a nat%ral !orce @ ic can be monopolised, and as been monopolised, by capital0 (nder t ese circ%mstances, t e s%rpl%s-pro!it is trans!ormed into gro%nd-rent, t at is, it !alls into possession o! t e o@ner o! a @ater!all0 &! t e man%!act%rer pays t e o@ner o! a @ater!all V1= ann%ally, t en is pro!it is V1+, t at is, 1+T on t e V1== @ ic t en make %p is cost o! prod%ction# and e is H%st as @ell or possibly better o!! t an all ot er capitalists in is sp ere o! prod%ction @ o operate @it steam0 &t @o%ld not alter matters one bit i! t e capitalist imsel! s o%ld be t e o@ner o! a @ater!all0 6e @o%ld, in s%c a case, pocket as be!ore t e s%rpl%s-pro!it o! V1= in is capacity as @ater!all o@ner, and not in is capacity as capitalist# and precisely beca%se t is s%rpl%s does not stem !rom is capital as s%c , b%t rat er !rom t e control o! a limited nat%ral !orce distinct !rom is capital @ ic can be monopolised, is it trans!ormed into gro%nd-rent0 'irst, it is e8ident t at t is rent is al@ays a di!!erential rent, !or it does not enter as a determining !actor into t e general prod%ction price o! commodities, b%t rat er is based on it0 &t in8ariably arises !rom t e di!!erence bet@een t e indi8id%al prod%ction price o! a partic%lar capital a8ing command o8er t e monopolised nat%ral !orce, on t e one and, and t e general prod%ction price o! t e total capital in8ested in t e sp ere o! prod%ction concerned, on t e ot er0 Secondly, t is gro%nd-rent does not arise !rom t e absol%te increase in t e prod%cti8eness o! employed capital, or labo%r appropriated by it, since t is can only red%ce t e 8al%e o! commodities# it is d%e to t e greater relati8e !r%it!%lness o! speci!ic separate capitals in8ested in a certain prod%ction sp ere, as compared @it in8estments o! capital @ ic are excl%ded !rom t ese exceptional and nat%ral conditions !a8o%ring prod%cti8eness0 For instance, i! t e %se o! steam s o%ld o!!er o8er@ elming ad8antages not o!!ered by t e %se o! @ater-po@er, despite t e !act t at coal as 8al%e and t e @ater-po@er as not, and i! t ese ad8antages more t an compensated !or t e expense, t en, t e @ater-po@er @o%ld not be %sed and co%ld not prod%ce any s%rpl%s-pro!it, and t ere!ore co%ld not prod%ce any rent0

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4hirdly, t e nat%ral !orce is not t e so%rce o! s%rpl%s-pro!it, b%t only its nat%ral basis, beca%se t is nat%ral basis permits an exceptional increase in t e prod%cti8eness o! labo%r0 &n t e same @ay, %se-8al%e is in general t e bearer o! exc ange-8al%e, b%t not its ca%se0 &! t e same %se-8al%e co%ld be obtained @it o%t labo%r, it @o%ld a8e no exc ange-8al%e, yet it @o%ld retain, as be!ore, t e same nat%ral %se!%lness as %se-8al%e0 3n t e ot er and, not ing can a8e exc ange-8al%e %nless it as %se-8al%e, i0e0, %nless it is a nat%ral bearer o! labo%r0 Were it not !or t e !act t at t e 8ario%s 8al%es are a8eraged o%t into prices o! prod%ction, and t e 8ario%s indi8id%al prices o! prod%ction into a general price o! prod%ction reg%lating t e market, t e mere increase in prod%cti8ity o! labo%r t ro%g %tilisation o! t e @ater!all @o%ld merely lo@er t e price o! commodities prod%ced @it t e aid o! t is @ater!all, @it o%t increasing t e s are o! pro!it contained in t ese commodities0 $imilarly, on t e ot er and, t is increased prod%cti8ity o! labo%r itsel! @o%ld not be con8erted into s%rpl%s-8al%e @ere it not !or t e !act t at capital appropriates t e nat%ral and social prod%cti8ity o! t e labo%r %sed by it as its o@n0 'ourthly, t e pri8ate o@ners ip o! t e @ater!all in itsel! as not ing to do @it t e creation o! t e s%rpl%s-8al%e Bpro!itC portion, and t ere!ore, o! t e price o! t e commodity in general, @ ic is prod%ced by means o! t e @ater!all0 5 is s%rpl%s-pro!it @o%ld also exist i! landed property did not exist# !or instance, i! t e land on @ ic t e @ater!all is sit%ated @ere %sed by t e man%!act%rer as %nclaimed land0 6ence landed property does not create t e portion o! 8al%e @ ic is trans!ormed into s%rpl%s-pro!it, b%t merely enables t e lando@ner, t e o@ner o! t e @ater!all, to coax t is s%rpl%s-pro!it o%t o! t e pocket o! t e man%!act%rer and into is o@n0 &t is not t e ca%se o! t e creation o! s%c s%rpl%s-pro!it, b%t is t e ca%se o! its trans!ormation into t e !orm o! gro%nd-rent, and t ere!ore o! t e appropriation o! t is portion o! t e pro!it, or commodity-price, by t e o@ner o! t e land or @ater!all0 'ifthly, it is e8ident t at t e price o! t e @ater!all, t at is, t e price @ ic t e lando@ner @o%ld recei8e @ere e to sell it to a t ird party or e8en to t e man%!act%rer imsel!, does not immediately enter into t e prod%ction price o! t e commodities, alt o%g it does enter into t e indi8id%al cost-price o! t e man%!act%rer# beca%se t e rent arises ere !rom t e price o! prod%ction o! similar commodities prod%ced by steam mac inery, and t is price is reg%lated independently o! t e @ater!all0 F%rt ermore, t is price o! t e @ater!all on t e @ ole is an irrational expression, b%t be ind it is idden a real economic relations ip0 5 e @ater!all, like land in general, and like any nat%ral !orce, as no 8al%e beca%se it does not represent any materialised labo%r, and t ere!ore, it as no price, @ ic is normally no more t an t e expression o! 8al%e in money terms0 W ere t ere is no 8al%e, t ere is also eo ipso not ing to be expressed in money0 5 is price is not ing more t an t e capitalised rent0 'ando@ners ip enables t e lando@ner to appropriate t e di!!erence bet@een t e indi8id%al pro!it and a8erage pro!it0 5 e pro!it t %s acD%ired, @ ic is rene@ed e8ery year, may be capitalised, and appears t en as t e price o! t e nat%ral !orce itsel!0 &! t e s%rpl%s-pro!it realised by t e man%!act%rer %sing t e @ater!all amo%nts to V1= per year, and t e a8erage interest is +T, t en t ese V1= represent t e ann%al interest on a capital o! V<== and t e capitalisation o! t e ann%al V1= @ ic t e @ater!all enables its o@ner to appropriate !rom t e man%!act%rer, appears t en as t e capital-8al%e o! t e @ater!all itsel!0 5 at it is not t e @ater!all itsel! @ ic as 8al%e, b%t t at its price is a mere re!lection o! t e appropriated s%rpl%s-pro!it capitalistically calc%lated, becomes at once e8ident !rom t e !act t at t e price o! V<== represents merely t e prod%ct obtained by m%ltiplying a s%rpl%s-pro!it o! V1= by <= years, @ ereas, ot er conditions remaining eD%al, t e same @ater!all @ill enable its o@ner to appropriate t ese V1= e8ery year !or an inde!inite n%mber o! years I 3= years, 1== years, or x years# and, @ ereas, on t e ot er and, s o%ld some ne@ met od o! prod%ction not applicable @it @aterpo@er red%ce t e cost-price o! commodities prod%ced by steam mac inery !rom V1== to V*=, t e s%rpl%s-pro!it, and t ereby t e rent, and t %s t e price o! t e @ater!all, @o%ld disappear0

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-o@ t at @e a8e described t e general concept o! di!!erential rent, @e s all pass on to its consideration in agric%lt%re proper0 W at applies to agric%lt%re @ill also apply on t e @ ole to mining0

Chapter 3*. #irst #or

of 'ifferential Rent

,'ifferential Rent 5.
)icardo is D%ite rig t in t e !ollo@ing obser8ations: K)ent is al@ays t e di!!erence bet@een t e prod%ce obtained by t e employment o! t@o eD%al D%antities o! capital and labo%rL B&rinciples, p0 +*C0 /6e means di!!erential rent, !or e ass%mes t at no ot er rent b%t di!!erential rent exists01 6e s o%ld a8e added, Kon eD%al areas o! landL in so !ar as it is a matter o! gro%nd-rent and not s%rpl%s-pro!it in general0 &n ot er @ords, s%rpl%s-pro!it, i! normal and not d%e to accidental occ%rrences in t e circ%lation process, is al@ays prod%ced as a di!!erence bet@een t e prod%cts o! t@o eD%al D%antities o! capital and labo%r, and t is s%rpl%s-pro!it is trans!ormed into gro%nd-rent @ en t@o eD%al D%antities o! capital and labo%r are employed on eD%al areas o! land @it %neD%al res%lts0 Moreo8er, it is by no means absol%tely necessary !or t is s%rpl%s-pro!it to arise !rom t e %neD%al res%lts o! eD%al D%antities o! in8ested capital0 5 e 8ario%s in8estments may also employ %neD%al D%antities o! capital0 &ndeed, t is is generally t e case0 A%t eD%al proportions, !or instance V1== o! eac , prod%ce %neD%al res%lts# t at is, t eir rates o! pro!it are di!!erent0 5 is is t e general prereD%isite !or t e existence o! s%rpl%s-pro!it in any sp ere o! capital in8estment0 5 e second prereD%isite is t e trans!ormation o! t is s%rpl%s-pro!it into t e !orm o! gro%nd-rent Bo! rent in general as a !orm distinct !rom pro!itC# it m%st be in8estigated in eac case @ en, o@, %nder @ at conditions t is trans!ormation takes place0 )icardo is also rig t in t e !ollo@ing obser8ation, pro8ided it is limited to di!!erential rent: KW ate8er diminis es t e ineD%ality in t e prod%ce obtained on t e same or on ne@ land, tends to lo@er rent, and @ ate8er increases t at ineD%ality, necessarily prod%ces an opposite e!!ect and tends to raise itL Bp0>2C0 6o@e8er, among t ese ca%ses are not merely t e general ones B!ertility and locationC, b%t also 1C t e distrib%tion o! taxes, depending on @ et er it operates %ni!ormly or not# t e latter is al@ays t e case @ en, as in England, it is not centralised and @ en t e tax is le8ied on land, not on rent# <C t e ineD%alities arising !rom a di!!erence in agric%lt%ral de8elopment in di!!erent parts o! t e co%ntry, since t is line o! prod%ction, o@ing to its traditional c aracter, e8ens o%t @it more di!!ic%lty t an man%!act%re# and 3C t e ineD%ality in distrib%tion o! capital among capitalist tenants0 $ince t e in8asion o! agric%lt%re by t e capitalist mode o! prod%ction, trans!ormation o! independently prod%cing peasants into @age-@orkers, is in !act t e last conD%est o! t is mode o! prod%ction, t ese ineD%alities are greater ere t an in any ot er line o! prod%ction0 6a8ing made t ese preliminary remarks, & @ill !irst present a brie! s%mmary o! t e c aracteristic !eat%res o! my analysis in contradistinction to t at o! )icardo, etc0 We s all !irst consider t e %neD%al res%lts o! eD%al D%antities o! capital applied to di!!erent plots o! land o! eD%al siEe# or, in t e case o! %neD%al siEe, res%lts calc%lated on t e basis o! eD%al areas0

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5 e t@o general ca%ses o! t ese %neD%al res%lts I D%ite independent o! capital I are: 1C 'ertility0 BWit re!erence to t is !irst point, it @ill be necessary to disc%ss @ at is meant by nat%ral !ertility o! land and @ at !actors are in8ol8ed0C <C 5 e location o! t e land0 5 is is a decisi8e !actor in t e case o! colonies and in general determines t e seD%ence in @ ic plots o! land can be c%lti8ated0 F%rt ermore, it is e8ident t at t ese t@o di!!erent ca%ses o! di!!erential rent I !ertility and location I may @ork in opposite directions0 ? certain plot o! land may be 8ery !a8o%rably located and yet be 8ery poor in !ertility, and 8ice 8ersa0 5 is circ%mstance is important, !or it explains o@ it is possible t at bringing into c%lti8ation t e land o! a certain co%ntry may eD%ally @ell proceed !rom t e better to t e @orse land as 8ice 8ersa0 Finally, it is clear t at t e progress o! social prod%ction in general as, on t e one and, t e e!!ect o! e8ening o%t di!!erences arising !rom location as a ca%se o! gro%nd-rent, by creating local markets and impro8ing locations by establis ing comm%nication and transportation !acilities# on t e ot er and, it increases t e di!!erences in indi8id%al locations o! plots o! land by separating agric%lt%re !rom man%!act%ring and !orming large centres o! prod%ction, on t e one and, @ ile relati8ely isolating agric%lt%ral districts, on t e ot er0 For t e present, o@e8er, @e s all lea8e t is point concerning location o%t o! consideration and con!ine o%rsel8es to nat%ral !ertility0 ?side !rom climatic !actors, etc0, t e di!!erence in nat%ral !ertility depends on t e c emical composition o! t e top soil, t at is, on its di!!erent plant n%trition content0 6o@e8er, ass%ming t e c emical composition and nat%ral !ertility in t is respect to be t e same !or t@o plots o! land, t e act%al e!!ecti8e !ertility di!!ers depending on @ et er t ese elements o! plant n%trition are in a !orm @ ic may be more or less easily assimilated and immediately %tilised !or no%ris ing t e crops0 6ence, it @ill depend partly %pon c emical and partly %pon mec anical de8elopments in agric%lt%re to @ at extent t e same nat%ral !ertility may be made a8ailable on plots o! land o! similar nat%ral !ertility0 Fertility, alt o%g an obHecti8e property o! t e soil, al@ays implies an economic relation, a relation to t e existing c emical and mec anical le8el o! de8elopment in agric%lt%re, and, t ere!ore, c anges @it t is le8el o! de8elopment0 W et er by c emical means Bs%c as t e %se o! certain liD%id !ertilisers on sti!! clay soil and calcination o! ea8y clayey soilsC or mec anical means Bs%c as special plo%g s !or ea8y soilsC, t e obstacles @ ic made a soil o! eD%al !ertility act%ally less !ertile can be eliminated Bdrainage also belongs %nder t is eadC0 3r e8en t e seD%ence in types o! soils taken %nder c%lti8ation may be c anged t ereby, as @as t e case, !or instance, @it lig t sandy soil and ea8y clayey soil at a certain period o! de8elopment in Englis agric%lt%re0 5 is s o@s once again t at istorically, in t e seD%ence o! soils taken %nder c%lti8ation, one may pass o8er !rom more !ertile to less !ertile soils as @ell as 8ice 8ersa0 5 e same res%lts may be obtained by an arti!icially created impro8ement in soil composition or by a mere c ange in agric%lt%ral met ods0 Finally, t e same res%lt may be bro%g t abo%t by a c ange in t e ierarc ical arrangement o! t e soil types d%e to di!!erent conditions o! t e s%bsoil, as soon as t e latter like@ise begins to be tilled and t%rned o8er into top layers0 5 is is in part dependent on t e employment o! ne@ agric%lt%ral met ods Bs%c as t e c%lti8ation o! !odder-grassC and in part on t e employment o! mec anical means @ ic eit er t%rn t e s%bsoil o8er into top layers, mix it @it top soil, or c%lti8ate t e s%bsoil @it o%t t%rning it %p0 ?ll t ese in!l%ences %pon t e di!!erential !ertility o! 8ario%s plots o! land are s%c t at !rom t e standpoint o! economic !ertility, t e le8el o! labo%r prod%cti8ity, in t is case t e capacity o! agric%lt%re to make t e nat%ral soil !ertility immediately exploitable I a capacity @ ic di!!ers in 8ario%s periods o! de8elopment I is as m%c a !actor in so-called nat%ral soil !ertility as its c emical composition and ot er nat%ral properties0 We ass%me, t en, t e existence o! a partic%lar stage o! de8elopment in agric%lt%re0 We ass%me !%rt ermore t at t e ierarc ical arrangement o! soil types accords @it t is stage o! de8elopment, as is, o! co%rse, al@ays t e case !or sim%ltaneo%s capital in8estments on di!!erent plots o! land0 7i!!erential rent may t en !orm eit er an ascending or a descending seD%ence, !or

26+

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alt o%g t e seD%ence is gi8en !or t e totality o! act%ally c%lti8ated plots o! land, a series o! mo8ements leading to its !ormation as in8ariably taken place0 'et %s ass%me t e existence o! !o%r kinds o! soil: ?, A, ;, 70 'et %s !%rt ermore ass%me t e price o! one D%arter o! @ eat R V3, or 6= s illings0 $ince t e rent is solely di!!erential rent, t is price o! 6= s illings per D%arter !or t e @orst soil is eD%al to t e price o! prod%ction, t at is, eD%al to t e capital pl%s a8erage pro!it0 'et ? be t is @orst soil, @ ic yields 1 D%arter R 6= s illings !or eac += s illings spent# ence t e pro!it amo%nts to 1= s illings, or <=T0 'et A yield < D%arters R 1<= s illings !or t e same expendit%re0 5 is @o%ld mean >= s illings o! pro!it, or a s%rpl%s-pro!it o! 6= s illings0 'et ; yield 3 D%arters R 18= s illings !or t e same expendit%re# total pro!it R 13= s illings# s%rpl%s-pro!it R 1<= s illings0 'et 7 yield 2 D%arters R <2= s illings R 18= s illings o! s%rpl%s-pro!it0 We @o%ld t en a8e t e !ollo@ing seD%ence: TABLE I ,rod%ct 5ype o! $oil M%arters $ illings ? A ; 7 5otal000 1 < 3 2 1= Drs 6= 1<= 18= <2= 6==s 0 ;apital ?d8anced += += += += ,ro!it )ent

M%arters $ illings M%arters $ illings 1N6 1= 1 1N6 >= < 1N6 13= 3 1N6 1*= I 1 < 3 6 Drs I 6= 1<= 18= 36=s 0

5 e respecti8e rents are: 7 R 1*=s 0 I 1=s 0, or t e di!!erence bet@een 7 and ?# ; R 13=s 0 I 1=s 0, or t e di!!erence bet@een ; and ?# A R >=s 0 I 1=s 0, or t e di!!erence bet@een A and ?# and t e total rent !or A, ;, 7 R 6 D%arters R 36= s illings, eD%al to t e s%m o! t e di!!erences bet@een 7 and ?, ; and ?, A and ?0 5 is seD%ence, @ ic represents a gi8en prod%ct in a gi8en condition may, considered abstractly B@e a8e already o!!ered t e reasons @ y t is may be t e case in realityC, descend !rom 7 to ?, !rom !ertile to less and less !ertile soil, or rise !rom ? to 7, !rom relati8ely poor to more and more !ertile soil, or, !inally, may !l%ct%ate, i0e0, no@ rising, no@ descending I !or instance !rom 7 to ;, !rom ; to ?, and !rom ? to A0 5 e process in t e case o! a descending seD%ence @as as !ollo@s: 5 e price o! a D%arter o! @ eat rose grad%ally !rom, say, 1+ s illings to 6= s illings0 ?s soon as t e 2 D%arters prod%ced by 7 B@e may consider t ese 2 D%arters as so many million D%artersC no longer s%!!iced, t e price o! @ eat rose to a point @ ere t e s%pply s ortage co%ld be prod%ced by ;0 5 at is to say, t e price o! @ eat m%st a8e risen to <= s illings per D%arter0 W en it ad risen to 3= s illings per D%arter, A co%ld be taken %nder c%lti8ation, and @ en it reac ed 6= s illings ? co%ld be taken %nder c%lti8ation# and t e capital in8ested did not a8e to content itsel! @it a rate o! pro!it lo@er t an <=T0 &n t is manner, a rent @as establis ed !or 7, !irst o! + s illings per D%arter R <= s illings !or t e 2 D%arters prod%ced by it# t en o! 1+ s illings per D%arter R 6= s illings, t en o! 2+ s illings per D%arter R 18= s illings !or 2 D%arters0 &! t e rate o! pro!it o! 7 originally @as similarly R <= T, t en its total pro!it on 2 D%arters o! @ eat @as also b%t 1= s illings, b%t t is represented more grain @ en t e price @as 1+ s illings t an it does @ en t e price is 6= s illings0 A%t since t e grain enters into t e reprod%ction o!

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labo%r-po@er, and part o! eac D%arter as to make good some portion o! @ages and anot er constant capital, t e s%rpl%s-8al%e %nder t ese conditions @as ig er, and t %s ot er t ings being eD%al t e rate o! pro!it too0 B5 e matter o! rate o! pro!it @ill a8e to be specially analysed, and in greater detail0C 3n t e ot er and, i! t e seD%ence @ere in t e re8erse order, t at is, i! t e process initiated !rom ?, t en t e price o! @ eat at !irst @o%ld rise abo8e 6= s illings per D%arter @ en ne@ land @o%ld a8e to be taken %nder c%lti8ation0 A%t since t e necessary s%pply @o%ld be prod%ced by A, a s%pply o! < D%arters, t e price @o%ld !all to 6= s illings again, !or A prod%ced @ eat at a cost o! 3= s illings per D%arter, b%t sold it at 6= s illings beca%se t e s%pply H%st s%!!iced to co8er t e demand0 5 %s a rent @as !ormed, !irst o! 6= s illings !or A, and in t e same @ay !or ; and 7# it is ass%med t ro%g o%t t at t e market-price remained at 6= s illings, alt o%g ; and 7 prod%ced @ eat a8ing an act%al 8al%e o! <= and 1+ s illings per D%arter respecti8ely, beca%se t e s%pply o! t e one D%arter prod%ced by ? @as needed as m%c as e8er to satis!y t e total demand0 &n t is case, t e increase in demand abo8e s%pply, @ ic @as !irst satis!ied by ?, t en by ? and A, @o%ld not a8e made it possible to c%lti8ate A, ; and 7 s%ccessi8ely, b%t @o%ld merely a8e ca%sed a general extension o! t e sp ere o! c%lti8ation, and t e more !ertile lands mig t only later come %nder c%lti8ation0 &n t e !irst seD%ence, an increase in price @o%ld raise t e rent and decrease t e rate o! pro!it0 $%c a decrease mig t be entirely or partially c ecked by co%nteracting circ%mstances0 5 is point @ill a8e to be treated later in more detail0 &t s o%ld not be !orgotten t at t e general rate o! pro!it is not determined %ni!ormly in all sp eres o! prod%ction by t e s%rpl%s-8al%e0 &t is not t e agric%lt%ral pro!it @ ic determines ind%strial pro!it, b%t 8ice 8ersa0 A%t o! t is more anon0 &n t e second seD%ence t e rate o! pro!it on in8ested capital @o%ld remain t e same0 5 e amo%nt o! pro!it @o%ld be represented by less grain# b%t t e relati8e price o! grain, compared @it t at o! ot er commodities, @o%ld a8e risen0 6o@e8er, t e increase in pro!it @ ere8er s%c an increase takes place, becomes separated !rom t e pro!it in t e !orm o! rent, instead o! !lo@ing into t e pockets o! t e capitalist tenant !armer and appearing as a gro@ing pro!it0 5 e price o! grain, o@e8er, co%ld remain %nc anged %nder t e conditions ass%med ere0 5 e de8elopment and gro@t o! di!!erential rent @o%ld remain t e same !or !ixed as @ell as !or increasing prices, and !or a contin%o%s progression !rom @orse to better soils as @ell as !or a contin%o%s retrogression !rom better to @orse soils0 5 %s !ar @e a8e ass%med: 1C t at t e price rises in one seD%ence and remains stationary in t e ot er# <C t at t ere is a contin%o%s progression !rom better to @orse soil, or !rom @orse to better soil0 A%t no@ let %s ass%me t at t e demand !or grain rises !rom its original !ig%re o! 1= to 1> D%arters# !%rt ermore, t at t e @orst soil ? is displaced by anot er soil ?, @ ic prod%ces 1 X D%arters at a price o! prod%ction o! 6= s illings B+=s 0 cost pl%s 1=s 0 !or <=T pro!itC, so t at its price o! prod%ction per D%arter R 2+ s illings# or, per aps, t e old soil ? may a8e impro8ed t ro%g contin%o%s rational c%lti8ation, or be c%lti8ated more prod%cti8ely at t e same cost, !or instance t ro%g t e introd%ction o! clo8er, etc0, so t at its o%tp%t @it t e same in8estment o! capital rises to 1 X D%arters0 'et %s also ass%me t at soil types A, ; and 7 yield t e same o%tp%t as pre8io%sly, b%t t at ne@ soil types a8e been introd%ced, !or instance, ?" @it a !ertility lying bet@een ? and A, and also A" and AL @it a !ertility bet@een A and ;0 We s o%ld t en obser8e t e !ollo@ing p enomena: 'irstI 5 e price o! prod%ction o! a D%arter o! @ eat, or its reg%lating market-price, !alls !rom 6= s illings to 2+ s illings, or by <+T0 SecondI 5 e c%lti8ation proceeds sim%ltaneo%sly !rom more !ertile to less !ertile soil, and !rom less !ertile to more !ertile soil0 $oil ?" is more !ertile t an ?, b%t less !ertile t an t e it erto c%lti8ated soils A, ; and 70 A" and AL are more !ertile t an ?, ?" and A, b%t less !ertile t an ;

26>

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and 70 5 e seD%ence t %s proceeds in crisscross !as ion0 ;%lti8ation does not proceed to soil absol%tely less !ertile t an ?, etc0, b%t to relati8ely less !ertile soil @it respect to t e it erto most !ertile soil types ; and on t e ot er and, c%lti8ation does not proceed to soil absol%tely more !ertile, b%t to relati8ely more !ertile soil @it respect to t e it erto least !ertile soil ?, or ? and A0 4hirdlyI 5 e rent on A !alls# like@ise t e rent on ; and 7# b%t t e total rental in grain rises !rom 6 D%arters to > W t e amo%nt o! c%lti8ated and rent-yielding land increases, and t e amo%nt o! prod%ce rises !rom 1= D%arters to 1>0 5 e pro!it, alt o%g it remains t e same !or ?, rises i! expressed in grain, b%t t e rate o! pro!it itsel! mig t rise, beca%se t e relati8e s%rpl%s-8al%e does0 &n t is case, t e @age, i0e0, t e in8estment o! 8ariable capital and t ere!ore t e total o%tlay, is red%ced beca%se o! t e c eapening o! means o! s%bsistence0 5 is total rental expressed in money !alls !rom 36= s illings to 32+ s illings0 TABLE II 5ype o! $oil ? ?" A A" AL ; 7 5otal000 ,rod%ct M%arters $ illings 1X 1W < <X <W 3 2 1> 6= >+ *= 1=+ 1<= 13+ 18= ;apital &n8ested += += += += += += += ,ro!it ,rice o! ,rod%ction M%arters $ illings M%arters $ illings per M%arter <N* 1= +N* <+ 8N* 2= 1 <N* ++ 1 +N* >= 1 8N* 8+ < 8N* 13= I X W 1 1X 1W <W >W I 1+ 3= 2+ 6= >+ 1<= 32+ 2+ 36 3= <+ +N>k <<Z <= 1+ s 0 s s s s s s 0 0 0 0 0 0 )ent

Bk &n t e :erman 18*2 edition t is reads: <+ <N>0 I 0d0C 'et %s dra@ %p t e ne@ seD%ence0 /$ee p0 6++ I 0d01 Finally, i! only soil types ?, A, ; and 7 @ere c%lti8ated as be!ore, b%t t eir prod%cti8eness rose in s%c a @ay t at ? prod%ced < D%arters instead o! 1 D%arter, A I 2 D%arters instead o! <, ; I > D%arters instead o! 3, and 7 I 1= D%arters instead o! 2, so t at t e same ca%ses a!!ect t e 8ario%s types o! soil di!!erently, t e total prod%ction increases !rom 1= D%arters to <30 ?ss%ming t at demand absorbs t ese <3 D%arters t ro%g an increase in pop%lation and a !all in prices, @e s o%ld obtain t e !ollo@ing res%lt: TABLE III 5ype o! $oil ? A ; 7 5otal000 ,rod%ct )ent ,rice o! ,ro!it ;apital ,rod%ction &n8ested per M%arter M%arters $ illings M%arters $ illings M%arters $ illings < 2 > 1= <3 6= 1<= <1= 3== += += += += 3= 1+ 8 6 X <X 2N> +X 8X 1= >= 16= <+= = < + 8 1+ = 6= 1+= <2= 2+=

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5 e n%merical proportions in t is and in ot er tables are c osen at random b%t t e ass%mptions are D%ite rational0 5 e !irst and principal ass%mption is t at an impro8ement in agric%lt%re acts di!!erently %pon di!!erent soils, and in t is case a!!ects t e best types o! soil, ; and 7, more t an types ? and A0 Experience as s o@n t at t is is generally t e case, alt o%g t e opposite may also take place0 &! t e impro8ement a!!ected t e poorer soils more t an t e better ones, rent on t e latter @o%ld a8e !allen instead o! risen0 A%t in o%r table, @e a8e ass%med t at t e absol%te gro@t in !ertility o! all soil types is sim%ltaneo%sly accompanied by an increase in greater relati8e !ertility o! t e better soil types, ; and 7# t is means an increase in t e di!!erence bet@een t e prod%ct at t e same capital in8estment, and t %s an increase in di!!erential rent0 5 e second ass%mption is t at total demand keeps pace @it t e increase in t e total prod%ct0 'irst, one need not imagine s%c an increase coming abo%t abr%ptly, b%t rat er grad%ally I %ntil seD%ence &&& is establis ed0 Secondly, it is not tr%e t at t e cons%mption o! necessities o! li!e does not increase as t ey become c eaper0 5 e abolition o! t e ;orn 'a@s in England pro8ed t e re8erse to be t e case BF0 -e@man, ,ectures on &olitical 0conomy, 'ondon, 18+1, p01+80 I 0d0C# t e opposite 8ie@ stems solely !rom t e !act t at large and s%dden di!!erences in ar8ests, @ ic are mere res%lts o! @eat er, bring abo%t at one time an extraordinary !all, at anot er an extraordinary rise, in grain prices0 W ile in s%c a case t e s%dden and s ort-li8ed red%ction in price does not a8e time to exert its !%ll e!!ect %pon t e extension o! cons%mption, t e opposite is tr%e @ en a red%ction arises !rom t e lo@ering o! t e reg%lating price o! prod%ction itsel!, i0e0, is o! a long-term nat%re0 4hirdly, a part o! t e grain may be cons%med in t e !orm o! brandy or beer# and t e increasing cons%mption o! bot o! t ese items is by no means con!ined @it in narro@ limits0 'ourthly, t e matter depends in part %pon t e increase in pop%lation and in part on t e !act t at t e co%ntry may be grain-exporting, as England still @as long a!ter t e middle o! t e 18t cent%ry, so t at t e demand is not solely reg%lated @it in t e con!ines o! national cons%mption0 'inally, t e increase and price red%ction in @ eat prod%ction may res%lt in making @ eat, instead o! rye or oats, t e principal article o! cons%mption !or t e masses, so t at t e demand !or it may gro@ i! only !or t is reason, H%st as t e opposite may take place @ en prod%ction decreases and prices rise0 5 %s, %nder t ese ass%mptions, and @it t e pre8io%sly selected ratios, seD%ence &&& yields t e res%lt t at t e price per D%arter !alls !rom 6= to 3= s illings, t at is, by +=T# t at prod%ction, compared to seD%ence &, increases !rom 1= to <3 D%arters, i0e0, by 13=T# t at t e rent remains !ixed !or soil A, increases by <+T B&n t e :erman 18*2 edition t is reads: do%bles0I 0d0C !or ;, and by 33XT B Dbid.p <<0I 0d0C !or 7# and t at t e total rental increases !rom V18 to V<<Z, BDbid. <<0 I 0d0C, by <+T0 BDbid.: << 1N*T I 0d0C ? comparison o! t ese t ree tables B@ ereby seD%ence & is to be taken t@ice, rising !rom ? to 7, and descending !rom 7 to ?C, @ ic may be considered eit er as gi8en gradations %nder some stage o! society, !or instance, as existing side by side in t ree di!!erent co%ntries, or as s%cceeding one anot er in di!!erent periods o! de8elopment @it in t e same co%ntry, s o@s: 1C 5 e seD%ence, @ en complete, @ ate8er t e co%rse o! its !ormati8e process may a8e been, in8ariably appears as being in a descending line# !or @ en analysing rent t e point o! depart%re @ill al@ays be land yielding t e maxim%m rent, and only !inally do @e come to land yielding no rent0 <C 5 e price o! prod%ction on t e @orst soil, i0e0, @ ic yields no rent, is al@ays t e one reg%lating t e market-price, alt o%g t e latter in 5able &, i! its seD%ence @ere !ormed in an ascending line, only remained !ixed beca%se better and better soil @as constantly dra@n into c%lti8ation0 &n s%c a case, t e price o! grain prod%ced on t e best soil is a reg%lating one ill so !ar as it depends %pon t e D%antity prod%ced on s%c soil to @ at extent soil type ? remains t e reg%lator0 &! A, ; and 7 s o%ld prod%ce more t an demand reD%ires, ? @o%ld cease to be t e reg%lator0 $torc as t is point aEily in mind @ en e adopts t e best soil type as t e reg%lating one0 B60 $torc , Cours d57conomie politi3ue, ou 0 position des principes 3ui determinent la

26*

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prosp7rit7 des nations, 5ome &&, $t0-,etersbo%rg, 181+, pp0 >8->*0 I Ed0C &n t is manner, t e ?merican price o! grain reg%lates t e Englis price0 3C 7i!!erential rent arises !rom di!!erences in t e nat%ral !ertility o! t e soil @ ic is gi8en !or e8ery gi8en stage o! agric%lt%ral de8elopment Blea8ing aside !or t e present t e D%estion o! locationC# in ot er @ords, !rom t e limited area o! t e best land, and !rom t e circ%mstance t at eD%al amo%nts o! capital m%st be in8ested on %neD%al types o! soil, so t at an %neD%al prod%ct res%lts !rom t e same amo%nt o! capital0 2C 5 e existence o! a di!!erential rent and o! a grad%ated di!!erential rent can de8elop eD%ally @ell in a descending seD%ence, @ ic proceeds !rom better to @orse soils, as in an ascending one, @ ic progresses in t e opposite direction !rom @orse to better soils# or it may be bro%g t abo%t in c eckered !as ion by alternating mo8ements0 B$eD%ence & may be !ormed by proceeding !rom 7 to ?, or !rom ? to 7# seD%ence && comprises bot types o! mo8ement0C +C 7epending on its mode o! !ormation, di!!erential rent may de8elop along @it a stationary, rising or !alling price o! t e prod%cts o! t e land0 &n t e case o! a !alling price, total prod%ction and total rental may rise, and rent may de8elop on it erto rentless land, e8en t o%g t e @orst soil ? may a8e been displaced by a better one or may itsel! a8e impro8ed, and e8en t o%g t e rent may decrease on ot er land @ ic is better, or e8en t e best B5able &&C# t is process may also be connected @it a !all in total rent Bin moneyC0 Finally, at a time @ en prices !all on acco%nt o! a general impro8ement in c%lti8ation, so t at t e prod%ct o! t e @orst soil and its price decrease, t e rent on some o! t e better soils may remain t e same, or may !all, @ ile it may rise on t e best ones0 -e8ert eless, t e di!!erential rent o! e8ery soil, compared @it t e @orst soil, depends, i! t e di!!erence in D%antity o! prod%cts is gi8en, %pon t e price, say, o! a D%arter o! @ eat0 A%t @ en t e price is gi8en, di!!erential rent depends %pon t e magnit%de o! t e di!!erence in D%antity o! prod%cts, and i! @it an increasing absol%te !ertility o! all soils t at o! t e better ones gro@s relati8ely more t an t at o! t e @orse ones, t e magnit%de o! t is di!!erence gro@s proportionately0 &n t is @ay Bsee 5able &C, @ en t e price is 6= s illings, t e rent on 7 is determined by its di!!erential prod%ct as compared @it ?# in ot er @ords, by t e s%rpl%s o! 3 D%arters0 5 e rent is t ere!ore R 3 \ 6= R l8= s illings0 A%t in 5able &&&, @ ere t e price R 3= s illings, t e rent is determined by t e D%antity o! s%rpl%s-prod%ct o! 7 as compared @it ? R 8 D%arters# @e t ere!ore obtain 8 \ 3= R <2= s illings0 5 is takes care o! t e !irst !alse ass%mption regarding di!!erential rent I still !o%nd among West, Malt %s, and )icardo I namely, t at it necessarily pres%pposes a mo8ement to@ard @orse and @orse soil, or an e8er-decreasing !ertility o! t e soil0 B/West1 0ssay on the +pplication :f Capital to ,and, 'ondon, 181+0 Malt %s, ,rinciples o! ,olitical Economy, 'ondon, 18360 Malt %s, +n Dn3uiry into the $ature and &rogress of 9ent, and the &rinciples by which it is regulated , 'ondon, 181+0 )icardo, :n the &rinciples of &olitical 0conomy, and 4a ation , 5 ird edition, 'ondon, 28<2, ; ap0 110 I0d.C &t can be !ormed, as @e a8e seen, @it a mo8ement to@ard better and better soil# it can be !ormed @ en a better soil takes t e lo@est position t at @as !ormerly occ%pied by t e @orst soil# it can be connected @it a progressi8e impro8ement in agric%lt%re0 5 e precondition is merely t e ineD%ality o! di!!erent kinds o! soil0 $o !ar as t e increase in prod%cti8ity is concerned, it ass%mes t at t e increase in absol%te !ertility o! t e total area does not eliminate t is ineD%ality, b%t eit er increases it, lea8es it %nc anged, or merely red%ces it0 From t e beginning to t e middle o! t e 18t cent%ry, England"s grain prices constantly !ell in spite o! t e !alling prices o! gold and sil8er, @ ile at t e same time B8ie@ing t is entire period as a @ oleC t ere @as an increase in rent, in t e o8er-all amo%nt o! rent, in t e area o! c%lti8ated land, in agric%lt%ral prod%ction, and in pop%lation0 5 is corresponds to 5able & taken in conH%nction @it 5able && in an ascending line, b%t in s%c a @ay t at t e @orst land ? is eit er impro8ed or eliminated !rom t e grain-prod%cing area# o@e8er, t is does not mean t at it @as not %sed !or ot er agric%lt%ral or ind%strial p%rposes0

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From t e early 1*t cent%ry Bdate to be speci!ied more preciselyC %ntil 181+ t ere is a constant rise in grain prices, accompanied by a steady increase in rent, in t e o8er-all amo%nt o! rent, in t e area o! c%lti8ated land, in agric%lt%ral prod%ction, and in pop%lation0 5 is corresponds to 5able & in a descending line0 B;ite some so%rces ere on t e c%lti8ation o! in!erior land in t at period0C &n ,etty"s and 7a8enant"s time, !armers and lando@ners complained abo%t impro8ements and t e bringing into c%lti8ation o! ne@ land# t e rent on better lands decreased, and t e total amo%nt o! rent increased t ro%g t e extension o! t e area o! land yielding rent0 B5 ese t ree points s o%ld be ill%strated later by D%otations# like@ise !or t e di!!erence in !ertility o! 8ario%s c%lti8ated sections o! land in a partic%lar co%ntry0C )egarding di!!erential rent in general, it is to be noted t at t e market-8al%e is al@ays abo8e t e total price o! prod%ction o! t e total D%antity o! prod%cts0 ?s an example, let %s take 5able &0 5en D%arters o! total prod%ct are sold !or 6== s illings beca%se t e market-price is determined by t e price o! prod%ction o! ?, @ ic amo%nts to 6= s illings per D%arter0 A%t t e act%al price o! prod%ction is: ? 1 Dr R 6= s 0 A < Drs R 6= s 0 ; 3 Drs R 6= s 0 7 2 Drs R 6= s 0 1 Dr R 6= s 0 1 Dr R 3= s 0 1 Dr R <= s 1 Dr R 1+ s 0

1& <rs = 04& sh. %verage 1 <r = 04 sh. 5 e act%al price o! prod%ction o! t ese 1= D%arters is <2= s illings# b%t t ey are sold !or 6== s illings, i0e0, at <+=T o! t e price o! prod%ction0 5 e act%al a8erage price !or 1 D%arter is <2 s illings# t e market-price is 6= s illings, i0e0, also <+=T o! t e prod%ction price0 5 is is determination by market-8al%e as it asserts itsel! on t e basis o! capitalist prod%ction t ro%g competition# t e latter creates a !alse social 8al%e0 5 is arises !rom t e la@ o! market8al%e, to @ ic t e prod%cts o! t e soil are s%bHect0 5 e determination o! t e market-8al%e o! prod%cts, incl%ding t ere!ore agric%lt%ral prod%cts, is a social act, albeit a socially %nconscio%s and %nintentional one0 &t is based necessarily %pon t e exc ange-8al%e o! t e prod%ct, not %pon t e soil and t e di!!erences in its !ertility0 &! @e s%ppose t e capitalist !orm o! society to be abolis ed and society organised as a conscio%s and planned association, t en t e 1= D%arters @o%ld represent a D%antity o! independent labo%r-time eD%al to t at contained in <2= s illings0 $ociety @o%ld not t en b%y t is agric%lt%ral prod%ct at t@o and a al! times t e act%al labo%r-time embodied in it and t e basis !or a class o! lando@ners @o%ld t %s be destroyed0 5 is @o%ld a8e t e same e!!ect as a red%ction in price o! t e prod%ct to t e same amo%nt res%lting !rom !oreign imports0 W ile it is, t ere!ore, tr%e t at, by retaining t e present mode o! prod%ction, b%t ass%ming t at t e di!!erential rent is paid to t e state, prices o! agric%lt%ral prod%cts @o%ld, e8eryt ing else being eD%al, remain t e same, it is eD%ally @rong to say t at t e 8al%e o! t e prod%cts @o%ld remain t e same i! capitalist prod%ction @ere s%perseded by association0 5 e identity o! t e market-price !or commodities o! t e same kind is t e manner @ ereby t e social c aracter o! 8al%e asserts itsel! on t e basis o! capitalist prod%ction and, in general, any prod%ction based on t e exc ange o! commodities bet@een indi8id%als0 W at society o8erpays !or agric%lt%ral prod%cts in its capacity o! cons%mer, @ at is a min%s in t e realisation o! its labo%r-time in agric%lt%ral prod%ction, is no@ a pl%s !or a portion o! society, !or t e landlords0

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? second circ%mstance, important !or t e analysis to be gi8en %nder && o! t e next c apter, is t e !ollo@ing: &t is not merely a matter o! rent per acre, or per ectare, nor generally o! a di!!erence bet@een t e price o! prod%ction and market-price, nor bet@een t e indi8id%al and t e general price o! prod%ction per acre, b%t it is also a D%estion o! o@ many acres o! eac type o! soil are %nder c%lti8ation0 5 e point o! importance ere relates directly only to t e magnit%de o! t e rental, t at is, t e total rent o! t e entire c%lti8ated area# b%t it ser8es %s at t e same time as a stepping-stone to t e consideration o! a rise in t e rate of rent alt o%g t ere is no rise in prices, nor increase in t e di!!erences in relati8e !ertility o! t e 8ario%s types o! soil i! prices !all0 We ad abo8e: TABLE I 5ype o! $oil ? A ; 7 5otal000 ?cres 1 1 1 1 2 acres ,rice o! ,rod%ction V3 V3 V3 V3 ,rod%ct )ent in :rain )ent in Money = Drs V3 Drs V6 V* V18

1 Drs = < Drs 1 3 Drs < 2 Drs 3Drs 1= Drs 6 Drs

-o@ let %s ass%me t at t e n%mber o! c%lti8ated acres is do%bled in e8ery category0 We t en a8e: TABLE Ia 5ype o! $oil ? A ; 7 5otal000 ?cres < < < < 8 acres ,rice o! ,rod%ction V6 V6 V6 V6 ,rod%ct )ent in :rain )ent in Money = Drs V6 Drs V1< V18 V 36

< Drs = 2 Drs < 6 Drs 2 8 Drs 6Drs <= Drs 1< Drs

'et %s ass%me t@o more cases0 $%ppose in t e !irst case prod%ction expands on t e t@o poorest types o! soil in t e !ollo@ing manner: TABLE Ib 5ype o! $oil ? A ; 7 5otal000 ?cres 2 2 < < 1< acres ,rice o! ,rod%ction ,er ?cre V3 V3 V3 V3 5otal V3 V6 V1+ V16 V36 ,rod%ct )ent in :rain )ent in Money V= Drs V1< Drs V1< V18 V2<

2 Dr = 8 Drs 2 6 Drs 2 8 Drs 6 Drs <6 Drs 12 Drs

?nd, !inally, let %s ass%me an %neD%al expansion o! prod%ction and c%lti8ated area !or t e !o%r soil categories: TABLE Ic

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5ype o! $oil ? A ; 7 5otal000

?cres 1 < + 2 1< acres

,rice o! ,rod%ction ,er ?cre V3 V3 V3 V3 5otal V3 V6 V1+ V1< V 36

,rod%ct

)ent in :rain

)ent in Money V= Drs V6 Drs V3= V18 V><

1 Dr = 2 Drs < 1+ Drs 1= 16 Drs 1< Drs 36 Drs <2 Drs

&n t e !irst place, t e rent per acre remains t e same in all t ese cases I &, &a, &b and &c I !or, in !act, t e res%lt o! t e same in8estment o! capital per acre o! t e same soil type as remained %nc anged0 We a8e only ass%med @ at is tr%e o! any co%ntry at any gi8en moment# namely, t at 8ario%s soil types exist in de!inite ratios to t e total c%lti8ated area0 ?nd @e also ass%med @ at is al@ays tr%e o! any t@o co%ntries being compared, or o! t e same co%ntry at di!!erent periods, namely, t at t e proportions in @ ic t e total c%lti8ated area is distrib%ted among t e di!!erent soil types 8ary0 &n comparing &a @it & @e see t at i! t e c%lti8ation o! land in all !o%r categories increases in t e same proportion a do%bling o! t e c%lti8ated acreage do%bles t e total prod%ction, and t at t e same applies to t e rent in grain and money0 6o@e8er, i! @e compare &b and t en &c @it &, @e see t at in bot cases a tripling o! t e area %nder c%lti8ation occ%rs0 &t increases in bot cases !rom 2 acres to 1<, b%t in &b classes ? and A contrib%te most to t e increase, @it ? yielding no rent and A yielding t e smallest amo%nt o! di!!erential rent0 5 %s, o%t o! t e 8 ne@ly c%lti8ated acres, ? and A acco%nt !or 3 eac , i0e0, 6 toget er, @ ereas ; and 7 acco%nt !or & eac , i0e0, < toget er0 &n ot er @ords, t ree-D%arters o! t e increase is acco%nted !or by ? and A, and only one-D%arter by ; and 70 Wit t is premise, in &b compared @it & t e trebled area o! c%lti8ation does not res%lt in a trebled prod%ct, !or t e prod%ct does not increase !rom 1= to 3=, b%t only to <60 3n t e ot er and, since a considerable part o! t e increase concerns ?, @ ic does not yield any rent, and since t e maHor part o! t e increase on better soils concerns A, t e rent in grain rises only !rom 6 to 12 D%arters, and t e rent in money !rom V18 to V2<0 A%t i! @e compare &c @it &, @ ere t e land yielding no rent does not increase in area and t e land yielding a minim%m rent increases b%t slig tly, @ ile ; and 7 acco%nt !or t e maHor part o! t e increase, @e !ind t at @ en t e c%lti8ated area is trebled prod%ction increases !rom 1= to 36 D%arters, i0e0, to more t an t ree times its original amo%nt0 5 e rent in grain increases !rom 6 to <2 D%arters or to !o%r times its original amo%nt# and similarly money-rent, !rom V18 to V><0 &n all t ese cases it is in t e nat%re o! t ings t at t e price o! t e agric%lt%ral prod%ct remains %nc anged0 5 e total rental increases in all cases @it t e extension o! c%lti8ation, %nless it takes place excl%si8ely on t e @orst soil, @ ic does not yield any rent0 A%t t is increase 8aries0 $ o%ld t is extension in8ol8e t e better soil types and t e total o%tp%t, conseD%ently, increase not merely in proportion to t e expansion o! t e area, b%t rat er more rapidly, t en t e rent in grain and money increases to t e same extent0 $ o%ld it be t e @orst soil, and t e types o! soil close to it, t at are principally in8ol8ed in t e expansion B@ ereby it is ass%med t at t e @orst soil represents a constant typeC, t e total rental does not increase in proportion to t e extension o! c%lti8ation0 5 %s, gi8en t@o co%ntries in @ ic soil ?, yielding no rent, is o! t e same D%ality, t e rental is in8ersely proportional to t e aliD%ot part represented by t e @orst soil and t e in!erior soil types in t e total area %nder c%lti8ation, and t ere!ore in8ersely proportional to t e o%tp%t, ass%ming eD%al capital in8estments on eD%al total land areas0 ? relations ip bet@een t e D%antity o! t e @orst and t e D%antity o! t e better c%lti8ated land in t e total land area o! a gi8en co%ntry t %s as an opposite in!l%ence on t e total rental t an t e relations ip bet@een t e D%ality o! t e @orst

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c%lti8ated land and t e D%ality o! t e better and best as on t e rent per acre and I ot er circ%mstances remaining t e same I on t e total rental0 ;on!%sion bet@een t ese t@o points as gi8en rise to all kinds o! erroneo%s obHections raised against di!!erential rent0 5 e total rental, t en, increases by t e mere extension o! c%lti8ation, and by t e conseD%ent greater in8estment o! capital and labo%r in t e land0 A%t t e most important point is t is: ?lt o%g it is o%r ass%mption t at t e ratio o! rents per acre !or t e 8ario%s kinds o! soil remains t e same, and t ere!ore also t e rate o! rent considered @it re!erence to capital in8ested in eac acre, yet t e !ollo@ing is to be obser8ed: &! @e compare &a @it &, t e case in @ ic t e n%mber o! c%lti8ated acres and t e capital in8ested in t em a8e been proportionately increased, @e !ind t at as t e total prod%ction as increased proportionately to t e expanded c%lti8ated area, i0e0, as bot a8e been do%bled, so as t e rental0 &t as risen !rom V18 to V36, H%st as t e n%mber o! acres as risen !rom 2 to 80 &! @e take t e total area o! 2 acres, @e !ind t at t e total rental amo%nted to V18 and t %s t e a8erage rent, incl%ding t e land @ ic does not yield any rent, is V2Z0 $%c a calc%lation mig t be made, say, by a landlord o@ning all 2 acres# and in t is @ay t e a8erage rent is statistically comp%ted !or a @ ole co%ntry0 5 e total rental o! V18 is obtained by t e in8estment o! a capital o! V1=0 We call t e ratio o! t ese t@o !ig%res t e rate o! rent# in t e present case it is t ere!ore 18=T0 5 e same rate o! rent obtains in &a, @ ere 8 instead o! 2 acres are c%lti8ated, b%t all types o! land a8e contrib%ted to t e increase in t e same proportion0 5 e total rental o! V36 yields !or 8 acres and an in8ested capital o! V<= an a8erage rent o! V2Z per acre and a rate o! rent o! 18=T0 A%t i! @e consider &b, @ ere t e increase as taken place mainly %pon t@o in!erior categories o! soil, @e obtain a rent o! V2< !or 1< acres, or an a8erage rent o! V3Z per acre0 5 e total in8ested capital is V3=, and t ere!ore t e rate o!" rent R 12=T0 5 e a8erage rent per acre as t %s decreased by V1, and t e rate o! rent as !allen !rom 18= to 12=T0 6ere t en @e a8e a rise in t e total rental !rom V18 to V2<, b%t a drop in a8erage rent calc%lated per acre as @ell as on t e basis o! capital# t e drop takes place parallel to an increase in prod%ction, b%t not proportionately0 5 is occ%rs e8en t o%g t e rent !or all types o! soil, calc%lated per acre as @ell as on t e basis o! capital o%tlay, remains t e same0 5 is occ%rs beca%se t ree-D%arters o! t e increase is acco%nted !or by soil ?, @ ic does not yield any rent, and soil A, @ ic yields only minim%m rent0 &! t e total expansion in ;ase &b ad taken place solely on soil ?, @e s o%ld a8e * acres on ?, & acre on A, & acre on ; and & acre on 70 5 e total rental @o%ld be V18, t e same as be!ore# t e a8erage rent !or t e 1< acres t ere!ore @o%ld be V1Z per acre# and a rent o! V18 on an in8ested capital o! V3= @o%ld gi8e a rate o! rent o! 6=T0 5 e a8erage rent, calc%lated per acre as @ell as on t e basis o! in8ested capital, @o%ld a8e greatly decreased, @ ile t e total rental @o%ld not a8e increased0 Finally, let %s compare &c @it & and &b0 ;ompared @it &, t e area as been trebled, and also t e in8ested capital0 5 e total rental is V>< !or 1< acres, or V6 per acre I as against V2Z in ;ase &0 5 e rate o! rent on t e in8ested capital BV><:V3=C is <2=T instead o! 18=T0 5 e total o%tp%t as risen !rom 1= to 36 D%arters0 ;ompared @it &b, @ ere t e total n%mber o! c%lti8ated acres, t e in8ested capital, and t e di!!erences bet@een t e c%lti8ated soil types are t e same, b%t t e distrib%tion di!!erent, t e o%tp%t is 36 D%arters instead o! <6 D%arters, t e a8erage rent per acre is V6 instead o! V3Z, and t e rate o! rent @it re!erence to t e same in8ested total capital is <2=T instead o! 12=T0 -o matter @ et er @e regard t e 8ario%s conditions in tables &a, &b and &c as existing sim%ltaneo%sly side by side in di!!erent co%ntries, or as existing s%ccessi8ely in t e same co%ntry, @e come to t e !ollo@ing concl%sions: $o long as t e price o! grain remains %nc anged beca%se t e yield on t e @orst, rentless soil remains t e same# so long as t e di!!erence in t e !ertility o! t e 8ario%s c%lti8ated types o! soil remains t e same# so long as t e respecti8e o%tp%ts remain t e same, ence, gi8en eD%al capital in8estments on eD%al aliD%ot parts BacresC o! c%lti8ated area in

2>2

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e8ery type o! soil# so long as t e ratio, t ere!ore, bet@een t e rents per acre on eac category o! soil is constant, and t e rate o! rent on t e capital in8ested in eac plot o! t e same kind o! soil is constant: 'irst, t e rental constantly increases @it t e extension o! c%lti8ated area and @it t e conseD%ent increased capital in8estment, except !or t e case @ ere t e entire increase is acco%nted !or by rentless land0 Secondly, t e a8erage rent per acre Btotal rental di8ided by t e total n%mber o! c%lti8ated acresC as @ell as t e a8erage rate o! rent Btotal rental di8ided by t e in8ested total capitalC may 8ary 8ery considerably# and, indeed, bot c ange in t e same direction, b%t in di!!erent proportions to eac ot er0 &! @e lea8e o%t o! consideration t e case in @ ic t e expansion takes place only on t e rentless soil ?, @e !ind t at t e a8erage rent per acre and t e a8erage rate o! rent on t e capital in8ested in agric%lt%re depend on t e proportions @ ic t e 8ario%s classes o! soil constit%te in t e total c%lti8ated area# or, @ at amo%nts to t e same t ing, on t e distrib%tion o! t e total employed capital among t e kinds o! soil o! 8arying !ertility0 W et er m%c or little land is c%lti8ated, and @ et er t e total rental is t ere!ore larger or smaller B@it t e exception o! t e case in @ ic t e expansion is con!ined to ?C, t e a8erage rent per acre, or t e a8erage rate o! rent on in8ested capital, remains t e same as long as t e proportions o! t e 8ario%s categories o! soil in t e total c%lti8ated area remain %nc anged0 &n spite o! an increase, e8en a 8ery considerable one, in t e total rental @it t e extension o! c%lti8ation and expansion o! capital in8estment, t e a8erage rent per acre and t e a8erage rate o! rent on capital decrease @ en t e extension o! rentless land, and land yielding only little di!!erential rent, is greater t an t e extension o! t e s%perior one yielding greater rent0 ;on8ersely, t e a8erage rent per acre and t e a8erage rate o! rent on capital increase proportionately to t e extent t at better land constit%tes a relati8ely greater part o! t e total area and t ere!ore employs a relati8ely greater s are o! t e in8ested capital0 6ence, i! @e consider t e a8erage rent per acre, or ectare, o! t e total c%lti8ated land as is generally done in statistical @orks, in comparing eit er di!!erent co%ntries in t e same period, or di!!erent periods in t e same co%ntry, @e !ind t at t e a8erage le8el o! rent per acre, and conseD%ently total rental, corresponds to a certain extent Balt o%g by no means identical, b%t rat er a more rapidly increasing extentC to t e absol%te, not to t e relati8e, !ertility o! t e soil in a gi8en co%ntry# t at is, to t e a8erage amo%nt o! prod%ce @ ic it yields !rom t e same area0 For t e larger t e s are o! s%perior soils in t e total c%lti8ated area, t e greater t e o%tp%t !or eD%al capital in8estments on eD%ally large areas o! land# and t e ig er t e a8erage rent per acre0 &n t e re8erse case t e opposite takes place0 5 %s, rent does not appear to be determined by t e ratio o! di!!erential !ertility, b%t by t e absol%te !ertility, and t e la@ o! di!!erential rent appears in8alid0 For t is reason certain p enomena are disp%ted, or an attempt is made to explain t em by nonexisting di!!erences in a8erage prices o! grain and in t e di!!erential !ertility o! c%lti8ated land, @ ereas s%c p enomena are merely d%e to t e !act t at t e ratio o! total rental to total area o! c%lti8ated land or to total capital in8ested in t e land I as long as t e !ertility o! t e rentless soil remains t e same and t ere!ore t e prices o! prod%ction, and t e di!!erences bet@een t e 8ario%s kinds o! soil remain %nc anged I is determined not merely by t e rent per acre or t e rate o! rent on capital, b%t D%ite as m%c by t e relati8e n%mber o! acres o! eac type o! soil in t e total n%mber o! c%lti8ated acres# or, @ at amo%nts to t e same t ing, by t e distrib%tion o! t e total in8ested capital among t e 8ario%s types o! soil0 ;%rio%sly eno%g , t is !act as been completely o8erlooked t %s !ar0 ?t any rate, @e see Band t is is important !or o%r !%rt er analysisC t at t e relati8e le8el o! t e a8erage rent per acre, and t e a8erage rate o! rent Bor t e ratio o! t e total rental to t e total capital in8ested in t e landC, may rise or !all by merely extensi8ely expanding c%lti8ation, as long as prices remain t e same, t e di!!erential !ertilities o! t e 8ario%s soils remain %naltered, and t e rent per acre, or rate o! rent !or capital in8ested per acre in e8ery type o! soil act%ally yielding rent, i0e0, !or all capital act%ally yielding rent, remains %nc anged0 &t is necessary to make t e !ollo@ing additional points @it re!erence to t e !orm o! di!!erential rent considered %nder eading &# t ey also apply in part to di!!erential rent &&:

2>+

; apter JJJ&J

'irst, it @as seen t at t e a8erage rent per acre, or t e a8erage rate o! rent on capital, may increase @it an extension o! c%lti8ation @ en prices are stationary and t e di!!erential !ertility o! t e c%lti8ated plots o! land remains %naltered0 ?s soon as all t e land in a gi8en co%ntry as been appropriated, and in8estments o! capital in land, c%lti8ation, and pop%lation a8e reac ed a de!inite le8el I all gi8en conditions as soon as t e capitalist mode o! prod%ction becomes t e pre8ailing one and also encompasses agric%lt%re I t e price o! %nc%lti8ated land o! 8arying D%ality Bmerely ass%ming di!!erential rent to existC is determined by t e price o! t e c%lti8ated plots o! land o! t e same D%ality and eD%i8alent location0 5 e price is t e same I a!ter ded%cting t e cost o! bringing t e ne@ land into c%lti8ation I e8en t o%g t is land does not yield any rent0 5 e price o! t e land is, indeed, not ing b%t t e capitalised rent0 A%t e8en in t e case o! c%lti8ated land, t e price pays only !or !%t%re rents, as, !or instance, @ en t e pre8alent interest rate is +T and t e rent !or t@enty years is paid at one time in ad8ance0 W en land is sold, it is sold as land yielding rent, and t e prospecti8e c aracter o! t e rent B@ ic is ere considered as a prod%ct o! t e soil, b%t it only seems to be t atC does not disting%is t e %nc%lti8ated !rom t e c%lti8ated land0 5 e price o! t e %nc%lti8ated land, like its rent t e price o! @ ic represents t e contracted !orm o! t e latter is D%ite ill%sory as long as t e land is not act%ally %sed0 A%t it is t %s determined a priori and is realised as soon as a p%rc aser is !o%nd0 6ence, @ ile t e act%al a8erage rent in a gi8en co%ntry is determined by its act%al a8erage ann%al rental and t e relation o! t e latter to t e total c%lti8ated area, t e price o! t e %nc%lti8ated land is determined by t e price o! t e c%lti8ated land, and is t ere!ore b%t a re!lection o! t e capital in8ested in t e c%lti8ated land and t e res%lts obtained t ere!rom0 $ince all land @it t e exception o! t e @orst yields rent Band t is rent, as @e s all see %nder t e ead o! di!!erential rent &&, increases @it t e D%antity o! capital and corresponding intensity o! c%lti8ationC, t e nominal price o! %nc%lti8ated plots o! land is t %s !ormed, and t ey t %s become commodities, a so%rce o! @ealt !or t eir o@ners0 5 is explains at t e same time, @ y t e price o! land increases in a @ ole region, e8en in t e %nc%lti8ated part B3pdykeC0 'and spec%lation, !or instance, in t e (nited $tates, is based solely on t is re!lection t ro@n by capital and labo%r on %nc%lti8ated land0 Secondly, progress in extending c%lti8ated land generally takes place eit er to@ard in!erior soil or on t e 8ario%s gi8en types o! soil in 8arying proportions, depending on t e manner in @ ic t ey are met0 Extension on in!erior soil is nat%rally ne8er made 8ol%ntarily, b%t can only res%lt !rom rising prices, ass%ming a capitalist mode o! prod%ction, and can only res%lt !rom necessity %nder any ot er mode o! prod%ction0 6o@e8er, t is is not absol%tely so0 ,oor soil may be pre!erred to a relati8ely better soil on acco%nt o! location, @ ic is o! decisi8e importance !or e8ery extension o! c%lti8ation in yo%ng co%ntries# !%rt ermore, e8en t o%g t e soil !ormation in a certain region may generally be classi!ied as !ertile, it may ne8ert eless consist o! a motley con!%sion o! better and @orse soils, so t at t e in!erior soil may a8e to be c%lti8ated i! only beca%se it is !o%nd in t e immediate 8icinity o! t e s%perior soil0 &! in!erior soil is s%rro%nded by s%perior soil, t en t e latter gi8es it t e ad8antage o! location in comparison @it more !ertile soil @ ic is not yet, or is abo%t to become, part o! t e c%lti8ated area0 5 %s, t e $tate o! Mic igan @as one o! t e !irst Western $tates to become an exporter o! grain0 .et its soil on t e @ ole is poor0 A%t its proximity to t e $tate o! -e@ .ork and its @ater-@ays 8ia t e 'akes and Erie ;anal initially ga8e it t e ad8antage o8er t e $tates endo@ed by -at%re @it more !ertile soil, b%t sit%ated !art er to t e West0 5 e example o! t is $tate, as compared @it t e $tate o! -e@ .ork, also demonstrates t e transition !rom s%perior to in!erior soil0 5 e soil o! t e $tate o! -e@ .ork, partic%larly its @estern part, is incomparably more !ertile, especially !or t e c%lti8ation o! @ eat0 5 is !ertile soil @as trans!ormed into in!ertile soil by rapacio%s met ods o! c%lti8ation, and no@ t e soil o! Mic igan appeared as t e more !ertile0 &n 1838, @ eaten !lo%r @as s ipped at A%!!alo !or t e West# and t e @ eat-region o! -e@ .ork, @it t at o!

2>6

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(pper ;anada, @ere t e main so%rces o! its s%pply0 -o@, a!ter only t@el8e years, an enormo%s s%pply o! @ eat and !lo%r is bro%g t !rom t e West, along 'ake Erie, and s ipped %pon t e Erie ;anal !or t e East, at A%!!alo and t e adHoining port o! Alackrock000 5 e e!!ect o! t ese large arri8als !rom t e Western $tates I @ ic @ere %nnat%rally stim%lated d%ring t e years o! E%ropean !amine 000 as been to render @ eat less 8al%able in @estern -e@ .ork, to make t e @ eat c%lt%re less rem%nerati8e, and to t%rn t e attention o! t e -e@ .ork !armers more to graEing and dairy %sbandry, !r%it c%lt%re, and ot er branc es o! r%ral economy, in @ ic t ey t ink t e -ort -West @ill be %nable so directly to compete @it t em0L B&0 W0 Po nston, $otes on $orth +merica, 'ondon, 18+1, &, pp0<<=-<30C 4hirdly, it is a mistaken ass%mption t at t e land in colonies and, in general, in yo%ng co%ntries @ ic can export grain at c eaper prices, m%st o! necessity be o! greater nat%ral !ertility0 5 e grain is not only sold belo@ its 8al%e in s%c cases, b%t belo@ its price o! prod%ction, i0e0, belo@ t e price o! prod%ction determined by t e a8erage rate o! pro!it in t e older co%ntries0 5 e !act t at @e, as Po nston says Bp0<<3C, Kare acc%stomed to attac t e idea o! great nat%ral prod%cti8eness and o! bo%ndless tracts o! ric land, to t ose ne@ $tates !rom @ ic come t e large s%pplies o! @ eat t at are ann%ally po%red into t e port o! A%!!alo,L is primarily t e res%lt o! economic conditions0 5 e entire pop%lation o! s%c an area as Mic igan, !or instance, is at !irst almost excl%si8ely engaged in !arming, and partic%larly in prod%cing agric%lt%ral mass prod%cts, @ ic alone can be exc anged !or ind%strial prod%cts and tropical goods0 &ts entire s%rpl%s prod%ction appears, t ere!ore, in t e !orm o! grain0 5 is !rom t e o%tset sets apart t e colonial states !o%nded on t e basis o! t e modern @orld-market !rom t ose o! earlier, partic%larly ancient, times0 5 ey recei8e t ro%g t e @orld-market !inis ed prod%cts, s%c as clot ing and tools @ ic t ey @o%ld a8e to prod%ce t emsel8es %nder ot er circ%mstances0 3nly on s%c a basis @ere t e $o%t ern $tates o! t e (nion enabled to make cotton t eir staple crop0 5 e di8ision o! labo%r on t e @orld-market makes t is possible0 6ence, i! t ey seem to a8e a large s%rpl%s prod%ction considering t eir yo%t and relati8ely small pop%lation, t is is not so m%c d%e to t e !ertility o! t eir soil, nor t e !r%it!%lness o! t eir labo%r, b%t rat er to t e onesided !orm o! t eir labo%r, and t ere!ore o! t e s%rpl%s-prod%ce in @ ic s%c labo%r is incorporated0 F%rt ermore, a relati8ely in!erior soil @ ic is ne@ly c%lti8ated and ne8er be!ore to%c ed by ci8ilisation pro8ided t e climatic conditions are t en not completely %n!a8o%rable, as

2>>

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acc%m%lated a great deal o! plant !ood t at is easily assimilated I at least in t e %pper layers o! t e soil I so t at it @ill yield crops !or a long time @it o%t t e application o! !ertilisers and e8en @it 8ery s%per!icial c%lti8ation0 5 e @estern prairies a8e t e additional ad8antage o! ardly reD%iring any clearing expenses since -at%re as made t em arable0 xliii &n less !ertile areas o! t is kind, t e s%rpl%s is not prod%ced as a res%lt o! t e ig !ertility o! t e soil, i0e0, t e yield per acre, b%t as a res%lt o! t e large acreage @ ic may be s%per!icially c%lti8ated, since s%c land costs t e c%lti8ator not ing, or next to not ing as compared @it older co%ntries0 5 is is t e case, !or instance, @ ere s are cropping exists, as in parts o! -e@ .ork, Mic igan, ;anada, etc0 ? !amily s%per!icially c%lti8ates, say, 1== acres, and alt o%g t e o%tp%t per acre is not large, t e o%tp%t !rom 1== acres yields a considerable s%rpl%s !or sale0 &n addition to t is, cattle may be graEed on nat%ral past%res at almost no cost, @it o%t reD%iring arti!icial grass meado@s0 &t is t e D%antity o! t e land, not its D%ality, @ ic is decisi8e ere0 5 e possibility o! s%c s%per!icial c%lti8ation is nat%rally more or less rapidly ex a%sted, namely, in in8erse proportion to t e !ertility o! t e ne@ soil and in direct proportion to t e export o! its prod%cts0 K?nd yet s%c a co%ntry @ill gi8e excellent !irst crops, e8en o! @ eat, and @ill s%pply to t ose @ o skim t e !irst cream o!! t e co%ntry, a large s%rpl%s o! t is grain to send to marketL B1, c0, p0<<2C0 ,roperty relations in co%ntries @it mat%rer ci8ilisations, @it t eir determination o! t e price o! %nc%lti8ated soil by t at o! t e c%lti8ated, etc0, make s%c an extensi8e economy impossible0 5 at t is soil, t ere!ore, need not be exceedingly ric , as )icardo imagines, nor t at soils o! eD%al !ertility need be c%lti8ated, may be seen !rom t e !ollo@ing0 &n t e $tate o! Mic igan 26+,*== acres @ere planted in 1828 to @ eat @ ic yielded 2,>3*,3== b%s els, or an a8erage o! 1= 1N+ b%s els per acre a!ter ded%cting seed grain, t is lea8es less t an * b%s els per acre0 3! t e <* co%nties o! t is $tate, < prod%ced an a8erage o! > b%s els, 3 an a8erage o! 8 b%s els, <I*, >I1=, 6I11, 3I1<, 2I13 b%s els, and only one co%nty prod%ced an a8erage o! 16 b%s els, and anot er 18 b%s els per acre Bl0 c0, p0 <<+C0 For practical c%lti8ation ig er soil !ertility coincides @it greater capability o! immediate exploitation o! s%c !ertility0 5 e latter may be greater in a nat%rally poor soil t an in a nat%rally ric one# b%t it is t e kind o! soil @ ic a colonist @ill take %p !irst, and m%st take %p @ en capital is @anting0 'inally, t e extension o! c%lti8ation to larger areas I aside !rom t e case H%st mentioned, in @ ic reco%rse m%st be ad to soil in!erior t an t at c%lti8ated it erto I to t e 8ario%s kinds o! soil !rom ? to 7, t %s, !or instance, t e c%lti8ation o! larger tracts o! A and ; does not by any means pres%ppose a pre8io%s rise in grain prices any more t an t e preceding ann%al expansion o! cotton spinning, !or instance, reD%ires a constant rise in yarn prices0 ?lt o%g considerable rise or !all in market-prices a!!ects t e 8ol%me o! prod%ction, regardless o! it t ere is in agric%lt%re BH%st as in all ot er capitalistically operated lines o! prod%ctionC ne8ert eless a contin%o%s relati8e o8erprod%ction, in itsel! identical @it acc%m%lation, e8en at t ose a8erage prices @ ose le8el as neit er a retarding nor exceptionally stim%lating e!!ect on prod%ction0 (nder ot er modes o! prod%ction t is relati8e o8erprod%ction is e!!ected directly by t e pop%lation increase, and in colonies by steady immigration0 5 e demand increases constantly, and, in anticipation o! t is ne@ capital is contin%ally in8ested in ne@ land, alt o%g t is 8aries @it t e circ%mstances !or di!!erent agric%lt%ral prod%cts0 &t is t e !ormation o! ne@ capitals @ ic in itsel! brings t is abo%t0 A%t so !ar as t e indi8id%al capitalist is concerned, e meas%res t e 8ol%me o! is prod%ction by t at o! is a8ailable capital, to t e extent t at e can still control it imsel!0 6is aim is to capt%re as big a portion as possible o! t e market0 $ o%ld t ere be any o8er-prod%ction, e @ill not take t e blame %pon imsel!, b%t places it %pon is competitors0 5 e indi8id%al capitalist may expand

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is prod%ction by appropriating a larger aliD%ot s are o! t e existing market or by expanding t e market itsel!0

Chapter 4/. Second #or

of 'ifferential Rent

,'ifferential Rent 55.

5 %s !ar @e a8e considered di!!erential rent only as t e res%lt o! 8arying prod%cti8ity o! eD%al amo%nts o! capital in8ested in eD%al areas o! land o! di!!erent !ertility, so t at di!!erential rent @as determined by t e di!!erence bet@een t e yield !rom t e capital in8ested in t e @orst, rentless soil and t at !rom t e capital in8ested in s%perior soil0 We ad side by side capitals in8ested in di!!erent plots o! land, so t at e8ery ne@ in8estment o! capital signi!ied a more extensi8e c%lti8ation o! t e soil, an expansion o! c%lti8ated area0 &n t e last analysis, o@e8er, di!!erential rent @as by its nat%re merely t e res%lt o! t e di!!erent prod%cti8ity o! eD%al capitals in8ested in land0 A%t can it make any di!!erence i! capitals o! di!!erent prod%cti8ity are in8ested s%ccessi8ely in t e same plot o! land or side by side in di!!erent plots o! land, pro8ided t e res%lts are t e sameQ 5o begin @it , t ere is no denying t at, in so !ar as t e !ormation o! s%rpl%s-pro!it is concerned, it is immaterial @ et er V3 in prod%ction price per acre o! ? yield 1 Dr, so t at V3 is t e price o! prod%ction and t e reg%lating market-price o! 1 Dr, @ ile V3 in prod%ction price per acre o! A yield < Drs, and t ereby V3 o! s%rpl%s-pro!it, similarly, V3 in prod%ction price per acre o! ; yield 3 Drs and V6 o! s%rpl%s-pro!it, and, !inally, V3 in prod%ction price per acre o! 7 yield 2 Drs and V* o! s%rpl%s-pro!it# or @ et er t e same res%lt is ac ie8ed by applying t ese V1< in prod%ction price, or V1= o! capital, @it t e same s%ccess in t e same seD%ence %pon one and t e same acre0 &t is in bot cases a capital o! V1=, @ ose 8al%e portions o! V<Z eac are s%ccessi8ely in8ested I @ et er in !o%r acres o! 8arying !ertility side by side, or s%ccessi8ely in one and t e same acre o! land I and beca%se o! t eir 8arying o%tp%ts, one portion yields no s%rpl%s-pro!it, @ ereas t e ot er portions yield s%rpl%s-pro!it proportionate to t eir di!!erence in yield @it respect to rentless in8estment0 5 e s%rpl%s-pro!it and t e 8ario%s rates o! s%rpl%s-pro!it !or t e di!!erent 8al%e portions o! capital are !ormed in t e same manner in bot cases0 ?nd t e rent is not ing b%t a !orm o! t is s%rpl%spro!it, @ ic constit%tes its s%bstance0 A%t at any rate, in t e second met od, t ere are some di!!ic%lties concerning t e trans!ormation o! s%rpl%s-pro!it into rent, t is c ange o! !orm, @ ic incl%des t e trans!er o! s%rpl%s-pro!it !rom t e capitalist tenant to t e lando@ner0 5 is acco%nts !or t e obstinate resistance o! Englis tenants to o!!icial agric%lt%ral statistics0 ?nd it acco%nts !or t eir str%ggle against t e landlords o8er t e determination o! act%al res%lts deri8ed !rom t eir capital in8estment BMortonC0 For rent is !ixed @ en land is leased, and a!ter t at t e s%rpl%s-pro!it arising !rom s%ccessi8e in8estments o! capital !lo@s into t e pockets o! t e tenant as long as t e lease lasts0 5 is is @ y t e tenants a8e !o%g t !or long leases, and, on t e ot er and, d%e to t e greater po@er o! t e landlords, an increase in t e n%mber o! tenancies at @ill as taken place, i0e0, leases @ ic can be cancelled ann%ally0 &t is t ere!ore e8ident !rom t e 8ery o%tset t at, e8en i! immaterial !or t e la@ o! !ormation o! s%rpl%s-pro!it, it makes a considerable di!!erence !or t e trans!ormation o! s%rpl%s-pro!it into gro%nd-rent @ et er eD%al capitals are in8ested side by side in eD%al areas o! land @it %neD%al res%lts, or @ et er t ey are in8ested s%ccessi8ely in t e same land0 5 e latter met od con!ines t is trans!ormation, on t e one and, @it in narro@er limits, on t e ot er and, @it in more 8ariable limits0 For t is reason, t e @ork o! t e tax-assessor, as Morton s o@s in is )eso%rces o! Estates, becomes a 8ery important, complicated and di!!ic%lt pro!ession in co%ntries practising intensi8e c%lti8ation Band, economically speaking, @e mean not ing more by intensi8e c%lti8ation t an t e concentration o! capital %pon t e same plot rat er t an its distrib%tion among se8eral

28=

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adHoining pieces o! landC0 &! soil impro8ements are o! a more permanent nat%re t e arti!icially increased di!!erential !ertility o! t e soil coincides @it its nat%ral di!!erential !ertility as soon as t e lease expires, and t ere!ore t e assessment o! t e rent corresponds to t e determination o! t e rent on plots o! di!!erent !ertilities in general0 3n t e ot er and, in so !ar as t e !ormation o! s%rpl%s-pro!it is determined by t e magnit%de o! operating capital, t e amo%nt o! rent !or a certain amo%nt o! operating capital is added to t e a8erage rent o! t e co%ntry and t %s pro8ision is made !or t e ne@ tenant to command s%!!icient capital to contin%e c%lti8ation in t e same intensi8e manner0 &n t e st%dy o! di!!erential rent &&, t e !ollo@ing points are still to be emp asised0 First, its basis and point o! depart%re, not H%st istorically, b%t also in so !ar as concerns its mo8ements at any gi8en period o! time, is di!!erential rent &, t at is, t e sim%ltaneo%s c%lti8ation side by side o! soils o! %neD%al !ertility and location# in ot er @ords, t e sim%ltaneo%s application, side by side, o! %neD%al portions o! t e total agric%lt%ral capital %pon plots o! land o! %neD%al D%ality0 6istorically t is is sel!-e8ident0 &n t e colonies, colonists a8e b%t little capital to in8est# t e principal prod%ction agents are labo%r and land0 E8ery indi8id%al ead o! !amily seeks !or imsel! and is kin an independent !ield o! employment alongside is !ello@-colonists0 5 is m%st generally be t e case in agric%lt%re proper e8en %nder pre-capitalist modes o! prod%ction0 &n t e case o! s eep- erding and cattle-raising, in general, as independent lines o! prod%ction, exploitation o! t e soil is more or less common and extensi8e !rom t e 8ery o%tset0 5 e capitalist mode o! prod%ction as !or its point o! depart%re !ormer modes o! prod%ction in @ ic t e means o! prod%ction @ere, in !act or legally, t e property o! t e tiller imsel!, in a @ord, !rom a andicra!t-like p%rs%it o! agric%lt%re0 &t is in t e nat%re o! t ings t at t e latter gi8es @ay b%t grad%ally to t e concentration o! means o! prod%ction and t eir trans!ormation into capital, as against direct prod%cers trans!ormed into @age-labo%rers0 &n so !ar as t e capitalist mode o! prod%ction is mani!ested ere typically, it occ%rs at !irst partic%larly in s eep- erding and cattleraising0 A%t it is t %s not mani!ested in a concentration o! capital %pon a relati8ely small area o! land, b%t in prod%ction on a larger scale, economising in t e expense o! keeping orses, and in ot er prod%ction costs# b%t, in !act, not by in8esting more capital in t e same land0 F%rt ermore, in accordance @it t e nat%ral la@s o! !ield %sbandry, capital I %sed ere, at t e same time, in t e sense o! means o! prod%ction already prod%ced I becomes t e decisi8e element in soil c%lti8ation @ en c%lti8ation as reac ed a certain le8el o! de8elopment and t e soil as been correspondingly ex a%sted0 $o long as t e tilled area is small in comparison @it t e %ntilled, and so long as t e soil strengt as not been ex a%sted Band t is is t e case @ en cattle-raising and meat cons%mption pre8ail in t e period be!ore agric%lt%re proper and plant n%trition a8e become dominantC, t e ne@ de8eloping mode o! prod%ction is opposed to peasant prod%ction mainly in t e extensi8eness o! t e land being tilled !or a capitalist, in ot er @ords, again in t e extensi8e application o! capital to larger areas o! land0 &t s o%ld t ere!ore be remembered !rom t e o%tset t at di!!erential rent & is t e istorical basis @ ic ser8es as a point o! depart%re0 3n t e ot er and, t e mo8ement o! di!!erential rent && at any gi8en moment occ%rs only @it in a sp ere @ ic is itsel! b%t t e 8ariegated basis o! di!!erential rent &0 $econdly, in t e di!!erential rent in !orm &&, t e di!!erences in distrib%tion o! capital Band ability to obtain creditC among tenants are added to t e di!!erences in !ertility0 &n man%!act%ring proper, eac line o! b%siness rapidly de8elops its o@n minim%m 8ol%me o! b%siness and a corresponding minim%m o! capital, belo@ @ ic no indi8id%al b%siness can be cond%cted s%ccess!%lly0 &n t e same @ay, eac line o! b%siness de8elops a normal a8erage amo%nt o! capital abo8e t is minim%m, @ ic t e b%lk o! prod%cers s o%ld, and do, command0 ? larger 8ol%me o! capital can prod%ce extra pro!it# a smaller 8ol%me does not so m%c as yield t e a8erage pro!it0 5 e capitalist mode o! prod%ction spreads in agric%lt%re b%t slo@ly and %ne8enly, as may be obser8ed in England, t e classic land o! t e capitalist mode o! prod%ction in agric%lt%re0 &n so !ar as t e !ree

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importation o! grain does not exist, or its e!!ect is b%t limited beca%se t e 8ol%me is small, prod%cers @orking in!erior soil, and t %s %nder @orse t an a8erage conditions o! prod%ction, determine t e market-price0 ? large portion o! t e total mass o! capital in8ested in %sbandry, and in general a8ailable to it, is in t eir ands0 &t is tr%e t at t e peasant, !or example, expends m%c labo%r on is small plot o! land0 A%t it is labo%r isolated !rom obHecti8e social and material conditions o! prod%cti8ity, labo%r robbed and stripped o! t ese conditions0 5 is circ%mstance enables t e act%al capitalist tenants to appropriate a portion o! s%rpl%s-pro!it I a !act @ ic @o%ld not obtain, at least so !ar as t is point is concerned, i! t e capitalist mode o! prod%ction @ere as e8enly de8eloped in agric%lt%re as in man%!act%re0 'et %s !irst consider H%st t e !ormation o! s%rpl%s-pro!it @it di!!erential rent &&, @it o%t !or t e present bot ering abo%t t e conditions %nder @ ic t e trans!ormation o! t is s%rpl%s-pro!it into gro%nd-rent may take place0 &t is t en e8ident t at di!!erential rent && is merely di!!erently expressed di!!erential rent &, b%t identical to it in s%bstance0 5 e 8ariation in !ertility o! 8ario%s soil types exerts its in!l%ence in t e case o! di!!erential rent & only in so !ar as %neD%al res%lts are attained by capitals in8ested in t e soil, i0e0, t e amo%nt o! prod%cts obtained eit er @it respect to eD%al magnit%des o! capital, or proportionate amo%nts0 W et er t is ineD%ality takes place !or 8ario%s capitals in8ested s%ccessi8ely in t e same land or !or capitals in8ested in se8eral plots o! di!!ering soil type I t is can c ange not ing in t e di!!erence in !ertility nor in its prod%ct and can t ere!ore c ange not ing in t e !ormation o! di!!erential rent !or t e more prod%cti8ely in8ested portions o! capital0 &t is still t e soil @ ic , no@ as be!ore, s o@s di!!erent !ertility @it t e same in8estment o! capital, sa8e t at ere t e same soil per!orms !or a capital s%ccessi8ely in8ested in di!!erent portions @ at 8ario%s kinds o! soil do in t e case o! di!!erential rent & !or di!!erent eD%al portions o! social capital in8ested in t em0 &! t e same capital o! V1=, @ ic is s o@n in 5able & to be in8ested in t e !orm o! independent capitals o! V<Z eac by 8ario%s tenants in eac acre o! t e !o%r soil types ?, A, ; and 7, @ere instead s%ccessi8ely in8ested in one and t e same acre 7, so t at t e !irst in8estment yielded 2 Drs, t e second 3, t e t ird <, and t e !o%rt 1 Dr Bor in t e re8erse orderC, t en t e price o! t e D%arter !%rnis ed by t e least prod%cti8e capital, namely R V3, @o%ld not yield any di!!erential rent, b%t @o%ld determine t e price o! prod%ction, so long as t e s%pply o! @ eat @ ose price o! prod%ction is V3 @ere needed0 ?nd since o%r ass%mption is t at t e capitalist mode o! prod%ction pre8ails, so t at t e price o! V3 incl%des t e a8erage pro!it made by a capital o! V<Z generally, t e ot er t ree portions o! V<Z eac @ill yield s%rpl%s-pro!it in accordance @it t e di!!erence in o%tp%t, since t is o%tp%t is not sold at its o@n price o! prod%ction, b%t at t e price o! prod%ction o! t e least prod%cti8e in8estment o! V<Z# t e latter in8estment does not yield any rent and t e price o! its prod%cts is determined by t e general la@ o! prices o! prod%ction0 5 e !ormation o! s%rpl%spro!it @o%ld be t e same as in 5able &0 3nce again it is seen ere t at di!!erential rent && pres%pposes di!!erential rent &0 5 e minim%m o%tp%t obtained !rom a capital o! V<Z, i0e0, !rom t e @orst soil, is ere ass%med to be 2 Dr0 ?ss%med, also, is t at aside !rom t e V<Z @ ic yield 2 Drs and !or @ ic e pays a di!!erential rent o! 3 Drs, t e tenant operating @it soil type 7 in8ests in t is same soil V<Z @ ic yield only 1 Dr, like t e same capital %pon t e @orst soil ?0 5 is @o%ld be an in8estment o! capital @ ic does not yield rent, since it ret%rns to im only a8erage pro!it0 5 ere @o%ld be no s%rpl%s-pro!it @ ic co%ld be trans!ormed into rent0 3n t e ot er and, t is decreasing yield o! t e second in8estment o! capital in 7 @o%ld a8e no in!l%ence on t e rate o! pro!it0 &t @o%ld be t e same as t o%g V<Z ad been in8ested ane@ in an additional acre o! soil type ?, a circ%mstance @ ic @o%ld in no @ay a!!ect t e s%rpl%s-pro!it and, t ere!ore, t e di!!erential rent o! soils ?, A, ; and 70 A%t !or t e tenant, t is additional in8estment o! V<Z in 7 @o%ld a8e been D%ite as pro!itable

28<

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as, in accordance @it o%r ass%mption, t e in8estment o! t e original V<Z per acre o! 7, alt o%g t e latter yields 2 Drs0 F%rt ermore, i! t@o ot er in8estments o! V<Z eac s o%ld yield an additional o%tp%t o! 3 Drs and < Drs respecti8ely, a decrease @o%ld a8e taken place again compared @it t e o%tp%t !rom t e !irst in8estment o! V<Z in 7, @ ic yielded 2 Drs, i0e0, a s%rpl%s-pro!it o! 3 Drs0 A%t it @o%ld be merely a decrease in t e amo%nt o! s%rpl%s-pro!it, and @o%ld not a!!ect eit er t e a8erage pro!it or t e reg%lating price o! prod%ction0 5 e latter @o%ld be t e case only i! t e additional prod%ction yielding t is decreasing s%rpl%s-pro!it made t e prod%ction %pon ? s%per!l%o%s, and t re@ acre ? o%t o! c%lti8ation0 &n s%c case, t e decreasing prod%cti8eness o! t e additional in8estment o! capital in acre 7 @o%ld be accompanied by a !all in t e price o! prod%ction, !or instance, !rom V3 to V1Z, i! acre A @o%ld become t e rentless soil and reg%lator o! t e market-price0 5 e o%tp%t !rom 7 @o%ld no@ be R 2 U 1 U 3 U < R 1= Drs @ ereas !ormerly it @as R 2 Drs0 A%t t e price per D%arter as reg%lated by A @o%ld a8e !allen to V1Z0 5 e di!!erence bet@een 7 and A @o%ld be R 1= - < R 8 Drs, at V1Z per D%arter R V1<, @ ereas t e money-rent !rom 7 @as pre8io%sly R V*0 5 is s o%ld be noted0 ;alc%lated per acre, t e magnit%de o! rent @o%ld a8e risen by 33XT in spite o! t e decreasing rate o! s%rpl%s-pro!it on t e t@o additional capitals o! V<Z eac 0 We see !rom t is to @ at ig ly complicated combinations di!!erential rent in general, and in !orm && co%pled @it !orm &, in partic%lar, may gi8e rise, @ ereas )icardo, !or instance, treats it 8ery one-sidedly and as t o%g it @ere a simple matter0 ?s in t e abo8e case, a !all in t e reg%lating market-price and at t e same time rise in rent !rom !ertile soils may take place so t at bot t e absol%te prod%ct and t e absol%te s%rpl%s-prod%ct increase0 B&n di!!erential rent &, in descending order, t e relati8e s%rpl%s-prod%ct and t %s t e rent per acre may increase, alt o%g t e absol%te s%rpl%s-prod%ct per acre remains constant or e8en decreases0C A%t at t e same time, prod%cti8eness o! t e in8estments o! capital made s%ccessi8ely in t e same soil decreases, alt o%g a large portion o! t em !alls to t e more !ertile soils0 From a certain point o! 8ie@ I as concerns bot o%tp%t and prices o! prod%ction I t e prod%cti8ity o! labo%r as risen0 A%t !rom anot er point o! 8ie@, it as decreased beca%se t e rate o! s%rpl%s-pro!it and t e s%rpl%s-prod%ct per acre decrease !or t e 8ario%s in8estments o! capital in t e same land0 7i!!erential rent &&, @it decreasing prod%cti8eness o! s%ccessi8e in8estments o! capital, @o%ld necessarily be accompanied by a rise in price o! prod%ction and an absol%te decrease in prod%cti8ity only i! in8estments o! capital co%ld be made in none b%t t e @orst soil ?0 &! an acre o! ?, @ ic @it an in8estment o! capital o! V<Z yielded 1 Dr at a price o! prod%ction o! V3, s o%ld only yield a total o! 1Z Drs @it an additional o%tlay o! V<Z, i0e0, a total in8estment o! V+, t en t e price o! prod%ction o! t is 1Z Drs R V6 or t at o! 1 Dr R V20 E8ery decrease in prod%cti8ity @it a gro@ing in8estment o! capital @o%ld ere mean a relati8e decrease in o%tp%t per acre, @ ereas %pon s%perior soils it @o%ld only signi!y a decrease in t e s%per!l%o%s s%rpl%sprod%ct0 A%t by t e nat%re o! t ings, @it t e de8elopment o! intensi8e c%lti8ation, i0e0, @it s%ccessi8e in8estments o! capital in t e same soil, t is @ill take place more ad8antageo%sly, or to a greater extent on better soils0 BWe are not re!erring to permanent impro8ements by @ ic a it erto %seless soil is con8erted into %se!%l soil0C 5 e decreasing prod%cti8eness o! s%ccessi8e in8estments o! capital m%st, t ere!ore, a8e principally t e e!!ect indicated abo8e0 5 e better soil is selected beca%se it a!!ords t e best promise t at capital in8ested in it @ill be pro!itable, since it contains t e most nat%ral elements o! !ertility, @ ic need b%t be %tilised0 W en, a!ter t e abolition o! t e ;orn 'a@s, c%lti8ation in England became still more intensi8e, a great deal o! !ormer @ eat land @as de8oted to ot er p%rposes, partic%larly cattle past%res, @ ile t e !ertile land best s%ited !or @ eat @as drained and ot er@ise impro8ed0 5 e capital !or @ eat c%lti8ation @as t %s concentrated in a more limited area0

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&n t is case I and all possible s%rpl%s rates bet@een t e greatest s%rpl%s-prod%ct o! t e best soil and t e o%tp%t o! rentless soil ? coincide ere @it an absol%te, rat er t an a relati8e, increase in s%rpl%s-prod%ct per acre I t e ne@ly !ormed s%rpl%s-pro!it Bpotential rentC does not represent a portion o! a !ormer a8erage pro!it trans!ormed into rent Ba portion o! t e o%tp%t in @ ic t e a8erage pro!it !ormerly @as expressedC b%t an additional s%rpl%s-pro!it, @ ic is trans!ormed o%t o! t is !orm into rent0 3n t e ot er and, only in s%c case @ ere t e demand !or grain increased to s%c an extent t at t e market-price rose abo8e t e price o! prod%ction o! ?, so t at t e s%rpl%s-prod%ct o! ?, A, or any ot er kind o! soil co%ld be s%pplied only at a price ig er t an V3 @o%ld t e decrease in yield !rom an additional in8estment o! capital in any o! t e soil types ?, A, ; and 7 be accompanied by a rise in price o! prod%ction and t e reg%lating market-price0 &n so !ar as t is lasted !or a lengt y period o! time @it o%t res%lting in t e c%lti8ation o! additional soil ? Bo! at least t e D%ality o! ?C, or @it o%t a c eaper s%pply res%lting !rom ot er circ%mstances, @ages @o%ld rise in conseD%ence o! t e increase in t e price o! bread, e8eryt ing else being eD%al, and t e rate o! pro!it @o%ld !all accordingly0 &n t is case, it @o%ld be immaterial, @ et er t e increased demand @ere satis!ied by bringing %nder c%lti8ation soil o! in!erior D%ality t an ?, or by additional in8estments o! capital, in any o! t e !o%r types o! soil0 7i!!erential rent @o%ld t en increase toget er @it a !alling rate o! pro!it0 5 is one case, in @ ic t e decreasing prod%cti8eness o! s%bseD%ent additional capitals in8ested in already c%lti8ated soils may lead to an increase in price o! prod%ction, a !all in rate o! pro!it, and t e !ormation o! ig er di!!erential rent I !or t e latter @o%ld increase %nder t e gi8en circ%mstances %pon all kinds o! soil H%st as t o%g soil o! in!erior D%ality t an ? @ere reg%lating t e market-price I as been labelled by )icardo as t e only case, t e normal case I to @ ic e red%ces t e entire !ormation o! di!!erential rent &&0 5 is @o%ld also be t e case i! only type ? soil @ere c%lti8ated and s%ccessi8e in8estments o! capital in it @ere not accompanied by a proportional increase in prod%ce0 6ere t en, in t e case o! di!!erential rent &&, one completely loses sig t o! di!!erential rent &0 Except !or t is case, in @ ic t e s%pply !rom t e c%lti8ated soils is eit er ins%!!icient and t e market-price t %s contin%ally ig er t an t e price o! prod%ction %ntil ne@ additional soil o! in!erior D%ality is taken %nder c%lti8ation, or %ntil t e total prod%ct !rom t e additional capital in8ested in 8ario%s kinds o! soil can be s%pplied only at a ig er price o! prod%ction t an t at it erto pre8ailing I sa8e !or t is case, t e proportional drop in prod%cti8ity o! t e additional capitals lea8es t e reg%lating price o! prod%ction and t e rate o! pro!it %nc anged0 For t e rest, t ree additional cases are possible: aC &! t e additional capital in8ested in any one o! t e types o! soil ?, A, ; or 7 yields only t e rate o! pro!it determined by t e price o! prod%ction o! ?, t en no s%rpl%s-pro!it, and t ere!ore no potential rent, is !ormed, any more t an t ere @o%ld be i! additional type ? soil ad been c%lti8ated0 bC &! t e additional capital yields a larger prod%ct, ne@ s%rpl%s-pro!it Bpotential rentC is, o! co%rse, !ormed pro8ided t e reg%lating price remains t e same0 5 is is not necessarily t e case# it is not t e case, in partic%lar, @ en t is additional prod%ction t ro@s soil ? o%t o! c%lti8ation and t %s o%t o! t e seD%ence o! competing soils0 &n t is case, t e reg%lating price o! prod%ction !alls0 &! t is @ere accompanied by a !all in @ages, or i! t e c eaper prod%ct @ere to enter into t e constant capital as one o! its elements, t e rate o! pro!it @o%ld rise0 &! t e increased prod%cti8ity o! t e additional capital ad taken place %pon t e best soils ; and 7, it @o%ld depend entirely %pon t e degree o! increased prod%cti8ity and t e amo%nt o! additional ne@ capital to @ at extent t e !ormation o! increased s%rpl%s-pro!it Band t %s increased rentC @o%ld be associated @it t e !all in prices and t e rise in t e rate o! pro!it0 5 e latter may also rise @it o%t a !all in @ages, t ro%g a c eapening o! t e elements o! constant capital0

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cC &! t e additional in8estment o! capital takes place @it decreasing s%rpl%s-pro!it, b%t in s%c manner t at t e yield !rom t e additional o%tlay still lea8es a s%rpl%s abo8e t e yield !rom t e same capital in8ested in ?, a ne@ !ormation o! s%rpl%s-pro!it takes place %nder all circ%mstances, %nless t e increased s%pply excl%des soil ? !rom c%lti8ation0 5 is may take place sim%ltaneo%sly %pon 7, ;, A and ?0 A%t, on t e ot er and, i! t e @orst soil ? is sD%eeEed o%t o! c%lti8ation, t en t e reg%lating price o! prod%ction !alls and it @ill depend %pon t e relation bet@een t e red%ced price o! 1 Dr and t e increased n%mber o! D%arters !orming s%rpl%s-pro!it @ et er t e s%rpl%s-pro!it expressed in money, and conseD%ently t e di!!erential rent, rises or !alls0 A%t at any rate, it is note@ort y ere t at @it decreasing s%rpl%s-pro!it !rom s%ccessi8e in8estments o! capital t e price o! prod%ction may !all, instead o! rising, @ ic it seemingly s o%ld do at !irst sig t0 5 ese additional in8estments o! capital @it decreasing s%rpl%s yields correspond entirely to t e case in @ ic , e0g0, !o%r ne@ independent capitals o! V<Z eac @o%ld be in8ested in soils @it !ertility bet@een ? and A, A and ;, ; and 7, and yielding 1Z, <X, <W, and 3 Drs respecti8ely0 $%rpl%s-pro!it Bpotential rentC @o%ld take s ape on all t ese soils !or all !o%r additional capitals, alt o%g t e rate o! s%rpl%s-pro!it, compared @it t at !or t e same in8estment o! capital on t e correspondingly better soil, @o%ld a8e decreased0 ?nd it @o%ld be immaterial @ et er t ese !o%r capitals @ere in8ested in 7, etc0, or distrib%ted bet@een 7 and ?0 We no@ come to an essential di!!erence bet@een t e t@o !orms o! di!!erential rent0 (nder di!!erential rent &, @it constant price o! prod%ction and constant di!!erences, t e a8erage rent per acre, or t e a8erage rate o! rent on capital, may increase toget er @it t e rental0 A%t t e a8erage is a mere abstraction0 5 e act%al amo%nt o! rent, calc%lated per acre or @it respect to capital, remains t e same ere0 3n t e ot er and, %nder t e same conditions, t e amo%nt o! rent calc%lated per acre may increase alt o%g t e rate o! rent, meas%red relati8e to in8ested capital, remains t e same0 'et %s ass%me t at prod%ction is do%bled by t e in8estment o! V+ instead o! V<Z in eac o! t e soils ?, A, ; and 7, i0e0, a total o! V<= instead o! V1=, and t at t e relati8e !ertility remains %nc anged0 5 is @o%ld be tantamo%nt to c%lti8ating < instead o! 1 acre o! eac o! t ese kinds o! soil at t e same cost0 5 e rate o! pro!it @o%ld remain t e same# also its relation to s%rpl%s-pro!it or rent0 A%t i! ? @ere no@ to yield < Drs, A I 2, ; I 6, and 7 I 8, t e price o! prod%ction @o%ld ne8ert eless remain V3 per D%arter beca%se t is increase is not d%e to do%bled !ertility @it t e same capital, b%t to t e same proportional !ertility @it a do%bled capital0 5 e t@o D%arters o! ? @o%ld no@ cost V6 H%st as 1 Dr cost V3 be!ore0 5 e pro!it @o%ld a8e do%bled on all !o%r soils, b%t only beca%se t e in8ested capital @as do%bled0 &n t e same proportion, o@e8er, t e rent @o%ld also a8e been do%bled# it @o%ld be < Drs !or A instead o! 1, 2 Drs !or ; instead o! <, and 6 !or 7 instead o! 3# and correspondingly, t e money-rent !or A, ; and 7 @o%ld no@ be V6, V1<, and V18 respecti8ely0 'ike t e yield per acre, t e rent in money per acre @o%ld be do%bled, and, conseD%ently, also t e price o! t e land @ ereby t is money-rent is capitalised0 ;alc%lated in t is manner, t e amo%nt o! rent in grain and money increases, and t %s t e price o! land, beca%se t e standard %sed in its comp%tation, i0e0, t e acre, is an area o! constant magnit%de0 3n t e ot er and, calc%lated as rate o! rent on in8ested capital, t ere is no c ange in t e proportional amo%nt o! rent0 5 e total rental o! 36 is to t e in8ested capital o! <= as t e rental o! 18 is to t e in8ested capital o! 1=0 5 e same olds tr%e !or t e ratio o! money-rent !rom eac type o! soil to t e capital in8ested in it# !or instance, in ;, V1< rent is to V+ capital as V6 rent @as !ormerly to V<Z capital0 -o ne@ di!!erences arise ere bet@een t e in8ested capitals, b%t ne@ s%rpl%s-pro!its do, merely beca%se t e additional capital is in8ested in one o! t e rent-bearing soils, or in all o! t em, @it t e same proportional yield as pre8io%sly0 &! t is do%ble in8estment took place, !or example, only in ;, t e di!!erential rent bet@een ;, A and 7, calc%lated @it respect to capital, @o%ld remain t e same: !or @ en t e amo%nt o! rent obtained !rom ; is do%bled, so is t e in8ested capital0

28+

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5 is s o@s t at t e amo%nt o! rent in prod%ce and money per acre, and t ere!ore t e price o! land, may rise, @ ile t e price o! prod%ction, t e rate o! pro!it, and t e di!!erences remain %nc anged Band t ere!ore t e rate o! s%rpl%s-pro!it or o! rent, calc%lated @it respect to capital, remains %nc angedC0 5 e same may take place @it decreasing rates o! s%rpl%s-pro!it, and t ere!ore o! rent, t at is, @it decreasing prod%cti8ity o! t e additional o%tlays o! capital t at still yield rent0 &! t e second in8estments o! capital o! V<Z ad not do%bled t e o%tp%t, b%t A ad yielded only 3Z Drs, ; I + Drs, and 7 I > Drs, /&n t e :erman 18*2 edition t is reads: 6 Drs0 I Ed01 t en t e di!!erential rent !or t e second V<Z o! capital in A @o%ld be only Z Dr instead o! 1, on ; I 1 Dr instead o! < and on 7 I < Drs instead o! 30 5 e proportions bet@een rent and capital !or t e t@o s%ccessi8e in8estments @o%ld t en be as !ollo@s:

'irst Dnvestment GI CI DI )ent V3, K K V6, V*,

Second Dnvestment ;apital V<Z K V<Z K V<Z

;apital )ent V<Z V1Z, K V<Z K V3, K V<Z K V6,

&n spite o! t is decreased rate o! relati8e prod%cti8ity o! capital, and t %s o! t e s%rpl%s-pro!it calc%lated on capital, t e rent in grain and money @o%ld a8e increased on A !rom 1 to 1Z Drs B!rom V3 to V2ZC, on ; I !rom < to 3 Drs B!rom V6 to V*C, and on 7 I !rom 3 to + Drs B!rom V* to V1+C0 &n t is case, t e di!!erences !or t e additional capitals, compared @it t e capital in8ested in ?, @o%ld a8e decreased, t e price o! prod%ction @o%ld a8e remained t e same, b%t t e rent per acre, and conseD%ently t e price o! land per acre, @o%ld a8e risen0 5 e combinations o! di!!erential rent &&, @ ic pres%pposes di!!erential rent & as its basis, @ill no@ be taken %p0

Chapter 41. 'ifferential Rent 55. #irst Case= Constant Price of Production
5 e ass%mption ere implies t at t e market-price is reg%lated as be!ore by t e capital in8ested in t e @orst soil ?0 &0 &! t e additional capital in8ested in any one o! t e rent-bearing soils I A, ;, 7 I prod%ces only as m%c as t e same capital %pon soil ?, i0e0, i! it yields only t e a8erage pro!it at t e reg%lating price o! prod%ction, b%t no s%rpl%s-pro!it, t en t e e!!ect %pon t e rent is nil0 E8eryt ing remains as be!ore0 &t is t e same as t o%g an arbitrary n%mber o! acres o! ? D%ality, i0e0, o! t e @orst soil, as been added to t e c%lti8ated area0 &&0 5 e additional capitals yield additional prod%ce proportional to t eir magnit%de on e8ery one o! t e 8ario%s soils# in ot er @ords, t e 8ol%me o! prod%ction gro@s according to t e speci!ic !ertility o! eac soil type I in proportion to t e magnit%de o! t e additional capital0 &n ; apter JJJ&J, @e started @it t e !ollo@ing 5able &: 5?A'E & 5ype o! ;apital ,ro!it ,rice o! 3%tp%t ?cres soil V V ,rod0 V Mrs ? A ; 7 5otal 1 1 1 1 2 <Z <Z <Z <Z 1= Z Z Z Z 3 3 3 3 1< 1 < 3 2 1= $elling price V 3 3 3 3 ,roceeds )ent )ate o! V $%rpl%s pro!it Mrs V 3 6 * 1< 3= = 1 < 3 6 = = 3 1<=T 6 <2=T * 36=T 18

5 is is no@ trans!ormed into: 5?A'E && 5ype soil ? A ; 7 5otal o! ?cres ;apital V 1 1 1 1 2 <Z <ZR+ <Z <ZR+ <Z <ZR+ <Z <ZR+ <= U U U U ,ro!it ,rice V ,rod0 1 1 1 1 6 6 6 6 o! 3%tp%t Mrs < 2 6 8 <= $elling price V 3 3 3 3 ,roceeds )ent $%rpl%s V Mrs V pro!it 6 < 18 <2 6= = < 2 6 = = 6 1<=T 1< <2=T 18 36=T

1< 36

28>

; apter J'&

&t is not necessary in t is case t at t e in8estment o! capital be do%bled in all soils, as in t e table0 5 e la@ is t e same so long as additional capital is in8ested in one, or se8eral, o! t e rent-bearing soils, no matter in @ at proportion0 &t is only necessary t at prod%ction s o%ld increase %pon e8ery soil in t e same ratio as t e capital0 5 e rent increases ere merely in conseD%ence o! an increased in8estment o! capital in t e soil, and in proportion to t is increase0 5 is increase in prod%ce and rent in conseD%ence o!, and proportionately to, t e increased o%tlay o! capital is H%st t e same as regards t e D%antity o! prod%ce and rent, as @ en t e c%lti8ated area o! t e rentbearing plots o! land o! t e same D%ality ad been increased and taken %nder c%lti8ation @it t e same o%tlay o! capital as t at pre8io%sly in8ested in t e same types o! soils0 &n t e case o! 5able &&, !or instance, t e res%lt @o%ld remain t e same, i! t e additional capital o! V<Z per acre @ere in8ested in an additional acre o! A, ; and 70 F%rt ermore, t is ass%mption does not imply a more prod%cti8e in8estment o! capital, b%t only an o%tlay o! more capital %pon t e same area @it t e same s%ccess as be!ore0 ?ll relati8e proportions remain t e same ere0 3! co%rse, i! @e do not consider t e proportional di!!erences, b%t consider t e p%rely arit metic ones, t en t e di!!erential rent may c ange %pon t e 8ario%s soils0 'et %s ass%me, !or instance, t at additional capital as been in8ested only in A and 70 5 e di!!erence bet@een 7 and ? is t en R > Drs @ ereas pre8io%sly it @as R 3, t e di!!erence bet@een A and ? R 3 Drs, @ ereas pre8io%sly it @as R 1# t at bet@een ; and A R -1, @ ereas pre8io%sly it @as R U1, etc0 A%t t is arit metic di!!erence, @ ic is decisi8e in di!!erential rent & in so !ar as it expresses t e di!!erence in prod%cti8ity @it eD%al o%tlays o! capital, is ere D%ite immaterial, beca%se it is merely a conseD%ence o! di!!erent additional in8estments o! capital, or o! no additional in8estment, @ ile t e di!!erence !or eac eD%al portion o! capital %pon t e 8ario%s plots o! land remains %nc anged0 &&&0 5 e additional capitals yield s%rpl%s-prod%ce and t %s !orm s%rpl%s-pro!it, b%t at a decreasing rate, not in proportion to t eir increase0 5?A'E &&& $oil ?cres ;apital V ? A ; 7 1 1 1 1 <Z ,ro!it ,rice o! 3%tp%t V ,rod0 V Mrs Z 3 6 6 6 <1 1 $elling price V 3 ,roceeds )ent V Mrs V 3 1=Z 1+ <<Z +1 = = )ate o! $%rpl%s pro!it =

<Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ 1>Z 3Z

< U 1Z R 3 3Z 3U<R+ 3

1Z 2Z *=T 3 * 18=T

2 U 3Z R 3 >Z 1>

+Z 16Z 33=T 1= 3=

&n t e case o! t is t ird ass%mption, it is again immaterial @ et er t e additional second in8estments o! capital are %ni!ormly distrib%ted among t e 8ario%s soils or not# @ et er t e decreasing prod%ction o! s%rpl%s-pro!it takes place proportionately or not# @ et er t e additional in8estments o! capital are all in t e same rent-bearing type o! soil, or @ et er t ey are distrib%ted eD%ally or %neD%ally among rent-bearing plots o! land o! 8arying D%ality0 ?ll t ese circ%mstances are immaterial !or t e la@ t at is to be de8eloped0 5 e only ass%mption is t at additional in8estments o! capital yield s%rpl%s-pro!it %pon any one o! t e rent-bearing soils, b%t in decreasing proportion to t e amo%nt o! t e increase in capital0 5 e limits o! t is decrease, in t e

288

; apter J'&

table be!ore %s, are bet@een 2 D%arters R V1<, t e o%tp%t !rom t e !irst o%tlay o! capital on t e best soil 7, and 1 D%arter R V3, t e o%tp%t !rom t e same o%tlay o! capital in t e @orst soil ?0 5 e o%tp%t !rom t e best soil in case o! t e in8estment o! capital & constit%tes t e top limit, and t e o%tp%t !rom t e same o%tlay o! capital in t e @orst soil ?, @ ic yields neit er rent nor s%rpl%spro!it, is t e bottom limit o! o%tp%t, @ ic s%ccessi8e in8estments o! capital yield %pon any o! t e soil types prod%cing s%rpl%s-pro!it @it decreasing prod%cti8ity o! s%ccessi8e in8estments o! capital0 P%st as ass%mption && corresponds to t e case in @ ic ne@ plots o! t e same D%ality are added !rom t e better soils to t e c%lti8ated area, in @ ic t e D%antity o! any one o! t e c%lti8ated soils is increased, so ass%mption &&& corresponds to t e case in @ ic additional plots are c%lti8ated @ ose 8ario%s degrees o! !ertility are distrib%ted among soils ranging !rom 7 to ?, i0e0, !rom t e best to t e @orst soils0 &! t e s%ccessi8e o%tlays o! capital are made excl%si8ely in soil 7, t ey may incl%de t e existing di!!erences bet@een 7 and ?, t en di!!erences bet@een 7 and ;, and like@ise bet@een 7 and A0 &! t ey are all made in soil ;, t en only di!!erences bet@een ; and ?, and ; and A# i! excl%si8ely in A, t en only di!!erences bet@een A and ?0 A%t t is is t e la@: 5 e rent increases absol%tely %pon all t ese soils, e8en i! not in proportion to t e additional capital in8ested0 5 e rate o! s%rpl%s-pro!it, considering bot t e additional capital and t e total capital in8ested in t e soil, decreases# b%t t e absol%te magnit%de o! t e s%rpl%s-pro!it increases# H%st as t e decreasing rate o! pro!it on capital in general is, in t e main, accompanied by an increase in t e absol%te amo%nt o! pro!it0 5 %s t e a8erage s%rpl%s-pro!it o! a capital in8ested in A R *=T on t e capital, @ ereas it @as R 1<=T !or t e !irst o%tlay o! capital0 A%t t e total s%rpl%s-pro!it increases !rom 1 Dr to 1Z Drs, or !rom V3 to V2Z0 5 e total rent I considered by itsel! rat er t an in relation to t e do%bled magnit%de o! t e ad8anced capital I as risen absol%tely0 5 e di!!erences in rents !rom 8ario%s soils and t eir relati8e proportions may 8ary ere# b%t t is 8ariation in di!!erences is a conseD%ence, not ca%se, o! t e increase in rents in relation to one anot er0 &40 5 e case in @ ic additional in8estments o! capital in t e better soils yield more prod%ce t an t e original ones reD%ires no !%rt er analysis0 &t goes @it o%t saying t at %nder t is ass%mption t e rent per acre @ill increase, and proportionately more t an t e additional capital, no matter in @ ic kind o! soil t e o%tlay as been made0 &n t is case, t e additional in8estment o! capital is accompanied by impro8ements0 5 is incl%des t e cases in @ ic an additional o%tlay o! less capital prod%ces t e same or a greater e!!ect t an an additional o%tlay o! more capital did !ormerly0 5 is case is not D%ite identical @it t e !ormer one, and t e distinction is important in all in8estments o! capital0 For instance, i! 2== yields a pro!it o! 2=, and <== employed in a certain !orm yields a pro!it o! 2=, t en t e pro!it as risen !rom 1=T to <=T, and to t at extent it is t e same as t o%g += employed in a more e!!ecti8e !orm yields a pro!it o! 1= instead o! +0 We ass%me ere t at t e pro!it is associated @it a proportional increase in o%tp%t0 A%t t e di!!erence is t at & m%st do%ble t e capital in t e one case, @ ereas in t e ot er, t e e!!ect & prod%ce is do%bled @it t e capital employed it erto0 &t is by no means t e same @ et er & prod%ce: 1C t e same o%tp%t as be!ore @it al! as m%c li8ing and materialised labo%r, or <C t@ice t e o%tp%t as be!ore @it t e same labo%r, or 3C !o%r times t e !ormer o%tp%t @it t@ice t e labo%r0 &n t e !irst case, labo%r I in a li8ing or materialised !orm I is released, and may be employed ot er@ise# t e po@er to dispose o! capital and labo%r increases0 5 e release o! capital Band labo%rC is in itsel! an a%gmentation o! @ealt # it as exactly t e same e!!ect as t o%g t is additional capital as been obtained by acc%m%lation, b%t it sa8es t e labo%r o! acc%m%lation0 ?ss%me t at a capital o! 1== as prod%ced an o%tp%t o! ten metres0 5 e 1== incl%des constant capital, li8ing labo%r and pro!it0 5 %s a metre costs 1=0 -o@, i! & can prod%ce <= metres @it t e same capital o! 1==, t en a metre costs +0 &!, on t e ot er and, & can prod%ce 1= metres @it a capital o! +=, t en a metre like@ise costs +, and s o%ld t e !ormer s%pply o! commodities s%!!ice a capital o! += is released0 &! & a8e to in8est a capital o! <== in order to prod%ce 2= metres, t en a metre also costs +0 5 e determination o! 8al%e, and also t e price, does not permit any di!!erence

28*

; apter J'&

to be discerned ere# no more t an t e amo%nt o! o%tp%t proportional to t e o%tlay o! capital0 A%t in t e !irst case, additional capital is sa8ed /&n t e :erman 18*2 edition t is reads: capital is released0 I 0d01 to be %sed per aps to do%ble prod%ction i! necessary# in t e second case, capital is released, /Dbid.I additional capital is sa8ed0 I 0d01 in t e t ird case, t e increased o%tp%t can only be obtained by a%gmenting t e in8ested capital, alt o%g not in t e same proportion as @ en t e increased o%tp%t @as to a8e been s%pplied by t e old prod%cti8e po@er0 B5 is belongs in ,art &0C From t e 8ie@point o! capitalist prod%ction, t e employment o! constant capital is al@ays c eaper t an t at o! 8ariable capital, not as regards increasing t e s%rpl%s-8al%e, b%t rat er as regards red%cing t e cost-price I and sa8ing o! costs e8en in t e element creating s%rpl%s-8al%e, in labo%r, per!orms t is ser8ice !or t e capitalist and makes pro!it !or im so long as t e reg%lating price o! prod%ction remains t e same0 5 is pres%pposes, in !act, t e de8elopment o! credit and an ab%ndance o! loan capital corresponding to t e capitalist mode o! prod%ction0 3n t e one and, & employ V1== additional constant capital, i! V1== is t e o%tp%t o! !i8e labo%rers d%ring t e year# on t e ot er and, V1== in 8ariable capital0 &! t e rate o! s%rpl%s-8al%e R 1==T, t en t e 8al%e created by t e !i8e labo%rers R V<==# on t e ot er and, t e 8al%e o! V1== constant capital R V1== and as capital it is per aps R V1=+, i! t e interest rate R +T0 5 e same s%ms o! money express 8ery di!!erent 8al%es, !rom t e 8ie@point o! t e o%tp%t t ey prod%ce, depending on @ et er t ey are ad8anced to prod%ction as magnit%des o! 8al%e o! constant or o! 8ariable capital0 F%rt ermore, as regards t e cost o! t e commodities !rom t e 8ie@point o! t e capitalist, t ere is also t is di!!erence, t at o! t e V1== constant capital only t e @ear and tear enters into t e 8al%e o! t e commodity in so !ar as t is money is in8ested in !ixed capital, @ ereas t e V1== in8ested in @ages m%st be completely reprod%ced in t e commodity0 &n t e case o! colonists, and independent small prod%cers in general, @ o a8e no access to capital at all or only at ig interest rates, t at part o! t e o%tp%t @ ic represents @ages is t eir re8en%e, @ ereas !or t e capitalist it constit%tes an ad8ance o! capital0 5 e !ormer, t ere!ore, regards t is expendit%re o! labo%r as t e indispensable prereD%isite !or t e labo%r-prod%ct, @ ic is t e t ing t at interests im abo8e all0 A%t, as regards is s%rpl%s-labo%r, a!ter ded%cting t e necessary labo%r, it is e8idently realised in t e s%rpl%s-prod%ct# and as soon as e can sell t e latter, or %se it !or imsel!, e looks %pon it as somet ing t at cost im not ing, beca%se it cost im no materialised labo%r0 &t is only t e expendit%re o! t e latter @ ic appears to im as alienation o! @ealt 0 3! co%rse, e tries to sell as ig as possible# b%t e8en a sale belo@ 8al%e and belo@ t e capitalist price o! prod%ction still appears to im as pro!it, %nless t is pro!it is anticipated by debts, mortgages, etc0 For t e capitalist, on t e ot er and, t e in8estment o! bot 8ariable and constant capital represents an ad8ance o! capital0 5 e relati8ely larger ad8ance o! t e latter red%ces t e cost-price, and in !act t e 8al%e o! t e commodities, e8eryt ing else being eD%al0 6ence, alt o%g pro!it arises only !rom s%rpl%s-labo%r, conseD%ently only !rom t e employment o! 8ariable capital, it may still seem to t e indi8id%al capitalist t at li8ing labo%r is t e most expensi8e element in is price o! prod%ction @ ic s o%ld be red%ced to a minim%m be!ore all else0 5 is is b%t a capitalistically distorted !orm o! t e !act t at t e relati8ely greater %se o! congealed labo%r, as compared @it li8ing labo%r, signi!ies an increase in t e prod%cti8ity o! social labo%r and a greater social @ealt 0 From t e 8ie@point o! competition, e8eryt ing appears t %s distorted and t%rned topsy-t%r8y0 ?ss%ming prices o! prod%ction to remain %nc anged, t e additional in8estments o! capital in t e better soils, t at is, in all soils !rom A %p@ard may be made @it %naltered, increasing, or decreasing prod%cti8ity0 For soil ? t is @o%ld only be possible %nder t e conditions ass%med by %s, i! prod%cti8ity remains t e same I @ ereby t e land contin%es to yield no rent I and also i! prod%cti8ity increases# a portion o! t e capital in8ested in ? @o%ld t en yield rent, @ ile t e remainder @o%ld not0 A%t it @o%ld be impossible i! prod%cti8ity on ? @ere to decrease, !or t en t e price o! prod%ction @o%ld not remain %nc anged, b%t @o%ld rise0 .et in all t ese cases, i0e0,

2*=

; apter J'&

@ et er t e s%rpl%s-prod%ct yielded by t e additional in8estments is proportional to t e latter or is greater or smaller t an t is proportion I @ et er, t ere!ore, t e rate o! s%rpl%s-pro!it on t e capital remains constant, rises or !alls, @ en t is capital increases, t e s%rpl%s-prod%ct and t e corresponding s%rpl%s-pro!it per acre increases, and ence also t e potential rent in grain and money0 5 e gro@t in t e mere D%antity o! s%rpl%s-pro!it or rent, calc%lated per acre, t at is, an increasing D%antity calc%lated on t e basis o! some constant %nit I in t e present case on a de!inite D%antity o! land s%c as an acre or a ectare I expresses itsel! as an increasing ratio0 6ence t e magnit%de o! t e rent, calc%lated per acre, increases %nder s%c circ%mstances simply in conseD%ence o! t e increase in t e capital in8ested in t e land0 5 is takes place, to be s%re, ass%ming t e prices o! prod%ction remain t e same, and, on t e ot er and, regardless o! @ et er t e prod%cti8ity o! t e additional capital remains %naltered, or @ et er it decreases or increases0 5 e latter circ%mstances modi!y t e range in @ ic t e magnit%de o! rent per acre increases b%t not t e existence o! t is increase itsel!0 5 is is a p enomenon pec%liar to di!!erential rent &&, and disting%is ing it !rom di!!erential rent &0 &! t e additional in8estments o! capital @ere made s%ccessi8ely in space, side by side in ne@ additional soil o! corresponding D%ality, rat er t an s%ccessi8ely in time in t e same soil, t e D%antity o! t e rental @o%ld a8e increased, and, as pre8io%sly s o@n, so @o%ld t e a8erage rent !rom t e total c%lti8ated area, b%t not t e magnit%de o! t e rent per acre0 :i8en t e same res%lt so !ar as D%antity and 8al%e o! total prod%ction and s%rpl%s-prod%ct are concerned, t e concentration o! capital %pon a smaller area o! land increases t e amo%nt o! rent per acre, @ ereas %nder t e same conditions, its dispersion o8er a larger area, all ot er conditions being eD%al, does not prod%ce t is e!!ect0 A%t t e more t e capitalist mode o! prod%ction de8elops, t e more does t e concentration o! capital %pon t e same area o! land de8elop, and, t ere!ore, t e more does t e rent, calc%lated per acre, increase0 ;onseD%ently, gi8en t@o co%ntries in @ ic t e prices o! prod%ction are identical, t e di!!erences in soil type are identical, and t e same amo%nt o! capital is in8ested I b%t in t e one co%ntry more in t e !orm o! s%ccessi8e o%tlays %pon a limited area o! land, @ ereas in t e ot er more in t e !orm o! coordinated o%tlays %pon a larger area I t en t e rent per acre, and t ereby t e price o! land, @o%ld be ig er in t e !irst co%ntry and lo@er in t e second, alt o%g t e total rent @o%ld be t e same !or bot co%ntries0 5 e di!!erence in magnit%de o! rent co%ld t %s not be explained ere to be a res%lt o! a di!!erence in t e nat%ral !ertility o! t e 8ario%s soils, nor a res%lt o! a di!!erence in t e D%antity o! employed labo%r, b%t solely a res%lt o! di!!erent @ays in @ ic t e capital is in8ested0 W en @e re!er to s%rpl%s-prod%ct ere, t is s o%ld al@ays be %nderstood to mean t at aliD%ot part o! t e o%tp%t @ ic represents s%rpl%s-pro!it0 3rdinarily, @e mean by excess prod%ct or s%rpl%s-prod%ct t at portion o! t e o%tp%t @ ic represents t e total s%rpl%s-8al%e, or in some cases t at portion @ ic represents t e a8erage pro!it0 5 e speci!ic meaning @ ic t is term ass%mes in t e case o! rent-bearing capital gi8es rise to mis%nderstanding, as pre8io%sly pointed o%t0

Chapter 42. 'ifferential Rent 55. Second Case= #allin) Price of Production
5 e price o! prod%ction may !all @ en additional in8estments o! capital take place @it an %naltered, !alling, or rising rate o! prod%cti8ity0

I. Productivit# of the additional investment of capital remains the same.

&n t is case, t e ass%mption, t ere!ore, is t at t e o%tp%t increases proportionally to t e capital in8ested in t e 8ario%s soils and in accordance @it t eir respecti8e D%alities0 5 is means !or constant di!!erences in soils t at t e s%rpl%s-prod%ct increases in proportion to t e increased in8estment o! capital0 5 is case, t en, excl%des any additional in8estment o! capital in soil ? @ ic mig t a!!ect t e di!!erential rent0 For t is soil, t e rate o! s%rpl%s-pro!it R =# t %s, it remains R = since @e a8e ass%med t at t e prod%cti8eness o! t e additional capital, and t ere!ore t e rate o! s%rpl%s-pro!it, remain t e same0 A%t %nder t ese conditions t e reg%lating price o! prod%ction can only !all, beca%se it is t e price o! prod%ction o! t e next best soil, o! A, or any better soil t an ?, rat er t an t at o! ?, @ ic becomes t e reg%lator# so t at t e capital is @it dra@n !rom ?, or per aps !rom ? and A i! t e price o! prod%ction o! ; s o%ld become t e reg%lating one, and t %s all soils in!erior to ; @o%ld be eliminated !rom t e competition among grain-prod%cing soils0 5 e prereD%isite !or t is is, %nder t e ass%med conditions, t at t e additional yield !rom t e additional in8estments o! capital satis!y t e demand, so t at t e o%tp%t !rom t e in!erior soil ?, etc0, become s%per!l%o%s !or t e reestablis ment o! a !%ll s%pply0 5 %s, let %s take, !or instance, 5able &&, b%t in s%c a @ay t at 18 Drs instead o! <= satis!y t e demand0 $oil ? @o%ld drop o%t# A k and its price o! prod%ction o! 3= s illings per D%arter @o%ld become reg%lating0 5 e di!!erential rent t en ass%mes t e !ollo@ing !orm: 5?A'E &4 )ent $elling 5ype ;apital ,ro!it ,rice o! 3%tp%t ,roceeds &n ?cres price per o! soil V V ,rod0 Mrs V :rain Dr V Mrs A ; 7 5otal 1 1 1 3 + + + 1+ 1 1 1 3 6 6 6 18 2 6 8 18 1Z 1Z 1Z 6 * 1< <> = < 2 6 )ate &n $%rpl%s Money ,ro!it V = 3 6 * =T 6=T 1<=T o!

/k &n t e :erman 18*2 edition t is reads: 70 I 0d01 ;ompared @it 5able &&, t e gro%nd-rent @o%ld ence a8e !allen !rom V36 to V*, and in grain !rom 1< Drs to 6 Drs# total o%tp%t @o%ld a8e !allen only by < Drs, !rom <= to 180 5 e rate o! s%rpl%s-pro!it calc%lated on t e capital @o%ld a8e !allen to one-t ird, i0e0, !rom 18=T to 6=T0

2*<

; apter J'&&

/Dbid.I one- al!, !rom 18=T to *=T0 I 0d.1 5 %s, t e !all in t e price o! prod%ction is accompanied ere by a decrease o! t e rent in grain and money0 ;ompared @it 5able &, t ere is merely a decrease in money-rent# t e rent in grain is in bot cases 6 Drs# b%t in t e one case it R V18, and in t e ot er V*0 For soil ;, / Dbid.I !or soil ; and 70 I 0d01 t e rent in grain, compared @it 5able &, as remained t e same0 &n !act, it is o@ing to t e additional prod%ction res%lting !rom t e %ni!ormly acting additional capital t at t e yield !rom ? as been excl%ded !rom t e market, and t ereby soil ? as been eliminated as a competing prod%cing agent, and it is o@ing to t is !act t at a ne@ di!!erential rent & as been !ormed in @ ic t e better soil A plays t e same role as did !ormerly t e in!erior soil ?0 ;onseD%ently, on t e one and, t e rent !rom A as disappeared# on t e ot er and, not ing as been altered in t e di!!erences bet@een A, ; and 7 by t e in8estment o! additional capital I in accordance @it o%r ass%mption0 For t is reason, t at part o! t e o%tp%t @ ic is trans!ormed into rent is red%ced0 &! t e abo8e res%lt I t e satis!action o! t e demand @it ? excl%ded I ad been accomplis ed, perc ance, by t e in8estment o! more t an do%ble t e capital in ; or 7, or in bot , t en t e matter @o%ld ass%me a di!!erent aspect0 For example, i! t e t ird in8estment o! capital @ere made in ;: 5?A'E &4a )ent 5ype ;apital ,ro!it ,rice o! 3%tp%t $elling ?cres o! soil V V ,rod0 V Mrs price V A ; 7 5otal 1 1 1 3 + >Z + 1>Z 1 1Z 1 3Z 6 * 6 <1 2 * 8 <1 1Z 1Z 1Z ,roceeds &n V :rain Mrs 6 13Z 1< 31Z = 3 2 > )ate &n $%rpl%s Money ,ro!it V = 2Z 6 1=Z =T 6=T 1<=Tk o!

&n t is case, compared @it 5able &4, t e o%tp%t !rom ; as risen !rom 6 to * Drs, t e s%rpl%sprod%ct !rom < to 3 Drs, and t e money-rent !rom V3 to V2Z0 ;ompared @it 5able &&, @ ere t e latter @as V1<, and 5able &, @ ere it @as V6, t e money-rent as, on t e ot er and, decreased0 5 e total rental in grain R > Drs and as !allen compared @it 5able && B1< DrsC and risen compared @it 5able & B6 DrsC# in money BV1=ZC it as !allen compared @it bot BV18 and V36C0 &! t e t ird in8estment o! capital o! V<Z ad been employed on soil A, it @o%ld indeed a8e altered t e D%antity o! prod%ction, b%t @o%ld not a8e a!!ected t e rent, since, according to o%r ass%mption, t e s%ccessi8e in8estments do not prod%ce any di!!erences %pon t e same soil and soil A does not yield any rent0 &! @e ass%me, on t e ot er and, t at t e t ird in8estment o! capital takes place %pon 7 instead o! ;, @e a8e t e !ollo@ing, 5able &4b: )ent 5ype o! ;apital ,ro!it ,rice o! 3%tp%t $elling ?cres soil V V ,rod0 V Mrs price V A 1 + 1 6 2 1Z ,roceeds &n V :rain Mr 6 = )ate &n $%rpl%s Money ,ro!it V = =T o!

2*3

; apter J'&&

; 7 5otal

1 1 3

+ >Z 1>Z

1 1Z 3Z

6 * <1

6 1< <<

1Z 1Z

* 18 33

< 6 8

3 * 1<

6=T 1<=T

6ere t e total prod%ct is << Drs, more t an do%ble t at o! 5able &, alt o%g t e in8ested capital is only V1>Z as against V1=, t at is, not t@ice t e amo%nt0 5 e total prod%ct is also larger by < Drs t an t at o! 5able &&, alt o%g t e in8ested capital in t e latter is larger I namely, V<=0 ;ompared @it 5able &, t e rent in grain !rom soil 7 as increased !rom 3 /&n t e :erman 18*2 edition t is reads: <0 I 0d.1 to 6 Drs, @ ereas t e money-rent, V*, as remained t e same0 ;ompared @it 5able &&, t e grain-rent !rom 7 is t e same, namely, 6 Drs, b%t t e money-rent as !allen !rom V18 to V*0 ;omparing t e total rents, t e grain-rent !rom 5able &4b R 8 Drs is larger t an t at !rom 5able & R 6 Drs and t an t at !rom 5able &4a R > Drs# b%t it is smaller t an t at !rom 5able && R 1< Drs0 5 e money-rent !rom 5able &4b R V1< is larger t an t at !rom 5able &4a R V1=Z and smaller t an t at !rom 5able 1 R V18 and t at !rom 5able && R V360 &n order t at t e total rental may, %nder t e conditions o! 5able &4b B@it t e elimination o! rent !rom AC, be eD%al to t at o! 5able &, @e need V6 more o! s%rpl%s-prod%ct, t at is, 2 Drs at V1Z, @ ic is t e ne@ price o! prod%ction0 We t en a8e a total rental o! V18 again as in 5able &0 5 e magnit%de o! t e reD%ired additional capital @ill 8ary according to @ et er @e in8est it in ; or 7, or di8ide it bet@een t e t@o0 3n ;, V+ capital yields < Drs o! s%rpl%s-prod%ct# conseD%ently, V1= additional capital yields 2 Drs o! additional s%rpl%s-prod%ct0 3n 7, V+ additional capital @o%ld s%!!ice to prod%ce 2 Drs o! additional grain-rent %nder t e conditions ass%med ere, namely t at t e prod%cti8ity o! t e additional in8estments o! capital remains t e same0 We s o%ld t en obtain t e !ollo@ing res%lts: 5?A'E &4c 5ype o! ;apital ,ro!t ,rice o! 3%tp%t ?cres soil V V ,rod0 V Mrs A ; 7 5otal 1 1 1 3 + 1+ >Z <>Z 1 3 1Z +Z 6 18 * 33 2 18 1< 32 $elling price V 1Z 1Z 1Z ,roceeds )ent )ate o! $%rpl%s V Mrs V ,ro!it 6 <> 18 +1 = 6 6 = =T * 6=T * 1<=T

1< 18

5?A'E &4d 5ype o! ;apital ,ro!t ,rice o! 3%tp%t ?cres soil V V ,rod0 V Mrs A ; 7 5otal 1 1 1 3 + + 1<Z <<Z 1 1 <Z 2Z 6 6 1+ <> 2 6 <= 3= $elling price V 1Z 1Z 1Z ,roceeds )ent )ate o! $%rpl%s V Mrs V ,ro!it 6 * 3= 2+ = < = =T 3 6=T

1= 1+ 1<=T 1< 18

2*2

; apter J'&&

5 e total money rental @o%ld be exactly one- al! o! @ at it @as in 5able &&, @ ere t e additional capitals @ere in8ested at constant prices o! prod%ction0 5 e most important t ing is to compare t e abo8e tables @it 5able &0 We !ind t at @ ile t e price o! prod%ction as !allen by one- al!, i0e0, !rom 6= s illings to 3= s illings per D%arter, t e total money rental as remained t e same, namely R V18, and t e grainrent as correspondingly do%bled !rom 6 to 1< Drs0 (pon A t e rent as disappeared# %pon ; t e money-rent as risen by one- al! in &4c, b%t as !allen by one- al! in &4d# %pon 7 in &4c, it as remained t e same, R V*, and as risen !rom V* to V1+ in &4d0 5 e prod%ction as risen !rom 1= to 32 Drs in &4c, and to 3= Drs in &4d# t e pro!it !rom V< to V+Z in &4c and to V2 in &4d0 5 e total in8estment o! capital as risen in t e one case !rom V1= to V<>Z, and in t e ot er !rom V1= to V<<Z# i0e0, in bot cases it as more t an do%bled0 5 e rate o! rent, t at is, t e rent calc%lated on t e in8ested capital, is in all tables !rom &4 to &4d e8ery@ ere t e same !or eac kind o! soil I @ ic @as already implied in t e ass%mption t at t e rate o! prod%cti8ity !or t e t@o s%ccessi8e in8estments o! capital remains t e same !or eac soil type0 A%t compared @it 5able & t is rate as !allen, bot !or t e a8erage o! all kinds o! soil and !or eac one o! t em indi8id%ally0 &n 5able & it @as R 18=T on an a8erage, @ ereas in &4c it R B18N<>ZC \ 1== R 6+ +N11T and in &4d it R B18N<<ZC \ 1== R 8=T0 5 e a8erage money-rent per acre as risen0 Formerly, in 5able &, its a8erage @as V2Z per acre !rom all !o%r acres, @ ereas in &4c and &4d it is V6 per acre %pon t e t ree acres0 &ts a8erage %pon t e rent-bearing land @as !ormerly V6, @ ereas no@ it is V* per acre0 6ence t e money-8al%e o! t e rent per acre as risen and no@ represents t@ice as m%c grain as it did !ormerly# b%t t e 1< Drs o! grain-rent are no@ less t an one- al! o! t e total o%tp%t o! 32 and 3= /&n t e :erman 18*2 edition t is reads: 33 and <>0 I 0d.1 Drs respecti8ely, @ ereas in 5able & t e 6 Drs represent 3N+ o! t e total o%tp%t o! 1= Drs0 ;onseD%ently, alt o%g t e rent as an aliD%ot part o! t e total o%tp%t as !allen, and as also !allen @ en calc%lated on t e in8ested capital, its money-8al%e calc%lated per acre as risen, and still more its 8al%e as a prod%ct0 &! @e take soil 7 in 5able &4d, @e !ind t at t e price o! prod%ction corresponding to t e capital o%tlay ere R V1+, o! @ ic V1<Z is in8ested capital0 5 e money-rent R V1+0 &n 5able &, !or t e same soil 7, t e price o! prod%ction @as R V3, t e in8ested capital R V<Z, and t e money-rent R V*# t at is, t e latter @as t ree times t e price o! prod%ction and almost !o%r times t e capital0 &n 5able &4d, t e money-rent !or 7, V1+, is exactly eD%al to t e price o! prod%ction and larger t an t e capital by only 1N+0 -e8ert eless, t e money-rent per acre is W larger, namely, V1+ instead o! V*0 &n 5able &, t e grain-rent o! 3 Drs R ` o! t e total prod%ct o! 2 Drs# in 5able &4d it is 1= Drs, or one- al! t e total prod%ct B<= DrsC per acre o! 70 5 is s o@s t at t e money-8al%e and grain 8al%e o! t e rent per acre may rise, alt o%g it constit%tes a smaller aliD%ot part o! t e total yield and as !allen in proportion to t e in8ested capital0 5 e 8al%e o! t e total prod%ct in 5able & R V3=# t e rent R V18, or more t an one- al! o! it0 5 e 8al%e o! t e total prod%ct in &4d R V2+, o! @ ic t e rent R V18, or less t an one- al!0 -o@, t e reason @ y in spite o! t e !all in price by V1Z per D%arter, i0e0, a !all o! +=T, and in spite o! t e red%ction in competing soil !rom 2 to 3 acres, t e total money-rent remains t e same and t e total grain-rent is do%bled, @ ile, calc%lated per acre, bot t e grain-rent and money-rent rise, is t at more D%arters o! s%rpl%s-prod%ct are prod%ced0 5 e price o! grain !alls by +=T, and t e s%rpl%s-prod%ct increases by 1==T0 A%t in order to obtain t is res%lt, t e total prod%ction %nder t e conditions ass%med by %s m%st be trebled, and t e in8estment o! capital in t e s%perior soils m%st be more t an do%bled0 ?t @ at rate t e latter m%st increase depends in t e !irst place %pon t e distrib%tion o! additional capital in8estments among t e better and best soils, al@ays ass%ming t at t e prod%cti8ity o! t e capital in8ested in eac soil type increases proportionately to its magnit%de0 &! t e !all in price o! prod%ction @ere smaller, less additional capital @o%ld be reD%ired to prod%ce t e same money-rent0 &! t e s%pply reD%ired to t ro@ soil ? o%t o! c%lti8ation I and t is depends not merely %pon t e o%tp%t per acre o! ?, b%t also %pon t e s are eld by ? in t e entire

2*+

; apter J'&&

c%lti8ated area I t %s, i! t e s%pply reD%ired !or t is p%rpose @ere larger, and t ereby also t e amo%nt o! additional in8ested capital reD%ired in soils better t an ?, t en, ot er circ%mstances remaining t e same, t e money and grain rents @o%ld a8e increased still more, alt o%g soil A @o%ld a8e ceased yielding money and grain rents0 &! t e capital eliminated !rom ? ad been R V+, t e tables to be compared !or t is case @o%ld be tables && and &4d0 5 e total prod%ct @o%ld a8e increased !rom <= to 3= Drs0 5 e money-rent @o%ld be only al! as large, or V28 instead o! V36# t e grain-rent @o%ld be t e same, namely R 1< Drs0 &! a total prod%ct o! 22 Drs R V66 co%ld be prod%ced %pon 7 @it a capital R V<>Z I corresponding to t e old rate !or 7, 2 Drs per V<Z capital I t en t e total rental @o%ld once more reac t e le8el attained in 5able &&, and t e table @o%ld appear as !ollo@s: 5ype o! $oil ;apital V A ; 7 5otal + + <>Z 3>Z 3%tp%t Mrs 2 6 22 +2 :rain-)ent Mrs = < << <2 Money-)ent V = 3 33 36

5 e total prod%ction @o%ld be +2 Drs as against <= Drs in 5able &&, and t e money-rent @o%ld be t e same, R V360 A%t t e total capital @o%ld be V3>Z, @ ereas in 5able && it @as R <=0 5 e total in8ested capital @o%ld be do%ble almost, @ ile prod%ction @o%ld be nearly treble# t e grain-rent @o%ld be do%ble and t e money-rent @o%ld remain t e same0 6ence, i! t e price !alls I @ ile prod%cti8ity remains t e same I as a res%lt o! t e in8estment o! additional money-capital in t e better soils @ ic yield rent, t at is, all soils better t an ?, t en t e total capital as a tendency not to increase at t e same rate as prod%ction and grain-rent# t %s t e increase in grain-rent may compensate !or t e loss in money-rent d%e to t e !alling price0 5 e same la@ also mani!ests itsel! in t at t e in8ested capital m%st be proportionately larger as more is in8ested in ; t an 7, i0e0, in soils yielding less rent rat er t an in soils yielding more rent0 5 e point is simply t is: in order t at t e money-rent may remain t e same or rise, a de!inite additional D%antity o! s%rpl%s-prod%ct m%st be prod%ced, and t e greater t e !ertility o! t e soils yielding s%rpl%s-prod%ct, t e less capital t is reD%ires0 &! t e di!!erence bet@een A and ;, and ; and 7, @ere still greater, still less additional capital @o%ld be reD%ired0 5 e speci!ic proportion is determined by 1C t e ratio o! !all in price, in ot er @ords, by t e di!!erence bet@een soil A, @ ic does not yield rent no@, and soil ?, @ ic !ormerly @as t e soil not yielding rent# <C t e ratio o! t e di!!erences bet@een t e soils better t an A %p@ards# 3C t e amo%nt o! ne@ly in8ested additional capital, and 2C its distrib%tion among t e soils o! 8arying D%ality0 &n !act, @e see t at t is la@ merely expresses @ at @as already ascertained in t e !irst case: W en t e price o! prod%ction is gi8en, no matter @ at its magnit%de, t e rent may increase as a res%lt o! additional capital in8estment0 For o@ing to t e elimination o! ?, @e no@ a8e a ne@ di!!erential rent & @it A as t e @orst soil and V1Z per D%arter as t e ne@ price o! prod%ction0 5 is applies to 5able &4 as @ell as to 5able &&0 &t is t e same la@, except t at o%r point o! depart%re is soil A instead o! ?, and o%r price o! prod%ction is taken as V1Z instead o! V30 5 e important t ing ere is t is: 5o t e extent t at so m%c and so m%c additional capital @as necessary in order to @it dra@ t e capital !rom soil ? and create t e s%pply @it o%t it, @e !ind t at t is may be accompanied by an %naltered, rising, or !alling rent per acre, i! not !rom all plots o! land t en at least !rom some, and so !ar as t e a8erage o! t e c%lti8ated plots is concerned0 We a8e seen t at grain-rent and money-rent do not maintain a %ni!orm relation to one anot er0 &t is merely d%e to tradition t at grain-rent is still o! any importance in economics0 3ne mig t demonstrate eD%ally @ell t at, e0g0, a man%!act%rer can b%y m%c more o! is yarn @it is pro!it

2*6

; apter J'&&

o! V+ t an e co%ld !ormerly @it a pro!it o! V1=0 &t s o@s at any rate, t at messie%rs landlords, @ en t ey are sim%ltaneo%sly o@ners or s are olders in man%!act%ring establis ments, s%garre!ineries, distilleries, etc0, may in t eir capacity as prod%cers o! t eir o@n ra@ materials still make a considerable pro!it @ en t e money-rent is !alling0 xli8

II. +ecreasing rate of productivit# of the additional capital.

5 is introd%ces not ing ne@ into t e problem, in so !ar as t e price o! prod%ction may also !all in t is case, as in t e case H%st considered, only @ en additional in8estments o! capital in better soils t an ? render t e o%tp%t !rom ? s%per!l%o%s and t e capital is t ere!ore @it dra@n !rom ?, or ? is employed !or t e prod%ction o! ot er prod%cts0 5 is case as been ex a%sti8ely disc%ssed abo8e0 &t @as s o@n t at t e rent in grain and money per acre may increase, decrease, or remain %nc anged0 For con8enience in making comparisons @e reprod%ce t e !ollo@ing table: 4+G,0 DL 5ype o! ;apital ,ro!it ,rice o! 3%tp%t ?cres $oil V V ,rod%ction0per Mr Mrs ? A ; 7 5otal 1 1 1 1 2 <Z <Z <Z <Z 1= Z Z Z Z 3 1Z 1 ` 1 < 3 2 1= :rainMoney)ent Mrs )ent Mrs = 1 < 3 6 = 3 6 * 18 )ate o! $%rpl%s ,ro!it = 1<=T <2=T 36=T 18=T a8erage

-o@ let %s ass%me t at a D%antity o! 16 Drs s%pplied by A, ;, and 7 at a decreasing rate o! prod%cti8ity s%!!ices to excl%de ? !rom c%lti8ation0 &n s%c case, 5able &&& is trans!ormed into t e !ollo@ing: 4+G,0 L 5ype $oil A ; 7 5otal o! ?cres 1 1 1 3kkk &n8estment ,ro!it V o! ;apital V <Z U <Z <Z U <Z <Z U <Z 1+ 1 1 1 3%tp%t Mrs $elling price V ,roceeds V 6 8 2N> 1< 6N> <> 3N> :rain-)ent MoneyMrs )ent V = 1Z 2 +Z = < 2N> 6 6N> * 3N>

)ate $%rpl%s =

< U 1Z R 1 +N> 3Z 3U<R+ 1 +N>

+1 3N>T

2 U 3Z R 1 +N> >Z 16

13> 1N>

*2 a8erage

/k &n t e :erman 18*2 edition t is reads +1 <N+0 I 0d.1 /kk Dbid. 13> 1N+ I 0d.1 /kkk Dbid.: 20 I 0d.1 /kkkk 6ere, as @ell as in tables 4&, 4&&, 4&& &, &J and J t e land @ ic yields no rent is le!t o%t o! consideration0 I 0d.1

2*>

; apter J'&&

6ere, at a decreasing rate o! prod%cti8ity o! t e additional capital, and a 8arying decrease !or t e 8ario%s soil types, t e reg%lating price o! prod%ction as !allen !rom V3 to V1 +N>0 5 e in8estment o! capital as risen by one- al!-!rom V1= to V1+0 5 e money-rent as !allen by almost one- al!!rom V18 to V* 3N>, b%t t e grain-rent as !allen by only 1N1< I !rom 6 Drs to +Z Drs0 5 e total o%tp%t as risen !rom 1= to 16, or by 6=T0 5 e grain-rent constit%tes a little more t an one-t ird o! t e total prod%ct0 5 e ad8anced capital is to t e money-rent as 1+:* 3N>, @ ereas !ormerly t is ratio @as 1=:180

III. )ising rate of productivit# of the additional capital.

5 is di!!ers !rom 4ariant & at t e beginning o! t is c apter, @ ere t e price o! prod%ction !alls @ ile t e rate o! prod%cti8ity remains t e same, merely in t at @ en a gi8en amo%nt o! additional prod%ce is reD%ired to excl%de soil ? t is occ%rs ere more D%ickly0 5 e e!!ect may 8ary in accordance @it t e distrib%tion o! in8estments among t e 8ario%s soils !or a !alling, as @ell as an increasing, prod%cti8ity o! t e additional capital in8estments0 &n so !ar as t is 8arying e!!ect balances o%t t e di!!erences, or accent%ates t em, t e di!!erential rent o! t e better soils, and t ereby t e total rental too, @ill !all or rise, as @as already t e case in di!!erential rent &0 &n ot er respects, e8eryt ing depends %pon t e magnit%de o! t e land area and capital excl%ded toget er @it ?, and %pon t e relati8e magnit%de o! ad8anced capital reD%ired @it a rising prod%cti8ity in order to prod%ce t e additional o%tp%t to meet t e demand0 5 e only point @ort @ ile analysing ere, and @ ic really takes %s back to t e in8estigation o! t e @ay in @ ic t is di!!erential pro!it is trans!ormed into di!!erential rent, is t e !ollo@ing: &n t e !irst case, @ ere t e price o! prod%ction remains t e same t e additional capital @ ic may be in8ested in soil ? does not a!!ect t e di!!erential rent as s%c , since soil ?, as be!ore, does not yield any rent, t e price o! its prod%ce remains t e same, and it contin%es to reg%late t e market0 &n t e second case, 4ariant &, @ ere t e price o! prod%ction !alls @ ile t e rate o! prod%cti8ity remains t e same, soil ? @ill necessarily be excl%ded, and still more so in 4ariant && B!alling price o! prod%ction @it !alling rate o! prod%cti8ityC, since ot er@ise t e additional capital in8ested in soil ? @o%ld a8e ad to raise t e price o! prod%ction0 A%t ere, in 4ariant &&& o! t e second case, @ ere t e price o! prod%ction !alls beca%se t e prod%cti8ity o! t e additional capital rises, t is additional capital may %nder certain circ%mstances be in8ested in soil ? as @ell as in t e better soils0 'et %s ass%me t at @ en in8ested in soil ? an additional capital o! V<Z prod%ces 1 1N+ Drs instead o! 1 Dr0 4+G,0 LD 5ype ;apital ,ro!it ,rice o! ?cres 3%tp%t Mrs o! $oil V V ,rod%ction V ? A ; 7 1 1 1 1 <Z U 1 <Z R + <Z U 1 <Z R + <Z U 1 <Z R + <Z U 1 <Z R + 6 6 6 6 )ent )ate o! $elling ,roceeds $%rpl%s price V V Mrs V ,ro!it 6 1< 18 <2 = = =T

1 U 1 1N+ R< 1N+ < 8N11 < U < <N+ R 2 <N+ < 8N11 3 U 3 3N+ R 6 3N+ < 8N11 2 U 2 2N+ R 8 2N+ < 8N11

< 6 1<=T 1N+ 2 1< <2=T <N+ 6 18 36=T 3N+

2*8

; apter J'&&

<=

<2

<<

6=

13 36 <2=T 1N+

?side !rom being compared @it t e basic 5able &, t is table s o%ld be compared @it 5able &&, @ ere a t@o-!old in8estment o! capital is associated @it a constant prod%cti8ity, proportional to t e in8estment o! capital0 &n accordance @it o%r ass%mption, t e reg%lating price o! prod%ction !alls0 &! it @ere to remain constant, R V3, t en t e @orst soil ?, @ ic %sed to yield no rent @it an in8estment o! only V<Z, @o%ld no@ yield rent @it o%t @orse soil being bro%g t %nder c%lti8ation0 5 is @o%ld a8e occ%rred d%e to an increase in t e prod%cti8ity o! t is soil, b%t only !or a part o! t e capital, not !or t e original capital in8ested0 5 e !irst V3 o! prod%ction price yield 1 Dr# t e second yield 1 1N+# Drs# b%t t e entire o%tp%t o! < 1N+# Drs is no@ sold at its a8erage price0 $ince t e rate ! prod%cti8ity increases @it t e additional in8estment o! capital, t is pres%pposes an impro8ement0 5 e latter may consist o! a general increase in capital in8ested per acre Bmore !ertiliser, more mec anised labo%r, etc0C, or it may be t at only t ro%g t is additional capital it is at all possible to bring abo%t a D%alitati8ely di!!erent more prod%cti8e in8estment o! t e capital0 &n bot cases, t e in8estment o! V+ o! capital per acre yields an o%tp%t o! < 1N+ Drs, @ ereas t e in8estment o! oneal! o! t is capital, i0e0, V< 1N+, yields only 1 Dr o! prod%ce0 5 e prod%ce !rom soil ? co%ld, regardless o! transient market conditions, only contin%e to be sold at a ig er price o! prod%ction instead o! at t e ne@ a8erage price, as long as a considerable area o! type ? soil contin%ed to be c%lti8ated @it a capital o! only V<Z per acre0 A%t as soon as t e ne@ relation o! V+ o! capital per acre, and t ereby t e impro8ed management, becomes %ni8ersal, t e reg%lating price o! prod%ction @o%ld a8e to !all to V< 8N110 5 e di!!erence bet@een t e t@o portions o! capital @o%ld disappear, and t en, in !act, t e c%lti8ation o! an acre o! soil ? @it a capital o! only V<Z @o%ld be abnormal, i0e0, @o%ld not correspond to t e ne@ conditions o! prod%ction0 &t @o%ld t en no longer be a di!!erence bet@een t e yields !rom di!!erent portions o! capital in8ested in t e same acre, b%t bet@een a s%!!icient and an ins%!!icient total in8estment o! capital per acre0 5 is s o@s, first of all, t at ins%!!icient capital in t e ands o! a large n%mber o! tenant !armers Bit m%st be a large n%mber, !or a small n%mber @o%ld simply be compelled to sell belo@ t eir price o! prod%ctionC prod%ces t e same e!!ect as a di!!erentiation o! t e soils t emsel8es in a descending line0 5 e in!erior c%lti8ation o! in!erior soil increases t e rent !rom s%perior soils# it may e8en lead to rent being yielded !rom better c%lti8ated soil o! eD%ally poor D%ality, @ ic @o%ld ot er@ise not be yielded0 &t s o@s, secondly, t at di!!erential rent, in so !ar as it arises !rom s%ccessi8e in8estments o! capital in t e same total area, resol8es itsel! in reality into an a8erage, in @ ic t e e!!ects o! t e 8ario%s in8estments o! capital are no longer recognisable and disting%is able, and t ere!ore do not res%lt in rent being yielded !rom t e @orst soil, b%t rat er: 1C make t e a8erage price o! t e total yield !or, say, an acre o! ?, t e ne@ reg%lating price and <C appear as alteration in t e total D%antity o! capital per acre reD%ired %nder t e ne@ conditions !or t e adeD%ate c%lti8ation o! t e soil# and in @ ic t e indi8id%al s%ccessi8e in8estments o! capital, as @ell as t eir respecti8e e!!ects, @ill appear indisting%is ably blended toget er0 &t is exactly t e same @it t e indi8id%al di!!erential rents !rom t e s%perior soils0 &n eac case, t ey are determined by t e di!!erence bet@een t e a8erage o%tp%t !rom t e soil in D%estion and t e o%tp%t !rom t e @orst soil at t e increased capital in8estment I @ ic as no@ become normal0 -o soil yields any prod%ce @it o%t an in8estment o! capital0 5 is is t e case e8en !or simple di!!erential rent, di!!erential rent &# @ en it is said t at one acre o! soil ?, @ ic reg%lates t e price o! prod%ction, yields so m%c and so m%c prod%ce at s%c and s%c a price, and t at s%perior soils A, ; and 7 yield so m%c di!!erential prod%ce, and t ere!ore so m%c and so m%c money-rent at t e reg%lating price o! prod%ction, it is al@ays ass%med t at a de!inite amo%nt o! capital is in8ested @ ic , %nder t e pre8ailing conditions o! prod%ction, is considered normal0 &n

2**

; apter J'&&

t e same @ay, a certain minim%m capital is reD%ired !or e8ery indi8id%al branc o! ind%stry in order t at t e commodities may be prod%ced at t eir price o! prod%ction0 &! t is minim%m is altered as a res%lt o! s%ccessi8e in8estments o! capital associated @it impro8ements on t e same soil, it occ%rs grad%ally0 $o long as a certain n%mber o! acres, say, o! ?, do not recei8e t is additional @orking capital, a rent is prod%ced %pon t e better c%lti8ated acres o! ? d%e to t e %naltered price o! prod%ction, and t e rent !rom all s%perior soils, A, ; and 7, is increased0 A%t as soon as t e ne@ met od o! c%lti8ation as become general eno%g to be t e normal one, t e price o! prod%ction !alls# t e rent !rom t e s%perior plots declines again, and t at portion o! soil ? t at does not possess t e @orking capital, @ ic as no@ become t e a8erage, m%st sell its prod%ce belo@ its indi8id%al price o! prod%ction, i0e0, belo@ t e a8erage pro!it0 &n t e case o! a !alling price o! prod%ction, t is also occ%rs e8en @it decreasing prod%cti8ity o! t e additional capital I as soon as t e reD%ired total prod%ct is s%pplied, in conseD%ence o! increased in8estment o! capital, by t e s%perior soils, and t %s, e0g0, t e @orking capital is @it dra@n !rom ?, i0e0, ? no longer competes in t e prod%ction o! t is partic%lar prod%ct, e0g0, @ eat0 5 e D%antity o! capital @ ic is no@ reD%ired, on an a8erage, to be in8ested in t e better soil A, t e ne@ reg%lator, no@ becomes normal: and @ en one speaks o! t e 8arying !ertility o! plots o! land, it is ass%med t at t is ne@ normal D%antity o! capital per acre is employed0 3n t e ot er and, it is e8ident t at t is a8erage in8estment o! capital, say, in England, o! V8 per acre prior to 1828, and V1< s%bseD%ent to t at year, @ill constit%te t e standard in concl%ding leases0 For t e !armer expending more t an t is, t e s%rpl%s-pro!it is not trans!ormed into rent !or t e d%ration o! t e contract0 W et er t is takes place a!ter expiration o! t e contract or not @ill depend %pon t e competition among t e !armers @ o are in a position to make t e same extra capital ad8ance0 We are not re!erring ere to s%c permanent soil impro8ements t at contin%e to pro8ide t e increased o%tp%t @it t e same or e8en @it a decreasing o%tlay o! capital0 $%c impro8ements, alt o%g prod%cts o! capital, a8e t e same e!!ect as nat%ral di!!erences in t e D%ality o! t e land0 We see, t en, t at a !actor comes into consideration in t e case o! di!!erential rent && @ ic does not appear in t e case o! di!!erential rent & as s%c , since t e latter can contin%e to exist independently o! any c ange in t e normal in8estment o! capital per acre0 &t is, on t e one and, t e bl%rring o! res%lts !rom 8ario%s in8estments, o! capital in reg%lating soil ?, @ ose o%tp%t !lo@ simply appears as a normal a8erage o%tp%t per acre0 &t is, on t e ot er and, t e c ange in t e normal minim%m, or in t e a8erage magnit%de o! in8ested capital per acre, so t at t is c ange appears as a property o! t e soil0 &t is, !inally, t e di!!erence in t e manner o! trans!orming s%rpl%s-pro!it into t e !orm o! rent0 5able 4& s o@s, !%rt ermore, compared @it tables & and &&, t at t e grain-rent as more t an do%bled in relation to &, and as increased by 1 1N+ Drs in relation to &&# @ ile t e money-rent as do%bled in relation to &, b%t as not c anged in relation to &&0 &t @o%ld a8e increased considerably i! Bot er conditions remaining t e sameC more o! t e additional capital ad been allocated to t e s%perior soils, or i! on t e ot er and t e e!!ect o! t e additional capital on ? ad been less appreciable, and t %s t e reg%lating a8erage price per D%arter !rom ? ad been ig er0 &! t e increase in prod%cti8eness by means o! additional capital s o%ld prod%ce 8arying res%lts !or t e 8ario%s soils, t is @o%ld prod%ce a c ange in t eir di!!erential rents0 &n any case, it as been s o@n t at t e rent per acre, !or instance @it a do%bled in8estment o! capital, may not only do%ble, b%t may more t an do%ble I @ ile t e price o! prod%ction !alls in conseD%ence o! an increased rate o! prod%cti8ity o! t e additional capital in8ested, i0e0, @ en t is prod%cti8ity gro@s at a ig er rate t an t e ad8anced capital0 A%t it may also !all i! t e price o! prod%ction s o%ld !all m%c lo@er as a res%lt o! a more rapid increase in prod%cti8eness o! soil ?0

+==

; apter J'&&

'et %s ass%me t at t e additional in8estments o! capital, !or instance in A and ;, do not increase t e prod%cti8ity at t e same rate as t ey do !or ?, so t at t e proportional di!!erences decrease !or A and ; and t e increase in o%tp%t does not make %p !or t e !all in price0 5 en, compared @it 5able &&, t e /money1 rent !rom 7 @o%ld remain %nc anged, and t at !rom A and ; @o%ld !all0 4+G,0 LDa 5ype $oil ? A ; 7 5otal o! ?cres ;apital V 1 1 1 1 2 <ZU<Z ,ro!it 3%tp%t ,er ?cre $elling V Mrs price 1 1U3R2 < U <Z R 2Z 3U+R8 2 U 1< R 16 3<Z 1Z 1Z 1Z 1Z ,roceeds :rain-)ent Money-)ent V Mrs V 6 6` 1< <2 = Z 2 1< 16Z = ` 6 18 <2`

<Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <=

Finally, t e money-rent @o%ld rise i! more additional capital @ere in8ested in t e s%perior soils @it t e same proportional increase in prod%cti8eness t an in ?, or i! t e additional in8estments o! capital in t e s%perior soils @ere e!!ecti8e at an increasing rate o! prod%cti8ity0 &n bot cases t e di!!erences @o%ld increase0 5 e money-rent !alls @ en t e impro8ement d%e to additional in8estment o! capital red%ces t e di!!erences completely, or in part, and a!!ects ? more t an A and ;0 5 e smaller t e increase in prod%cti8ity o! t e s%perior soils, t e more it !alls0 &t depends %pon t e extent o! ineD%ality prod%ced, @ et er t e grain-rent s all rise, !all or remain stationary0 5 e money-rent rises, and similarly t e grain-rent, eit er @ en I t e proportional di!!erence in additional !ertility o! t e 8ario%s soils remaining %naltered I more capital is in8ested in t e rentbearing soils t an in rentless soil ?, and more in soils yielding ig er rent t an in t ose yielding lo@er rents# or @ en t e !ertility I t e additional capital remaining eD%al I increases more on t e better and best soils t an on ?, i0e0, t e money and grain rents rise in proportion to t is increase in !ertility o! t e better soils abo8e t at o! t e poorer ones0 A%t %nder all circ%mstances, t ere is a relati8e rise in rent @ en increased prod%cti8e po@er is t e res%lt o! an addition o! capital, and not merely t e res%lt o! increased !ertility @it %naltered in8estment o! capital0 5 is is t e absol%te point o! 8ie@, @ ic s o@s t at ere, as in all !ormer cases, t e rent and increased rent per acre Bas in t e case o! di!!erential rent & on t e entire c%lti8ated area I t e magnit%de o! t e a8erage rentalC are t e res%lt o! an increased in8estment o! capital in land, no matter @ et er t is capital !%nctions @it a constant rate o! prod%cti8ity at constant or decreasing prices or @it a decreasing rate o! prod%cti8ity at constant or !alling prices, or @it an increasing rate o! prod%cti8ity at !alling prices0 For o%r ass%mption: constant prices @it a constant, !alling, or rising rate o! prod%cti8ity o! t e additional capital, and !alling prices @it a constant, !alling, or rising rate o! prod%cti8ity, resol8es itsel! into: a constant rate o! prod%cti8ity o! t e additional capital at constant or !alling prices, a !alling rate o! prod%cti8ity at constant or !alling prices, and a rising rate o! prod%cti8ity at constant and !alling prices0 ?lt o%g t e rent may remain stationary, or may !all, in all t ese cases, it @o%ld !all more i! t e additional in8estment o! capital, ot er circ%mstances remaining t e same, @ere not a prereD%isite !or t e increased prod%cti8eness0 5 e additional capital, t en, is al@ays t e ca%se !or t e relati8ely ig rent, alt o%g absol%tely it may a8e decreased0

Chapter 43. 'ifferential Rent 55. Third Case= Risin) Price of Production
/? rising price o! prod%ction pres%pposes t at t e prod%cti8ity o! t e poorest D%ality land yielding no rent decreases0 5 e ass%med reg%lating price o! prod%ction cannot rise abo8e V3 per D%arter %nless t e V<Z in8ested in soil ? prod%ce less t an 1 Dr, or t e V+ I less t an < Drs, or %nless an e8en poorer soil t an ? as to be taken %nder c%lti8ation0 For constant, or e8en increasing, prod%cti8ity o! t e second in8estment o! capital t is @o%ld only be possible i! t e prod%cti8ity o! t e !irst in8estment o! capital o! Z ad decreased0 5 is case occ%rs o!ten eno%g 0 For instance, @ en @it s%per!icial plo%g ing t e ex a%sted top soil yields e8er smaller crops, %nder t e old met od o! c%lti8ation, and t en t e s%bsoil, t%rned %p t ro%g deeper plo%g ing, prod%ces better crops t an be!ore @it more rational c%lti8ation0 A%t, strictly speaking, t is special case does not apply ere0 5 e decrease in prod%cti8ity o! t e !irst V<Z o! in8ested capital signi!ies !or t e s%perior soils, e8en @ en t e conditions are ass%med to be analogo%s t ere, a decrease in di!!erential rent &# yet ere @e are considering only di!!erential rent &&0 A%t since t is special case cannot occ%r @it o%t pres%pposing t e existence o! di!!erential rent &&, and represents in !act t e reaction o! a modi!ication o! di!!erential rent & %pon &&, @e s all gi8e an ill%stration o! it /see 5able 4&& I 0d010 5 e money-rent and proceeds are t e same as in 5able &&0 5 e increased reg%lating price o! prod%ction makes good @ at as been lost in D%antity o! prod%ce# since t is price and t e D%antity o! prod%ce are in8ersely proportional, it is e8ident t at t eir mat ematical prod%ct @ill remain t e same0 5?A'E 4&& ,rice $ell5ype &n8ested ,ro- :rain- Money )ate ,ro!it o! 3%tp%t ing o! ?cres ;apital ceeds )ent -)ent o! V ,rod0 Mrs ,rice $oil V V Mrs V )ent V V ? 1 <Z U <Z 1 6 Z 1[ 1` U R 3 3N> 6 = = =T

<Z U <Z 1

1 U <Z 3 3N> 1< R 3Z 1Z 3` +[ U R 3 3N> 18

1`

1<=T

<Z U <Z 1

3Z

1<

<2=T

<Z U <Z 1 <=

<U+R 3 3N> <2 > 1>Z 6=

+[ 1=Z

18 36

36=T <2=T

&n t e abo8e case, it @as ass%med t at t e prod%cti8eness o! t e second in8estment o! capital @as greater t an t e original prod%cti8ity o! t e !irst in8estment0 -ot ing c anges i! @e ass%me t e second in8estment to a8e only t e same prod%cti8ity as t e !irst, as s o@n in t e !ollo@ing table:

+=<

; apter J'&&&

5?A'E 4&&& )ent ,rice $ell5ype &n8ested ,ro- &n &n )ate o! ,ro!it o! 3%tp%t ing o! ?cres ;apital ceeds :rain Money $%rpl%sV ,rod0 Mrs ,rice $oil V V Mrs V ,ro!it V V ? 1 <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <= 6 Z 1Z <Z U R2 6 = = =T

A ; 7

1 1 1

6 6 6

1U<R 2 3 1Z U 3 2 R 2Z <U2R 2 6 1+

1< 18 <2 6=

1Z 3 2Z *

6 1< 18 36

1<=T <2=T 36=T <2=T

6ere, too, t e price o! prod%ction rising at t e same rate compensates in !%ll !or t e decrease in prod%cti8ity in t e case o! yield as @ell as money-rent0 5 e t ird case appears in its p%re !orm only @ en t e prod%cti8ity o! t e second in8estment o! capital declines, @ ile t at o! t e !irst remains constant I @ ic @as al@ays ass%med in t e !irst and second cases0 6ere di!!erential rent & is not a!!ected, i0e0, t e c ange a!!ects only t at part @ ic arises !rom di!!erential rent &&0 We s all gi8e t@o ill%strations: in t e !irst @e ass%me t at t e prod%cti8ity o! t e second in8estment o! capital as been red%ced to Z, in t e second to `0 5?A'E &J )ent $ell5ype &n8ested ,rice ,ro- &n &n )ate ,ro!it 3%tp%t ing o! ?cres ;apital o! ceeds :rain Money o! V Mrs ,rice $oil V ,rod0 V Mrs V )ent V ? A ; 7 1 1 1 1 <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <= 6 6 6 6 1 U Z 2 R 1Z <U1R 2 3 3 U 1Z 2 R 2Z 2U<R 2 6 1+ 6 1< 18 <2 6= = 1Z 3 2Z * = 6 1< 18 36 = 1<=T <2=T 36=T <2=T

+=3

; apter J'&&&

5able &J is t e same as 5able 4&&&, except !or t e !act t at t e decrease in prod%cti8ity in 4&&& occ%rs !or t e !irst, and in &J !or t e second in8estment o! capital0 5?A'E J )ent $ell5ype &n8ested ,rice ,ro- &n &n )ate ,ro!it 3%tp%t ing o! ?cres ;apital o! ceeds :rain Money o! V Mrs ,rice $oil V ,rod0 V Mrs V )ent V ? A ; 7 1 1 1 1 <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <Z U <Z 1 R+ <= 6 6 6 6 <2 1 U [ 2 2N+ 6 R 1[ < U Z 2 2N+ 1< R <Z 3 U ` 2 2N+ 18 R 3` 2U1R 2 2N+ <2 + 1<Z 6= = 1[ <Z 3` >Z = 6 1< 18 36 =T 1<=T <2=T 36=T <2=T

&n t is table, too, t e total proceeds, t e money-rent and rate o! rent remain t e same as in tables &&, 4&& and 4&&&, beca%se prod%ce and selling price are again in8ersely proportional, @ ile t e in8ested capital remains t e same0 A%t o@ do matters stand in t e ot er possible case @ en t e price o! prod%ction rises, namely, in t e case o! a poor D%ality soil not @ort c%lti8ating %ntil t en t at is taken %nder c%lti8ationQ 'et %s s%ppose t at a soil o! t is sort, @ ic @e s all designate by a, enters into competition0 5 en t e it erto rentless soil ? @o%ld yield rent, and t e !oregoing tables 4&&, 4&&& and J @o%ld ass%me t e !ollo@ing !orms: 5?A'E 4&&a )ent $ell5ype &n8ested ,rice ,ro- &n &n ,ro!it 3%tp%t ing o! ?cres ;apital o! ceeds :rain Money &ncrease V Mrs ,rice $oil V ,rod0 V Mrs V V a ? 1 1 + 1 6 6 1Z Z 1[ 1` 2 U R2 6 > = [ = 1 = 1

<Z U <Z 1

A ;

1 1

<Z U <Z 1 <Z U <Z 1

6 6

1 U <Z 2 R 3Z 1Z 3` U2 R

12 <1

< 3`

8 1+

1U> 1U<\>

+=2

; apter J'&&&

+[ 7 1 <Z U <Z 1 6 3= <U+R 2 > 1* <8 >6 +Z << 1U3\>

11Z 26

5?A'E 4&&&a )ent $ell5ype &n8ested ,rice ,ro- &n &n ,ro!it 3%tp%t ing o! ?cres ;apital o! ceeds :rain Money &ncrease V Mrs ,rice $oil V ,rod0 V Mrs V V a ? A ; 7 1 1 1 1 1 + /> &n t e />> Dbid0: * I 0d01 5?A'E Ja )ent $ell5ype &n8ested ,rice ,ro- &n &n ,ro!it 3%tp%t ing o! ?cres ;apital o! ceeds :rain Money &ncrease V Mrs ,rice $oil V ,rod0 V Mrs V V a ? A ; 1 1 1 1 + 1 6 6 6 6 1 1N8 +X 6 6W = W = W W U 6W W U < \ 6W = + 1 6 6 6 6 6 3= :erman 1[ 2 2N+ 6 = = 1 1N+ 8 <N+ = 1 1N+ 1 1N+ U > 1N+ 1 1N+ U < \ > 1N+ 1 1N+ U 3 \ > 1N+

<Z U <Z 1 <Z U <Z 1 <Z U <Z 1 <Z U <Z 1

Z U 1 2 2N+ > 1N+ [ R 1Z 1U<R 12 2 2N+ 3 <N+ 1Z U 3 <1 2 2N+ R 2Z 3N+ <U2R <8 2 2N+ 6 2N+ 16[ 18*2 >8 edition 1`

3[> 1+ 3N+ 2` << 2N+

1=>> 28 t is reads: <[0 I 0d01

<Z U <Z 1 <Z U <Z 1 <Z U <Z 1

1 U [ +X R 1[ < U Z +X R <Z 3 U ` +X R 3`

13X 1 3N8 >X <= < +N8 12

+=+

; apter J'&&&

<Z U <Z 1

6 3=

2U1R +X + 13 +N8

<6W 3 >N8 <=W ><W 8 2<W

W U 3 \ 6W

Ay interpolating soil a t ere arises a ne@ di!!erential rent &# %pon t is ne@ basis, di!!erential rent && like@ise de8elops in an altered !orm0 $oil a as di!!erent !ertility in eac o! t e abo8e t ree tables# t e seD%ence o! proportionally increasing !ertilities begins only @it soil ?0 5 e seD%ence o! rising rents also be a8es similarly0 5 e rent o! t e @orst rent-bearing soil, pre8io%sly rentless, is a constant @ ic is simply added to all ig er rents0 3nly a!ter ded%cting t is constant does t e seD%ence o! di!!erences clearly become e8ident !or t e ig er rents, and similarly its parallel in t e !ertility seD%ence o! t e di!!erent soils0 &n all t e tables, t e !ertilities !rom ? to 7 are related as 1 : < : 3 : 2, and correspondingly t e rents: in 4&&a, as 1 : B1 U >C : B1 U < \ >C : B1 U 3 \ >C, in 4&&&a, as 1 1N+ : B1 1N+ U > 1N+C : B1 1N+ U < \ > 1N+C : B1 1N+ U 3 \ > 1N+C, and in Ja, as W : BW U 6WC : BW U < \ 6WC : W U 3 \ 6WC0 &n brie!, i! t e rent !rom ? R n, and t e rent !rom t e soil o! next ig er !ertility R n U m, t en t e seD%ence is as !ollo@s: n : Bn U mC : Bn U <mC : Bn U 3mC, etc0 I '. 0.1 /$ince t e !oregoing t ird case ad not been elaborated in t e man%script I only t e title is t ere I it @as t e task o! t e editor to !ill in t e gap, as abo8e, to t e best o! is ability0 6o@e8er, in addition, it still remains !or im to dra@ t e general concl%sions !rom t e entire !oregoing analysis o! di!!erential rent &&, consisting o! t ree principal cases and nine s%bcases0 5 e ill%strations presented in t e man%script, o@e8er, do not s%it t is p%rpose 8ery @ell0 &n t e !irst place, t ey compare plots o! land @ ose yields !or eD%al areas are related as 1 : < : 3 : 2# i0e0, di!!erences, @ ic exaggerate greatly !rom t e 8ery !irst, and @ ic lead to %tterly monstro%s n%merical 8al%es in t e !%rt er de8elopment o! t e ass%mptions and calc%lations made %pon t is basis0 $econdly, t ey create a completely erroneo%s impression0 &! !or degrees o! !ertility related as 1 : < : 3 : 2, etc0, rents are obtained in t e seD%ence = : 1 : < : 3, etc0, one !eels tempted to deri8e t e second seD%ence !rom t e !irst, and to explain t e do%bling, tripling, etc0, o! rents by t e do%bling, tripling, etc0, o! t e total yields0 A%t t is @o%ld be @ olly incorrect0 5 e rents are related as = : 1 : < : 3 : 2 e8en @ en t e degrees o! !ertility are related as n : Bn U 1C : Bn U <C : Bn U 3C : Bn U 2C0 5 e rents are not related as t e degrees o! !ertility, b%t as t e differences o! !ertility I beginning @it t e rentless soil as t e Eero point0 5 e original tables ad to be o!!ered to ill%strate t e text0 A%t in order to obtain a percept%al basis !or t e !ollo@ing res%lts o! t e in8estigation, & present belo@ a ne@ series o! tables in @ ic t e yields are indicated in b%s els B1N8 D%arter, or 3603+ litresC and s illings B R marksC0 5 e !irst o! t ese, 5able J&, corresponds to t e !ormer 5able &0 &t s o@s t e yields and rents !or soils o! !i8e di!!erent D%alities, ? to E, @it a !irst capital in8estment o! += s illings, @ ic added to 1= s illings pro!it R 6= s illings total price o! prod%ction per acre0 5 e yields in grain are made lo@: 1=, 1<, 12, 16, 18 b%s els per acre0 5 e res%lting reg%lating price o! prod%ction is 6 s illings per b%s el0 5 e !ollo@ing 13 tables correspond to t e t ree cases o! di!!erential rent && treated in t is and t e t@o preceding c apters @it an additional in8ested capital o! += s illings per acre in t e same soil @it constant, !alling and rising prices o! prod%ction0 Eac o! t ese cases, in t%rn, is presented as it takes s ape !or: 1C constant, <C !alling, and 3C rising prod%cti8ity o! t e second in8estment o! capital in relation to t e !irst0 5 is yields a !e@ ot er 8ariants, @ ic are especially %se!%l !or ill%stration p%rposes0 For case &: ;onstant price o! prod%ction I @e a8e:

+=6

; apter J'&&&

4ariant ,rod%cti8ity o! t e second in8estment o! capital 1: remains t e same B5able J&&C0 ,rod%cti8ity declines0 5 is can take place only @ en no second in8estment o! capital is made in soil ?, 4ariant i0e0, in <: s%c a @ay t at aC soil A like@ise yields no rent B5able J&&&C or bC soil A does not become completely rentless B5able J&4C0 ,rod%cti8ity increases B5able J4C0 5 is case 4ariant like@ise excl%des a second in8estment o! capital 3: in soil ?0 For case &&: Falling price o! prod%ction I @e a8e: 4ariant ,rod%cti8ity o! t e second in8estment o! capital 1: remains t e same B5able J4&C0 ,rod%cti8ity declines B5able J4&&C0 5 ese t@o I K I 8ariants reD%ire t at soil ? be eliminated !rom <: competition, and t at soil A become rentless and reg%late t e price o! prod%ction0 3: I K I ,rod%cti8ity increases B5able J4&&&C0 6ere $oil ? remains t e reg%lator0

For case &&&: )ising price o! prod%ction I t@o e8ent%alities are possible: soil ? may remain rentless and contin%e to reg%late t e price, or poorer soil t an ? enters into competition and reg%lates t e price, in @ ic case ? yields rent0 First e8ent%ality: $oil ? remains t e reg%lator0 ,rod%cti8ity o! t e second in8estment remains t e 4ariant same B5able J&JC0 5 is is admissible %nder t e 1: conditions ass%med by %s, pro8ided t e prod%cti8ity o! t e !irst in8estment decreases0 ,rod%cti8ity o! t e second in8estment decreases I K I B5able JJC0 5 is does not excl%de t e possibility <: t at t e !irst in8estment may retain t e same prod%cti8ity0 ,rod%cti8ity o! t e second in8estment increases I K I B5able JJ&/&n t e :erman 18*2 edition t is 3: reads: J&J0 I 0d01C0 5 is, again, pres%pposes !alling prod%cti8ity o! t e !irst in8estment0 $econd e8ent%ality: ?n in!erior D%ality soil Bdesignated as aC enters into competition# soil ? yields rent0 4ariant ,rod%cti8ity o! t e second in8estment remains t e 1: same B5able JJ&&C0

+=>

; apter J'&&&

4ariant ,rod%cti8ity declines B5able JJ&&&C0 <: I K I 3: ,rod%cti8ity increases B5able JJ&4C0 5 ese t ree 8ariants con!orm to t e general conditions o! t e problem and reD%ire no !%rt er comment0 5 e tables no@ !ollo@: 5?A'E J& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A ; 7 E 6= 6= 6= 6= 6= 1= 1< 12 16 18 6 6 6 6 6 6= >< 82 *6 1=8 = 1< <2 36 28 = 1< < \ 1< 3 \ 1< 2 \ 1<

1<= 1= \ 1< For second capital in8ested in t e same soil: First ;ase: ,rice o! prod%ction remains %naltered0 4ariant 1: ,rod%cti8ity o! t e second in8estment o! capital remains t e same0 5?A'E J&& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A ; 7 E 6= U 6= R 1= U 1= 6 1<= R <= 6= U 6= R 1< U 1< 6 1<= R <2 6= U 6= R 12 U 12 6 1<= R <8 6= U 6= R 16 U 16 6 1<= R 3< 6= U 6= R 18 U 18 6 1<= R 36 1<= 122 168 1*< <16 = <2 28 >< *6 = <2 < \ <2 3 \ <2 2 \ <2

<2= 1= \ <2 4ariant <: ,rod%cti8ity o! t e second in8estment o! capital declines# no second in8estment in soil ?0

+=8

; apter J'&&&

1C $oil A ceases to yield rent0 5?A'E J&&& 5ype ,rice o! 3%tp%t o! ,rod%ction A%s els $oil $ 0 ? A ; 7 E 6= 1= $elling ,ro)ent )ent ,rice ceeds $ 0 &ncrease $ 0 $ 0 6 6= 1<= 12= 16= 18= = = <= 2= 6= = = <= < \ <= 3 \ <=

6= U 6= R 1< U 8 R 6 1<= <= 6= U 6= R 12 U *X R 6 1<= <3X 6= U 6= R 16 U 1=W 6 1<= R <6W 6= U 6= R 18 U 1< R 6 1<= 3=

1<= 6 \ <= /> &n t e :erman 18*2 edition t is reads: <=0 I 0d01 <C $oil A does not become completely rentless0 5?A'E J&4 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A 6= 1= 6 6= 1<6 = 6 = 6

6= U 6= R 1< U * R 6 1<= <1 12 6= U 6= R 1=Z 1<= <2Z U R6

12>

<>

6 U <1 6 U < \ <1 6 U 3 \ <1 2\6U6 \ <1 ere, too, no second

6= U 6= R 16 U 1< 6 1<= R <8 18 6= U 6= R 13Z 1<= 31Z U R6

168

28

18*

6*

1+=

4ariant 3: ,rod%cti8ity o! t e second in8estment o! capital increases# in8estment in $oil ?0 5?A'E J4

+=*

; apter J'&&&

5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A 6= 1= 6 6= 16< = 2< = 2<

6= U 6= R 1< U 1+ 6 1<= R <> 12 6= U 6= R 1>Z 1<= 31Z U R6

18*

6*

2< U <> 2< U < \ <> 2< U 3 \ <> 2 \ 2< U 6 \ <>

6= U 6= R 16 U <= 6 1<= R 36 18 6= U 6= R <<Z 1<= 2=Z U R6

<16

*6

<23

1<3

33=

$econd ;ase: ,rice o! prod%ction declines0 4ariant 1: ,rod%cti8ity o! t e second in8estment o! capital remains t e same0 $oil ? is excl%ded !rom competition and soil A becomes rentless0 5?A'E J4& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 A ; 7 E 6= U 6= R 1< U 1< + 1<= R <2 6= U 6= R 12 U 12 + 1<= R <8 6= U 6= R 16 U 16 + 1<= R 3< 6= U 6= R 18 U 18 + 1<= R 36 1<= 12= 16= 18= = <= 2= 6= = <= < \ <= 3 \ <=

1<= 6 \ <= 4ariant <: ,rod%cti8ity o! t e second in8estment o! capital declines# soil ? is excl%ded !rom competition and soil A becomes rentless0 5?A'E J4&& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0

+1=

; apter J'&&&

6= U 6= R 1< U * R + +N> 1<= <1 12 6= U 6= R 1=Z 1<= <2Z U R + +N>

1<=

12=

<=

<=

6= U 6= R 16 U 1< + +N> 1<= R <8 18 6= U 6= R 13Z 1<= 31Z U R + +N>

16=

2=

< \ <=

18=

6=

3 \ <=

1<= 6 \ <= 4ariant 3: ,rod%cti8ity o! t e second in8estment o! capital increases# soil ? remains in competition# soil A yields rent0 5?A'E J4&&& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A ; 7 E 6= U 6= R 1= U 1+ 2 2N+ 1<= R <+ 6= U 6= R 1< U 18 2 2N+ 1<= R 3= 6= U 6= R 12 U <1 2 2N+ 1<= R 3+ 6= U 6= R 16 U <2 2 2N+ 1<= R 26 6= U 6= R 18 U <> 2 2N+ 1<= R 2+ 1<= 122 168 1*< <16 = <2 28 >< *6 = <2 < \ <2 3 \ <2 2 \ <2

<2= 1= \ <2 ;ase: ,rice o! prod%ction rises0 ?C $oil ? remains rentless and contin%es to reg%late t e price0 4ariant 1: ,rod%cti8ity o! t e second in8estment o! capital remains t e same: t is reD%ires decreasing prod%cti8ity o! t e !irst in8estment o! capital0 5?A'E J&J 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? 6= U 6= R >Z U 1= 6 6N> 1<= R 1>Z 1<= = =

+11

; apter J'&&&

6= U 6= R * U 1< 6 6N> 1<= R <1 1=Z 6= U 6= R 12 1<= <2Z U R 6 6N>

122

<2

<2

168

28

< \ <2

6= U 6= R 1< U 16 6 6N> 1<= R <8 13Z 6= U 6= R 18 1<= 31Z U R 6 6N>

1*<

><

3 \ <2

<16

*6

2 \ <2

<2= 1= \ <2 4ariant <: ,rod%cti8ity o! t e second in8estment o! capital decreases# @ ic does not excl%de constant prod%cti8ity o! t e !irst in8estment0 5?A'E JJ& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? A ; 7 E 6= U 6= R + U 1<Z 6 6N> 1<= R 1>Z 6= U 6= R 6 U 1+ 6 6N> 1<= R <1 6= U 6= R > U 1>Z 6 6N> 1<= R <2Z 6= U 6= R 8 U <= 6 6N> 1<= R <8 6= U 6= R * U <<Z 6 6N> 1<= R 31Z 1<= 122 168 1*< <16 = <2 28 >< *6 = <2 < \ <2 3 \ <2 2 \ <2

<2= 1= \ <2 AC ?n in!erior soil Bdesignated as aC becomes t e price reg%lator and soil ? t %s yields rent0 5 is makes admissible !or all 8ariants constant prod%cti8ity o! t e second in8estment0 4ariant 1: ,rod%cti8ity o! t e second in8estment o! capital remains t e same0 5?A'E JJ&& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 a ? 1<= 16 >Z 1<= 1+= = 3= = 3=

6= U 6= R 1= U 1= >Z 1<= R <=

+1<

; apter J'&&&

A ; 7 E

6= U 6= R 1< U 1< >Z 1<= R <2 6= U 6= R 12 U 12 >Z 1<= R <8 6= U 6= R 16 U 16 >Z 1<= R 3< 6= U 6= R 18 U 18 >Z 1<= R 36

18= <1= <2= <>=

6= *=

< \ 3= 3 \ 3=

1<= 2 \ 3= 1+= + \ 3= 2+= 1+ \ 3=

4ariant <: ,rod%cti8ity o! t e second in8estment o! capital declines0 5?A'E JJ&&& 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? ? A 1<= 1+ 8 1<= 12= 168 = <= 28 = <= <= U <8 <= U < \ <8 <= U 3 \ <8 <= U 2 \ <8 + \ <= U 1= \ <8

6= U 6= R 1= U >Z 8 1<= R 1>Z 6= U 6= R 1< U * R 8 1<= <1 12 6= U 6= R 1=Z 1<= <2Z U R8

1*6

>6

6= U 6= R 16 U 1< 8 1<= R <8 18 6= U 6= R 13Z 1<= 31Z U R8

<<2

1=2

<+<

13<

38=

4ariant 3: ,rod%cti8ity o! t e second in8estment increases0 5?A'E JJ&4 5ype ,rice o! $elling 3%tp%t ,roceeds )ent )ent o! ,rod%ction ,rice A%s els $ 0 $ 0 &ncrease $oil $ 0 $ 0 ? ? 1<= 16 >Z U >Z R 1<= 168` = =

6= U 6= R 1= 1<= 1<Z

28` 1+ U 33`

+13

; apter J'&&&

<1Z A 6= U 6= R 1< U 1+ >Z 1<= R <> 12 6= U 6= R 1>Z 1<= 31Z U R >Z <=<Z 8<Z 1+ U < \ 33` 1+ U 3 \ 33` 1+ U 2 \ 33` 1+ U + \ 33` + \ 1+ U 1+ \ 33`

<36[

116[

6= U 6= R 16 U <= >Z 1<= R 36 18 6= U 6= R <<Z 1<= 2=Z U R >Z

<>=

1+=

3=3`

183`

+81[

5 ese tables lead to t e !ollo@ing concl%sions: &n t e !irst place, t e seD%ence o! rents be a8es exactly as t e seD%ence o! !ertility di!!erences I taking t e rentless reg%lating soil as t e Eero point0 &t is not t e absol%te yield, b%t only t e di!!erences in yield @ ic are t e !actors determining rent0 W et er t e 8ario%s soils yield 1, <, 3, 2, + b%s els, or @ et er t ey yield 11, 1<, 13, 12, 1+ b%s els per acre, t e rents in bot cases !orm t e seD%ence =, 1, <, 3, 2 b%s els, or t eir eD%i8alent in money0 A%t !ar more important is t e res%lt @it respect to t e total rent yields !or repeated in8estment o! capital in t e same land0 &n !i8e o%t o! t e t irteen analysed cases, t e total rent do%bles @ en t e in8estment o! capital is do%bled# instead o! l=x1< s illings it becomes 1= \ <2 s illings R <2= s illings0 5 ese cases are: ;ase &, constant price, 8ariant 1: constant prod%ction rise B5able J&&C0 ;ase &&, !alling price, 8ariant 3: increasing prod%ction rise B5able J4&&&C0 ;ase &&&, increasing price, !irst e8ent%ality B@ ere soil ? remains t e reg%latorC, in all t ree 8ariants Btables J&J, JJ and JJ&C0 &n !o%r cases t e rent more t an do%bles, namely: ;ase &, 8ariant 3, constant price, b%t increasing prod%ction rise B5able J4C 5 e total rent climbs to 33= s illings0 ;ase &&&, second e8ent%ality B@ ere soil ? yields rentC, in all t ree 8ariants B5able JJ&&, rent R 1+ \ 3= R 2+= s illings# 5able JJ&&&, rent R + \ <= U 1= \ <8 R 38= s illings# 5able JJ&4, rent R + \ 1+ U 1+ \ 33` R +81[ s illingsC0 &n one case t e rent rises, b%t not to t@ice t e amo%nt yielded by t e !irst in8estment o! capital: ;ase &, constant price, 8ariant <: !alling prod%cti8ity o! t e second in8estment, %nder conditions @ ereby A does not become completely rentless B5able J&4, rent R 2 \ 6 U 6 \ <1 R 1+= s illingsC0 Finally, only in t ree cases does t e total rent remain at t e same le8el @it a second in8estment I !or all soils taken toget er I as @it t e !irst in8estment B5able J&C# t ese are t e cases in @ ic soil ? is excl%ded !rom competition and A becomes t e reg%lator and t ereby rentless soil0 5 %s, t e rent !or A not only 8anis es b%t is also ded%cted !rom e8ery s%cceeding term o! t e rent seD%ence# t e res%lt is t %s determined0 5 ese cases are:

+12

; apter J'&&&

;ase &, 8ariant <, @ en t e conditions are s%c t at soil ? is excl%ded B5able J&&&C0 5 e total rent is 6 \ <=, or 1= \ 1< R 1<=, as in 5able J&0 ;ase &&, 8ariants & and <0 6ere soil ? is necessarily excl%ded in accordance @it t e ass%mptions Btables J4& and J4&&C and t e total rent is again 6 \ <= R 1= \ 1< R 1<= s illings0 5 %s, t is means: &n t e great maHority o! all possible cases t e rent rises I per acre o! rentbearing land as @ell as partic%larly in its total amo%nt I as a res%lt o! an increased in8estment o! capital in t e land0 3nly in t ree o%t o! t e t irteen analysed cases does its total remain %naltered0 5 ese are t e cases in @ ic t e lo@est D%ality soil I it erto t e reg%lator and rentless I is eliminated !rom competition and t e next D%ality soil takes its place, i0e0, becomes rentless0 A%t e8en in t ese cases, t e rents %pon t e s%perior soils rise in comparison @it t e rents d%e to t e !irst capital in8estment# @ en t e rent !or ; !alls !rom <2 to <=, t en t ose !or 7 and E rise !rom 36 and 28 to 2= and 6= s illings respecti8ely0 ? !all in t e total rents belo@ t e le8el !or t e !irst in8estment o! capital B5able J&C @o%ld be possible only i! soil A as @ell as soil ? @ere to be excl%ded !rom competition and soil ; @ere to become reg%lating and rentless0 5 %s, t e more capital is in8ested in t e land, and t e ig er t e de8elopment o! agric%lt%re and ci8ilisation in general in a gi8en co%ntry, t e more rents rise per acre as @ell as in total amo%nt, and t e more immense becomes t e trib%te paid by society to t e big lando@ners in t e !orm o! s%rpl%s-pro!its I so long as t e 8ario%s soils, once taken %nder c%lti8ation, are all able to contin%e competing0 5 is la@ acco%nts !or t e amaEing 8itality o! t e class o! big landlords0 -o social class li8es so s%mpt%o%sly, no ot er class claims t e rig t it does to traditional l%x%ry in keeping @it its Kestate,L regardless o! @ ere t e money !or t is p%rpose may be deri8ed, and no ot er class piles debt %pon debt so lig t eartedly0 ?nd yet it al@ays lands again on its !eet I t anks to t e capital in8ested by ot er people in t e land, @ ic yields it a rent, completely o%t o! proportion to t e pro!its reaped t ere!rom by t e capitalist0 6o@e8er, t e same la@ also explains @ y t e 8itality o! t e big landlord is grad%ally being ex a%sted0 W en t e Englis corn d%ties @ere abolis ed in 1826, t e Englis man%!act%rers belie8ed t at t ey ad t ereby t%rned t e land-o@ning aristocracy into pa%pers0 &nstead, t ey became ric er t an e8er0 6o@ did t is occ%rQ 4ery simply0 &n t e !irst place, t e !armers @ere no@ compelled by contract to in8est V1< per acre ann%ally instead o! V80 ?nd secondly, t e landlords, being strongly represented in t e 'o@er 6o%se too, granted t emsel8es a large go8ernment s%bsidy !or drainage proHects and ot er permanent impro8ements on t eir land0 $ince no total displacement o! t e poorest soil took place, b%t rat er, at @orst, it became employed !or ot er p%rposes I and mostly only temporarily I rents rose in proportion to t e increased in8estment o! capital, and t e landed aristocracy conseD%ently @as better o!! t an e8er be!ore0 A%t e8eryt ing is transitory0 5ransoceanic steams ips and t e rail@ays o! -ort and $o%t ?merica and &ndia enabled some 8ery sing%lar tracts o! land to compete in E%ropean grain markets0 5 ese @ere, on t e one and, t e -ort ?merican prairies and t e ?rgentine pampas I plains cleared !or t e plo%g by -at%re itsel!, and 8irgin soil @ ic o!!ered ric ar8ests !or years to come e8en @it primiti8e c%lti8ation and @it o%t !ertilisers0 ?nd, on t e ot er and, t ere @ere t e land oldings o! )%ssian and &ndian comm%nist comm%nities @ ic ad to sell a portion o! t eir prod%ce, and a constantly increasing one at t at, !or t e p%rpose o! obtaining money !or taxes @r%ng !rom t em I !reD%ently by means o! tort%re I by a r%t less and despotic state0 5 ese prod%cts @ere sold @it o%t regard to price o! prod%ction, t ey @ere sold at t e price @ ic t e dealer o!!ered, beca%se t e peasant per!orce needed money @it o%t !ail @ en taxes became d%e0 ?nd in !ace o! t is competition I coming !rom 8irgin plains as @ell as !rom )%ssian and &ndian peasants gro%nd do@n by taxation I t e E%ropean tenant !armer and peasant co%ld not pre8ail at

+1+

; apter J'&&&

t e old rents0 ? portion o! t e land in E%rope !ell decisi8ely o%t o! competition as regards grain c%lti8ation, and rents !ell e8ery@ ere# o%r second case, 8ariant < I !alling prices and !alling prod%cti8ity o! t e additional in8estment o! capital I became t e r%le !or E%rope# and t ere!ore t e lament o! landlords !rom $cotland to &taly and !rom so%t ern France to East ,r%ssia0 Fort%nately, t e plains are !ar !rom being entirely bro%g t %nder c%lti8ation# t ere are eno%g le!t to r%in all t e big landlords o! E%rope and t e small ones into t e bargain I '.0.1 5 e eadings %nder @ ic rent s o%ld be analysed are:

?0 7i!!erential rent0 1C ;onception o! di!!erential rent0 Water-po@er as an ill%stration0 5ransition to agric%lt%ral rent proper0 <C 7i!!erential rent &, arising !rom t e 8arying !ertility o! 8ario%s plots o! land0 3C 7i!!erential rent &&, arising !rom s%ccessi8e in8estments o! capital in t e same land0 7i!!erential rent && s o%ld be analysed: aC @it a stationary, bC !alling, cC and rising price o! prod%ction0 ?nd also dC trans!ormation o! s%rpl%s-pro!it into rent0 2C &n!l%ence o! t is rent %pon t e rate o! pro!it0 A0 ?bsol%te rent0 ;0 5 e price o! land0 70 Final remarks concerning gro%nd-rent0
38er-all concl%sions to be dra@n !rom t e consideration o! di!!erential rent in general are t e !ollo@ing: 'irst, t e !ormation o! s%rpl%s-pro!it may take place in 8ario%s @ays0 3n t e one and, based on di!!erential rent &, t at is, on t e in8estment o! t e entire agric%lt%ral capital in land consisting o! soils o! 8arying !ertility0 3r, in t e !orm o! di!!erential rent &&, based on t e 8arying di!!erential prod%cti8ity o! s%ccessi8e in8estments o! capital in t e same land, i0e0, a greater prod%cti8ity I expressed, e0g0, in D%arters o! @ eat I t an is sec%red @it t e same in8estment o! capital in t e @orst land I rentless, b%t @ ic reg%lates t e price o! prod%ction0 A%t no matter o@ t is s%rpl%spro!it may arise, its trans!ormation into rent, i0e0, its trans!er !rom !armer to landlord, al@ays pres%pposes t at t e 8ario%s act%al indi8id%al prod%ction prices o! t e partial o%tp%ts o! t e indi8id%al s%ccessi8e in8estments o! capital Bi0e0, independent o! t e general price o! prod%ction by @ ic t e market is reg%latedC a8e pre8io%sly been red%ced to an indi8id%al a8erage price o! prod%ction0 5 e excess o! t e general reg%lating prod%ction price o! t e o%tp%t per acre o8er t is indi8id%al a8erage prod%ction price constit%tes and is a meas%re o! t e rent per acre0 &n t e case o! di!!erential rent &, t e di!!erential res%lts are in t emsel8es disting%is able beca%se t ey take

+16

; apter J'&&&

place %pon di!!erent portions o! land I distinct !rom one anot er and existing side by side I gi8en an in8estment o! capital per acre and a degree o! c%lti8ation considered normal0 &n t e case o! di!!erential rent &&, t ey m%st !irst be made disting%is able# t ey m%st in !act be trans!ormed back into di!!erential rent &, and t is can only take place in t e indicated @ay0 For example, let %s take 5able &&&, $0 <<60 $oil A yields !or t e !irst in8ested capital o! V<Z I < D%arters per acre, and !or t e second in8estment o! eD%al magnit%de I 1Z D%arters# toget er I 3Z D%arters !rom t e same acre0 &t is not possible to disting%is @ ic part o! t ese 3Z D%arters is a prod%ct o! in8ested capital & and @ ic part a prod%ct o! in8ested capital &&, !or it is all gro@n %pon t e same soil0 &n !act, t e 3Z D%arters is t e yield !rom t e total capital o! V+# and t e act%al !act o! t e matter is simply t is: a capital o! V<Z yielded < D%arters, and a capital o! V+ yielded 3Z D%arters rat er t an 2 D%arters0 5 e sit%ation @o%ld be H%st t e same i! t e V+ yielded 2 D%arters, i0e0, i! t e yield !rom bot in8estments o! capital @ere eD%al# similarly, i! t e yield @ere e8en + D%arters, i0e0, i! t e second in8estment o! capital @ere to yield a s%rpl%s o! 1 D%arter0 5 e price o! prod%ction o! t e !irst < D%arters is V1Z per D%arter, and t at o! t e second 1Z D%arters is V< per D%arter0 ;onseD%ently t e 3Z D%arters toget er cost V60 5 is is t e indi8id%al price o! prod%ction o! t e total prod%ct, and, on t e a8erage, amo%nts to V1 12 <N> s 0 per D%arter, i0e0, approximately V1`0 Wit t e general price o! prod%ction determined by soil ?, namely V3, t is res%lts in a s%rpl%s-pro!it o! V1[ per D%arter, and t %s !or t e 3Z D%arters, a total o! V2 3N80 ?t t e a8erage price o! prod%ction o! A t is corresponds to abo%t 1Z D%arters0 &n ot er @ords, t e s%rpl%s-pro!it !rom A is represented by an aliD%ot portion o! t e o%tp%t !rom A, i0e0, by t e 1Z D%arters, @ ic express t e rent in terms o! grain, and @ ic sell I in accordance @it t e general price o! prod%ction I !or V2Z0 A%t on t e ot er and, t e excess prod%ct !rom an acre o! A o8er t at !rom an acre o! ? does not a%tomatically represent s%rpl%s-pro!it, and t ereby s%rpl%s-prod%ct0 ?ccording to o%r ass%mption, an acre o! A yields 3Z D%arters, @ ereas an acre o! ? yields only 1 D%arter0 Excess prod%ct !rom A is, t ere!ore, <Z D%arters b%t t e s%rpl%s-prod%ct is only 1Z D%arters# !or t e capital in8ested in A is t@ice t at in8ested in ?, and t %s its price o! prod%ction is do%ble0 &! an in8estment o! V+ @ere also to take place in ?, and t e rate o! prod%cti8ity @ere to remain t e same, t en t e o%tp%t @o%ld be < D%arters instead o! 1 D%arter, and it @o%ld t en be seen t at t e act%al s%rpl%s-prod%ct is determined by comparing 3Z @it <, not 3Z @it 1# i0e0, it is only 1Z D%arters, not <Z D%arters0 F%rt ermore, i! a t ird in8estment o! capital, amo%nting to V<Z, @ere made in A, and t is @ere to yield only 1 D%arter I t is D%arter @o%ld t en cost V3 as in ? I its selling price o! V3 @o%ld only co8er t e price o! prod%ction, @o%ld pro8ide only t e a8erage pro!it, b%t no s%rpl%s-pro!it, and @o%ld t %s yield not ing t at co%ld be trans!ormed into rent0 5 e comparison o! t e o%tp%t per acre !rom any gi8en soil type @it t e o%tp%t per acre !rom soil ? does not s o@ @ et er it is t e o%tp%t !rom an eD%al or !rom a larger in8estment o! capital, nor @ et er t e additional o%tp%t only co8ers t e price o! prod%ction or is d%e to greater prod%cti8ity o! t e additional capital0 Secondly, ass%ming a decreasing rate o! prod%cti8ity !or t e additional in8estments o! capital @ ose limit, so !ar as t e ne@ !ormation o! s%rpl%s-pro!it is concerned, is t at in8estment o! capital @ ic H%st co8ers t e price o! prod%ction, i0e0, @ ic prod%ces a D%arter as dearly as t e same in8estment o! capital in an acre o! soil ?, namely, at V3, according to o%r ass%mption I it !ollo@s !rom @ at as H%st been said: t at t e limit, @ ere t e total in8estment o! capital in an acre o! A @o%ld no longer yield any rent, is reac ed @ en t e indi8id%al a8erage prod%ction price o! o%tp%t per acre o! A @o%ld rise to t e price o! prod%ction per acre o! ?0 &! only in8estments o! capital are made in A t at yield t e price o! prod%ction, i0e0, yield no s%rpl%s-pro!it nor ne@ rent, t en t is indeed raises t e indi8id%al a8erage price o! prod%ction per D%arter, b%t does not a!!ect t e s%rpl%s-pro!it, and e8ent%ally t e rent, !ormed by pre8io%s in8estments o! capital0 For t e a8erage price o! prod%ction al@ays remains belo@ t at o! ?, and @ en t e price excess per D%arter decreases, t e n%mber o! D%arters increases proportionately, so t at t e total excess in price remains %naltered0

+1>

; apter J'&&&

&n t e case ass%med, t e !irst t@o in8estments o! capital in A amo%nting to V+ yield 3Z D%arters, t %s according to o%r ass%mption 1Z D%arters o! rent R V2Z0 -o@, i! a t ird in8estment o! V<Z is made, b%t one @ ic yields only an additional D%arter, t en t e total price o! prod%ction Bincl%ding <=T pro!itC o! t e 2Z D%arters R V*# t %s t e a8erage price per D%arter R V<0 5 e a8erage price o! prod%ction per D%arter %pon A as t %s risen !rom V1 +N> to V<, and t e s%rpl%spro!it per D%arter, compared @it t e reg%lating price o! ?, as !allen !rom V1 <N> to V10 A%t 1 \ 2Z R V2Z H%st as !ormerly 1 <N> \ 3Z R V2Z0 'et %s ass%me t at a !o%rt and !i!t additional in8estment o! capital, amo%nting to V<Z eac , are made in A, @ ic do no more t an prod%ce a D%arter at its general price o! prod%ction0 5 e total prod%ct per acre @o%ld t en be 6Z D%arters and t eir price o! prod%ction V1+0 5 e a8erage price o! prod%ction per D%arter !or A @o%ld a8e risen again I !rom V< /&n t e :erman 18*2 edition t is reads: 10 I 0d01 to V< 2N13 I and t e s%rpl%s-pro!it per D%arter, compared @it t e reg%lating price o! prod%ction o! ?, @o%ld a8e dropped again I !rom V1 to V *N130 A%t t ese V*N13 @o%ld no@ a8e to be calc%lated %pon t e basis o! 6Z D%arters instead o! 2Z D%arters0 ?nd *N13 \ 6Z R 1 \ 2Z R 2Z0 &t !ollo@s !rom t is, !irstly, t at no increase in t e reg%lating price o! prod%ction is necessary %nder t ese circ%mstances, in order to make possible additional in8estments o! capital in t e rentbearing soil I e8en to t e point @ ere t e additional capital completely ceases to prod%ce s%rpl%spro!it and contin%es to yield only t e a8erage pro!it0 &t !ollo@s !%rt ermore t at t e total s%rpl%spro!it per acre remains t e same ere, no matter o@ m%c s%rpl%s-pro!it per D%arter may decrease# t is decrease is al@ays balanced by a corresponding increase in t e n%mber o! D%arters prod%ced per acre0 &n order t at t e a8erage price o! prod%ction mig t reac t e le8el o! t e general price o! prod%ction B ence V3 !or soil AC, it is necessary t at s%pplementary in8estments be made @ ose o%tp%t as a ig er price o! prod%ction t an t e reg%lating one o! V30 A%t @e s all see t at t is alone does not s%!!ice @it o%t !%rt er ado to raise t e a8erage price o! prod%ction per D%arter o! A to t e general price o! prod%ction o! V30 'et %s ass%me t at soil A prod%ced: 1C 3Z D%arters @ ose price o! prod%ction is, as be!ore, V6, i0e0, t@o in8estments o! capital amo%nting to V<Z eac bot yielding s%rpl%s-pro!it, b%t o! decreasing amo%nt0 <C 1 D%arter at V3, an in8estment o! capital in @ ic t e indi8id%al price o! prod%ction is eD%al to t e reg%lating price o! prod%ction0 3C 1 D%arter at V2, an in8estment o! capital in @ ic t e indi8id%al price o! prod%ction is ig er by 33T t an t e reg%lating price0 We s o%ld t en a8e +Z D%arters per acre !or V13 @it an in8estment o! a capital o! V1= >N1=# t is is !o%r times t e original in8ested capital, b%t not D%ite t ree times t e o%tp%t o! t e !irst in8estment o! capital0 +Z D%arters at V13 gi8es an a8erage price o! prod%ction o! V< 2N11 per D%arter, i0e0, an excess o! V>N11 per D%arter, ass%ming t e reg%lating price o! prod%ction o! V30 5 is excess may be trans!ormed into rent0 +Z D%arters sold at t e reg%lating price o! prod%ction o! V3 yield V16Z0 ?!ter ded%cting t e prod%ction price o! V13, a s%rpl%s-pro!it, or rent, o! V3Z remains, @ ic , calc%lated at t e present a8erage price o! prod%ction per D%arter o! A, t at is, at V<2N11 per D%arter, represents 1 <+N+< D%arters0 5 e money-rent @o%ld be lo@er by V1 and t e grain-rent by abo%t Z D%arter, b%t in spite o! t e !act t at t e !o%rt additional in8estment o! capital in A not only !ails to yield s%rpl%s-pro!it, b%t yields less t an t e a8erage pro!it, s%rpl%s-pro!it, and rent still contin%e to exist0 'et %s ass%me t at, in addition to in8estment 3C, in8estment <C also prod%ces at a price exceeding t e reg%lating price o! prod%ction0 5 en t e total prod%ction is: 3Z D%arters !or V6 U < D%arters !or V8# total +Z D%arters !or V12 prod%ction price0 5 e a8erage price o! prod%ction per D%arter @o%ld be V< 6N11 and @o%ld lea8e an excess o! V+N110 5 e +Z D%arters, sold at V3, gi8e a total o! V16Z# ded%cting t e V12 prod%ction price lea8es V<Z !or rent0 ?t t e

+18

; apter J'&&&

present a8erage price o! prod%ction %pon A, t is @o%ld be eD%i8alent to ++N+6 o! a D%arter0 &n ot er @ords, rent is still yielded alt o%g less t an be!ore0 5 is s o@s, at any rate, t at @it additional in8estments o! capital in t e better soils @ ose o%tp%t costs more t an t e reg%lating price o! prod%ction t e rent does not disappear I at least not @it in t e bo%nds o! admissible practice I alt o%g it m%st decrease0 &t @ill decrease in proportion, on t e one and, to t e aliD%ot part !ormed by t is less prod%cti8e capital in t e total in8estment o! capital, and on t e ot er and, in proportion to t e decrease in its prod%cti8eness0 5 e a8erage price o! its prod%ce @o%ld still lie belo@ t e reg%lating price and @o%ld t %s still permit s%rpl%spro!it to be !ormed t at co%ld be trans!ormed into rent0 'et %s no@ ass%me t at, as a res%lt o! !o%r s%ccessi8e in8estments o! capital BV<Z, V<Z, V+ and V+C @it decreasing prod%cti8ity, t e a8erage price per D%arter o! A coincides @it t e general price o! prod%ction0 ,rice o! ,rod%ction 3%t;apital ,ro!it ,er p%t V V V Mrs 1C <Z Z <C <Z Z 3C + 2C + 1+ 1 1 3 < 1Z Mr 5otal V 3 3 6 6 18 $%rpl%s !or )ent $elling ,ro,rice ceeds Mrs V V 3 3 3 3 6 2Z 2Z 3 18 1 Z -Z -1 = V 3 1Z -1Z -3 =

1Z < 1Z 2 1 6 6

5 e !armer, in t is case, sells e8ery D%arter at its indi8id%al price o! prod%ction, and conseD%ently t e total n%mber o! D%arters at t eir a8erage price o! prod%ction per D%arter, @ ic coincides @it t e reg%lating price o! V30 6ence e still makes a pro!it o! <=T R V3 %pon is capital o! V1+0 A%t t e rent is gone0 W at as become o! t e excess in t is eD%alisation o! t e indi8id%al prices o! prod%ction per D%arter @it t e general price o! prod%ctionQ 5 e s%rpl%s-pro!it !rom t e !irst V<Z @as V3, !rom t e second V<Z it @as V1Z# total s%rpl%spro!it !rom X o! t e in8ested capital, t at is, !rom V+ R V2Z R *=T0 &n t e case o! in8estment 3C, t e V+ not only !ails to yield s%rpl%s-pro!it, b%t its o%tp%t o! 1Z D%arters, sold at t e general price o! prod%ction, gi8es a de!icit o! V1Z0 Finally, in t e case o! in8estment 2C, @ ic like@ise amo%nts to V+ its o%tp%t o! & D%arter, sold at t e general price o! prod%ction, gi8es a de!icit o! V30 Aot in8estments o! capital toget er t %s gi8e a de!icit o! V2Z, @ ic is eD%al to t e s%rpl%s-pro!it o! V2Z, realised !rom in8estments 2C and <C0 5 e s%rpl%s-pro!it and de!icit balance o%t0 5 ere!ore t e rent disappears0 &n !act, t is is possible only beca%se t e elements o! s%rpl%s-8al%e, @ ic !ormed s%rpl%s-pro!it or rent, no@ enter into t e !ormation o! t e a8erage pro!it0 5 e !armers makes t is a8erage pro!it o! V3 on V1+, or <=T, at t e expense o! t e rent0 5 e eD%alisation o! t e indi8id%al a8erage price o! prod%ction o! A to t e general price o! prod%ction o! ?, @ ic reg%lates t e market-price, pres%pposes t at t e di!!erence o! t e indi8id%al price o! t e prod%ce !rom t e !irst in8estments o! capital belo@ t e reg%lating price is more and more compensated and !inally balanced o%t by t e di!!erence o! t e price o! t e prod%ce !rom t e s%bseD%ent in8estments o! capital abo8e t e reg%lating price0 W at appears as s%rpl%spro!it, so long as t e prod%ce !rom t e !irst in8estments o! capital is sold by itsel!, t %s grad%ally

+1*

; apter J'&&&

becomes part o! its a8erage price o! prod%ction, and t ereby enters into t e !ormation o! t e a8erage pro!it, %ntil it is !inally completely absorbed by it0 &! only V+ are in8ested in A instead o! V1+ and t e additional <Z D%arters o! t e last table are prod%ced by taking <Z ne@ acres o! ? %nder c%lti8ation @it an in8estment o! V<Z per acre, t en t e additional in8ested capital @o%ld amo%nt to only V6[, i0e0, t e total in8estment in ? and A !or t e prod%ction o! t ese 6 D%arters @o%ld be only V11[, instead o! V1+, and t eir total price o! prod%ction, incl%ding pro!it, V13Z0 5 e 6 D%arters @o%ld still be sold !or V18, b%t t e in8estment o! capital @o%ld a8e decreased by V3`, and t e rent !rom A @o%ld be V2Z per acre, as be!ore0 &t @o%ld be di!!erent i! t e prod%ction o! t e additional <Z D%arters reD%ired t at a soil in!erior to ?, !or instance, ?-1 and ?-<, be taken %nder c%lti8ation# so t at t e price o! prod%ction per D%arter @o%ld be: !or 1Z D%arters on soil ? -1 R V2, and !or t e last D%arter on soil ? -< R V60 &n t is case, V6 @o%ld be t e reg%lating price o! prod%ction per D%arter0 5 e 3Z D%arters !rom A @o%ld t en be sold !or V<1 instead o! V1=Z, @ ic @o%ld mean a rent o! V1+ instead o! V2Z, or, a rent in grain o! <Z D%arters instead o! 1Z D%arters0 $imilarly, a D%arter on ? @o%ld no@ yield a rent o! V3 R Z D%arter0 Ae!ore disc%ssing t is point !%rt er, anot er obser8ation: 5 e a8erage price o! a D%arter !rom A is eD%alised, i0e0, coincides @it t e general prod%ction price o! V3 per D%arter, reg%lated by ?, as soon as t at portion o! t e total capital @ ic prod%ces t e excess o! 1Z D%arters is balanced by t at portion o! t e total capital @ ic prod%ces t e de!icit o! 1Z D%arters0 6o@ soon t is eD%alisation is e!!ected, or o@ m%c capital @it %nderprod%cti8eness m%st be in8ested in A !or t is p%rpose, @ill depend, ass%ming t e s%rpl%sprod%cti8ity o! t e !irst in8estments o! capital to be gi8en, %pon t e relati8e %nder-prod%cti8eness o! t e later in8estments compared @it an in8estment o! t e same amo%nt in t e @orst, reg%lating soil ?, or %pon t e indi8id%al price o! prod%ction o! t eir prod%ce, compared @it t e reg%lating price0 5 e !ollo@ing concl%sions can no@ be dra@n !rom t e !oregoing: 'irst: $o long as t e additional capitals are in8ested in t e same land @it s%rpl%s-prod%cti8ity, e8en i! t e s%rpl%s-prod%cti8ity is decreasing, t e absol%te rent per acre in grain and money increases, alt o%g it decreases relati8ely, in proportion to t e ad8anced capital Bin ot er @ords, t e rate o! s%rpl%s-pro!it or rentC0 5 e limit is establis ed ere by t at additional capital @ ic yields only t e a8erage pro!it, or !or @ ose prod%ce t e indi8id%al price o! prod%ction coincides @it t e general price o! prod%ction0 5 e price o! prod%ction remains t e same %nder t ese circ%mstances, %nless t e prod%ction !rom t e poorer soils becomes s%per!l%o%s as a res%lt o! increased s%pply0 E8en @ en t e price is !alling, t ese additional capitals may @it in certain limits still prod%ce s%rpl%s-pro!it, t o%g less o! it0 Secondly: 5 e in8estment o! additional capital yielding only t e a8erage pro!it, @ ose s%rpl%sprod%cti8ity t ere!ore R =, does not alter in any @ay t e amo%nt o! t e existing s%rpl%s-pro!it, and conseD%ently o! rent0 5 e indi8id%al a8erage price per D%arter increases t ereby %pon t e s%perior soils# t e excess per D%arter decreases, b%t t e n%mber o! D%arters @ ic contain t is decreased excess increases, so t at t e mat ematical prod%ct remains t e same0 4hirdly: ?dditional in8estments o! capital, t e prod%ce o! @ ic as an indi8id%al price o! prod%ction exceeding t e reg%lating price I t e s%rpl%s-prod%cti8ity is t ere!ore not merely R =, b%t less t an Eero, or a negati8e D%antity, t at is, less t an t e prod%cti8ity o! an eD%al in8estment o! capital in t e reg%lating soil ? I bring t e indi8id%al a8erage price o! prod%ction o! t e total o%tp%t !rom t e s%perior soil closer and closer to t e general price o! prod%ction, i0e0, red%ce more and more t e di!!erence bet@een t em @ ic constit%tes t e s%rpl%s-pro!it, or rent0 ?n increasingly greater part o! @ at constit%ted s%rpl%s-pro!it or rent enters into t e !ormation o! t e a8erage pro!it0 A%t ne8ert eless, t e total capital in8ested in an acre o! A contin%es to yield s%rpl%s-pro!it, alt o%g t e latter decreases as t e amo%nt o! capital @it %nder-prod%cti8eness

+<=

; apter J'&&&

increases and to t e extent o! t is %nder-prod%cti8eness0 5 e rent, @it increasing capital and increasing prod%ction, in t is case decreases absol%tely per acre, not merely relati8ely @it re!erence to t e increasing magnit%de o! t e in8ested capital, as in t e second case0 5 e rent can be eliminated only @ en t e indi8id%al a8erage price o! prod%ction o! t e total o%tp%t !rom t e better soil A coincides @it t e reg%lating price, so t at t e entire s%rpl%s-pro!it !rom t e !irst more prod%cti8e in8estments o! capital is cons%med in t e !ormation o! a8erage pro!it0 5 e minim%m limit o! t e drop in rent per acre is t at point at @ ic it disappears0 A%t t is point does not occ%r as soon as t e additional in8estments o! capital are %nder-prod%cti8e, b%t rat er as soon as t e additional in8estment o! %nder-prod%cti8e capital becomes so large in magnit%de t at its e!!ect is to cancel t e o8er-prod%cti8eness o! t e !irst in8estments o! capital, so t at t e prod%cti8eness o! t e total in8ested capital becomes t e same as t at o! t e capital in8ested in ?, and t e indi8id%al a8erage price per D%arter o! A becomes t ere!ore t e same as t at per D%arter o! ?0 &n t is case too, t e reg%lating price o! prod%ction, V3 per D%arter, @o%ld remain t e same, alt o%g t e rent ad disappeared0 3nly beyond t is point @o%ld t e price o! prod%ction a8e to rise in conseD%ence o! an increase eit er in t e extent o! %nder-prod%cti8eness o! t e additional capital or in t e magnit%de o! t e additional capital o! eD%al %nder-prod%cti8eness0 For instance, i!, in t e abo8e table <Z D%arters @ere prod%ced instead o! 1Z D%arters %pon t e same soil at V2 per D%arter, @e @o%ld a8e ad a total o! > D%arters !or V<< price o! prod%ction# a D%arter @o%ld a8e cost V3 1N> it @o%ld t %s be V1N> abo8e t e general price o! prod%ction, and t e latter @o%ld t ere!ore a8e to rise0 For a long time, t en, additional capital @it %nder-prod%cti8eness, or e8en increasing %nderprod%cti8eness, mig t be in8ested %ntil t e indi8id%al a8erage price per D%arter !rom t e best soils became eD%al to t e general price o! prod%ction, %ntil t e excess o! t e latter o8er t e !ormer I and t ereby t e s%rpl%s-pro!it and t e rent I entirely disappeared0 ?nd e8en t en, t e disappearance o! rent !rom t e better soils @o%ld only signi!y t at t e indi8id%al a8erage price o! t eir prod%ce coincides @it t e general price o! prod%ction, so t at an increase in t e latter @o%ld not yet be reD%ired0 &n t e abo8e ill%stration, %pon better soil A I @ ic is o@e8er t e lo@est in t e seD%ence o! better or rent-bearing soils I 3Z D%arters @ere prod%ced by a capital o! V+ @it s%rpl%sprod%cti8eness and <Z D%arters by a capital o! V1= @it %nder-prod%cti8eness, i0e0, a total o! 6 D%arters# +Z o! t is total is t %s prod%ced by t e latter portions o! capital @it %nderprod%cti8eness0 ?nd it is only at t is point t at t e indi8id%al a8erage price o! prod%ction o! t e 6 D%arters rises to V3 per D%arter and t %s coincides @it t e general price o! prod%ction0 (nder t e la@ o! landed property, o@e8er, t e latter <Z D%arters co%ld not a8e been prod%ced in t is @ay at V3 per D%arter, except @ en t ey co%ld be prod%ced %pon <Z ne@ acres o! soil ?0 5 e case in @ ic t e additional capital prod%ces only at t e general price o! prod%ction, @o%ld a8e constit%ted t e limit0 Aeyond t is point, t e additional in8estment o! capital in t e same land @o%ld a8e ad to cease0 &ndeed, i!, t e !armer once pays V2Z rent !or t e !irst t@o in8estments o! capital, e m%st contin%e to pay it, and e8ery in8estment o! capital @ ic prod%ced a D%arter !or more t an V3 /&n t e :erman 18*2 edition t is reads: !or less t an V30 I 0d01 @o%ld res%lt in a ded%ction !rom is pro!it0 5 e eD%alisation o! t e indi8id%al a8erage price, in t e case o! %nder-prod%cti8eness, is t ereby pre8ented0 'et %s take t is case in t e pre8io%s ill%stration, @ ere t e price o! prod%ction !or soil ?, V3 per D%arter, reg%lates t e price !or A0 $elling ,rice

+<1

; apter J'&&&

,rice o! ,rice o! $%rpl%s;apital ,ro!it 3%tp%t ,er Mr 5otal 'oss ,rod%ction ,rod%ction ,ro!it V V Mrs V V V V per Mr V V <Z <Z + + 1+ Z Z 1 1 3 3 3 6 6 18 < 1Z 1Z 1 1Z < 2> 6 3 3 3 3 6 2Z 2Z 3 18 3 1Z I I 2Z I I 1Z 3 2Z

/> &n t e :erman 18*2 edition t is reads: 30 I 0d01 5 e price o! prod%ction !or t e 3Z D%arters in t e !irst t@o in8estments o! capital is like@ise V3 per D%arter !or t e !armer, since e as to pay a rent o! V2Z# t %s t e di!!erence bet@een is indi8id%al price o! prod%ction and t e general price o! prod%ction is not pocketed by im0 For im, t en, t e excess in prod%ce price !or t e !irst t@o in8estments o! capital cannot ser8e to balance o%t t e de!icit inc%rred by t e prod%ce in t e t ird and !o%rt in8estments o! capital0 5 e 1Z D%arters !rom in8estment 3 cost t e !armer V6, pro!it incl%ded: b%t at t e reg%lating price o! V3 per D%arter, e can sell t em !or only V2Z0 &n ot er @ords, e @o%ld not only lose is @ ole pro!it, b%t gb163Z, or 1=T o! is in8ested capital o! V+, o8er and abo8e it0 5 e loss o! pro!it and capital in t e case o! in8estment 3 @o%ld amo%nt to V2Z, and in t e case o! in8estment 2 to V3, i0e0, a total o! V2Z, or H%st as m%c as t e rent !rom t e better in8estments o! capital# t e indi8id%al price o! prod%ction !or t e latter, o@e8er, cannot take part in eD%alising t e indi8id%al a8erage price o! prod%ction o! t e total prod%ct !rom A, beca%se t e excess is paid o%t as rent to a t ird party0 &! it @ere necessary, to meet t e demand, to prod%ce t e additional 1Z D%arters by t e t ird in8estment o! capital t e reg%lating market-price @o%ld a8e to rise to V2 per D%arter0 &n conseD%ence o! t is rise in t e reg%lating market-price, t e rent !rom A @o%ld rise !or t e !irst and second in8estments, and rent @o%ld e !ormed %pon ?0 5 %s alt o%g di!!erential rent is b%t a !ormal trans!ormation o! s%rpl%s-pro!it into rent, and property in land merely enables t e o@ner in t is case to trans!er t e s%rpl%s-pro!it o! t e !armer to imsel!, @e !ind ne8ert eless t at s%ccessi8e in8estment o! capital in t e same land, or, @ at amo%nts to t e same t ing, t e increase in capital in8ested in t e same land, reac es its limit !ar more rapidly @ en t e rate o! prod%cti8eness o! t e capital decreases and t e reg%lating price remains t e same# in !act a more or less arti!icial barrier is reac ed as a conseD%ence o! t e mere !ormal trans!ormation o! s%rpl%s-pro!it into gro%nd-rent, @ ic is t e res%lt o! landed property0 5 e rise in t e general price o! prod%ction, @ ic becomes necessary ere @it in more narro@ limits t an ot er@ise, is in t is case not merely t e ca%se o! t e increase in di!!erential rent, b%t t e existence o! di!!erential rent as rent is at t e same time t e reason !or t e earlier and more rapid rise in t e general price o! prod%ction I in order to ens%re t ereby t e increased s%pply o! prod%ce t at as become necessary0 5 e !ollo@ing s o%ld !%rt ermore be noted: Ay an additional in8estment o! capital in soil A, t e reg%lating price co%ld not, as abo8e, rise to V2 i! soil ? @ere to s%pply t e additional prod%ce belo@ V2 by a second in8estment o! capital, or i! ne@ and @orse soil t an ?, @ ose price o! prod%ction @ere indeed ig er t an V3 b%t lo@er t an V2, @ere to enter into competition0 We see, t en, t at di!!erential rent & and di!!erential rent &&, @ ile t e !irst is t e basis o! t e second, ser8e sim%ltaneo%sly as limits !or one anot er, @ ereby no@ a s%ccessi8e in8estment o! capital in t e same land, no@ an in8estment o! capital

+<<

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side by side in ne@ additional land, is made0 &n like manner t ey limit eac ot er in ot er cases# !or instance, @ en better soil is taken %p0

Chapter 44. 'ifferential Rent -lso on the 2orst Cultivated Soil

'et %s ass%me t e demand !or grain is rising, and t e s%pply can only res%lt !rom s%ccessi8e in8estments o! capital %nder conditions o! %nder-prod%cti8eness in t e rent-bearing soils, or by additional in8estment o! capital, also @it decreasing prod%cti8ity, in soil ?, or by t e in8estment o! capital in ne@ lands o! in!erior D%ality t an ?0 'et %s take soil A as representati8e o! t e rent-bearing soils0 5 e additional in8estment o! capital demands an increase in t e market-price abo8e t e it erto pre8ailing price o! prod%ction o! V3 per D%arter, in order to make possible t e increased prod%ction %pon A o! one D%arter B@ ic may ere stand !or one million D%arters, H%st as e8ery acre may stand !or one million acresC0 &ncreased o%tp%t may also be yielded by soils ; and 7, etc0, t e soils bearing t e ig est rent, b%t only @it decreasing s%rpl%s-prod%cti8eness# b%t it is ass%med t at t e D%arter !rom A is necessary in order to meet t e demand0 &! t is D%arter is more c eaply prod%ced by in8esting more capital in A t an @it t e same addition o! capital to ?, or by descending to soil ? - 1, @ ic may, e0g0, reD%ire V2 to prod%ce a D%arter, @ ereas t e addition to capital ? mig t do so !or V3`, t en t e additional capital on A @ill reg%late t e market-price0 ? prod%ces a D%arter !or V3, as ereto!ore0 $imilarly A, as be!ore, prod%ces a total o! 3Z D%arters at an indi8id%al price o! prod%ction o! V6 !or its total o%tp%t0 -o@, i! an additional V2 o! prod%ction price Bincl%ding pro!itC becomes necessary on A in order to prod%ce an additional D%arter, @ ereas it co%ld a8e been prod%ced on ? !or V3`, t en it @o%ld nat%rally be prod%ced on ?, rat er t an on A0 'et %s ass%me, t en, t at it can be prod%ced on A @it t e additional price o! prod%ction o! V3Z0 &n t is case, V3Z @o%ld become t e reg%lating price !or t e entire o%tp%t0 A @o%ld no@ sell its present o%tp%t o! 2Z D%arters !or Vl+`0 3! t is V6 is t e price o! prod%ction !or t e !irst 3Z D%arters and t e V3Z !or t e last D%arter, i0e0, a total o! V*Z0 5 is lea8es a s%rpl%spro!it !or rent R V6[ as against t e !ormer V2Z0 &n t is case, an acre o! ? @o%ld also yield a rent o! V1Z# b%t it @o%ld not be t e @orst soil ?, b%t rat er t e better soil A t at @o%ld reg%late t e price o! prod%ction o! V3Z0 3! co%rse, @e ass%me ere t at ne@ soil o! D%ality ? and eD%ally !a8o%rable location as t at it erto c%lti8ated is not a8ailable, b%t t at eit er a second in8estment o! capital in t e already c%lti8ated plot ? at a ig er price o! prod%ction, or t e c%lti8ation o! an e8en poorer soil ? - 1, is reD%ired0 ?s soon as di!!erential rent && comes into !orce t ro%g s%ccessi8e in8estments o! capital, t e limits o! t e rising price o! prod%ction may be reg%lated by better soil# and t e @orst soil, t e basis o! di!!erential rent &, may also yield rent0 5 is, e8en @it a single di!!erential rent, all c%lti8ated land @o%ld yield rent0 We @o%ld t en a8e t e !ollo@ing t@o tables, @ ere by price o! prod%ction @e mean t e s%m o! t e in8ested capital pl%s <=T pro!it# in ot er @ords, on e8ery V<Z o! capital VZ o! pro!it or a total o! V30 5ype ?cres ,rice o! 3%tp%t o! ,rod%c- Mrs $oil tion V ? A 1 1 3 6 1 3Z $elling ,ro- :rain- Money,rice ceeds )ent )ent V V Mrs V 3 3 3 1=Z = 1Z = 2Z

+<2

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; 7

1 1

6 6 <1

+Z >Z 1>Z

3 3

16Z <<Z +<Z

3Z +Z 1=Z

1=Z 16Z 31Z

5otal 2

5 is is t e state o! a!!airs be!ore t e ne@ capital o! V3Z, @ ic yields only one D%arter, is in8ested in A0 ?!ter t is in8estment, t e sit%ation looks as !ollo@s: 5ype o! $oil ? A ?cres ,rice 3! 3%tp%t $elling ,ro- :rain- Money,rod%c- Mrs ,rice ceeds )ent )ent tion V V Mrs V V 1 1 ; 1 3 *Z 6 1 2Z +Z 3Z 3Z 3Z 3Z 1+` 1*[ 1N> 1 11N12 3 11N12 Z 6[ 13[

7 5otal

1 2

6 <2Z

>Z 18Z

3Z

<6[ 62`

+ 11N12 11Z

<=[ 2=[

/5 is, again, is not D%ite correctly calc%lated0 First o! all, t e cost o! t e 2Z Drs !or !armer A is, in t e !irst place, V*Z: in price o! prod%ction and, secondly, V2Z in rent, i0e0, a total o! V12# a8erage per D%arter R V3Z0 5 is a8erage price o! is total prod%ction t %s becomes t e reg%lating marketprice0 5 %s, t e rent on ? @o%ld amo%nt to V1N* instead o! VZ, and t at on A @o%ld remain V2Z as ereto!ore# 2Z Drs at V3Z R V12 and, i! @e ded%ct V*Z in price o! prod%ction, V2Z remain !or s%rpl%s-pro!it0 We see, t en, t at in spite o! t e reD%ired c ange in n%merical 8al%es t is ill%stration s o@s o@, by means o! di!!erential rent &&, better soil, already yielding rent, may reg%late t e price and t %s trans!orm all soil, e8en it erto rentless, into rent-bearing soil0 I '. 0.1 5 e grain-rent m%st rise as soon as t e reg%lating price o! prod%ction o! t e grain rises, i0e0, as soon as t e price o! prod%ction o! a D%arter o! grain !rom t e reg%lating soil, or t e reg%lating in8ested capital in one o! t e 8ario%s soil types, rises0 &t is t e same as t o%g all soils ad become less prod%cti8e and prod%ced, e0g0, only +N> D%arter instead o! 1 D%arter @it e8ery ne@ in8estment o! V<Z0 W ate8er else t ey prod%ce in grain @it t e same in8estment o! capital is trans!ormed into s%rpl%s-prod%ct, @ ic represents t e s%rpl%s-pro!it and t ere!ore t e rent0 ?ss%ming t e rate o! pro!it remains t e same, t e !armer can b%y less grain @it is pro!it0 5 e rate o! pro!it may remain t e same i! @ages do not rise I eit er beca%se t ey are depressed to t e p ysical minim%m, i0e0, belo@ t e normal 8al%e o! labo%r-po@er# or beca%se t e ot er articles o! cons%mption needed by t e labo%rer and s%pplied by man%!act%re a8e become relati8ely c eaper# or beca%se t e @orking day as become longer or more intensi8e, so t at t e rate o! pro!it in non-agric%lt%ral lines o! prod%ction, @ ic , o@e8er, reg%lates t e agric%lt%ral pro!it, as remained t e same or as risen# or, !inally, beca%se more constant and less 8ariable capital is employed in agric%lt%re, e8en t o%g t e amo%nt o! capital in8ested is t e same0

+<+

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We a8e t %s considered t e !irst met od by @ ic rent may arise on t e it erto @orst soil ? @it o%t taking still @orse soil %nder c%lti8ation# t at is, rent may arise !rom t e di!!erence bet@een its indi8id%al, it erto reg%lating, price o! prod%ction and t e ne@, ig er price o! prod%ction, @ ereby t e last additional capital employed %nder conditions o! %nderprod%cti8eness %pon t e better soil s%pplies t e necessary additional prod%ce0 &! t e additional prod%ce ad to be s%pplied by soil ? - 1, @ ic cannot prod%ce a D%arter !or less t an V2, t en t e rent per acre o! ? @o%ld a8e risen to V10 A%t, in t is case, soil ? - 1 @o%ld a8e taken t e place o! ? as t e @orst c%lti8ated soil, and t e latter @o%ld a8e mo8ed into t e lo@est position in t e seD%ence o! rent-bearing soils0 7i!!erential rent & @o%ld a8e c anged0 5 is case, t en, is not incl%ded in t e consideration o! di!!erential rent &&, @ ic arises !rom t e 8arying prod%cti8eness o! s%ccessi8e in8estments o! capital in t e same piece o! land0 A%t aside !rom t is, di!!erential rent may arise on soil ? in t@o ot er @ays0 Wit t e price %nc anged I any gi8en price, e8en a lo@er one compared to !ormer ones I @ en t e additional in8estment o! capital res%lts in s%rpl%s-prod%cti8eness, @ ic prima facie, and %p to a certain point m%st al@ays be t e case precisely on t e @orst soil0 $econdly, o@e8er, @ en t e prod%cti8eness o! s%ccessi8e in8estments o! capital in soil ? decreases0 &t is ass%med in bot cases t at t e increased prod%ction is reD%ired to meet demand0 A%t !rom t e point o! 8ie@ o! di!!erential rent, a pec%liar di!!ic%lty arises ere o@ing to t e pre8io%sly de8eloped la@ I according to @ ic it is al@ays t e indi8id%al a8erage price o! prod%ction per D%arter !or t e total prod%ction Bor t e total o%tlay o! capitalC @ ic acts as t e determining !actor0 &n t e case o! soil ?, o@e8er, t ere is not, as in t e cases o! t e better soils, anot er price o! prod%ction @ ic limits !or ne@ in8estments o! capital t e eD%alisation o! t e indi8id%al @it t e general price o! prod%ction0 For t e indi8id%al price o! prod%ction o! ? is precisely t e general price o! prod%ction reg%lating t e market-price0 'et %s ass%me: 1C "hen the productiveness of successive investments of capital is increasing , 1 acre o! ? @ill prod%ce 3 Drs instead o! < Drs gi8en an in8estment o! V+ I corresponding to a price o! prod%ction o! V60 5 e !irst in8estment o! V<Z yielded 1 Dr, t e second I < Drs0 &n t is case, a price o! prod%ction o! V6 @ill yield 3 Drs, so t at t e a8erage cost o! a D%arter @ill be V<# i0e0, i! t e 3 Drs are sold at V< per D%arter, t en ?, as ereto!ore, does not yield any rent, b%t only t e basis o! di!!erential rent && as been altered# t e reg%lating price o! prod%ction is no@ V< instead o! V3# a capital o! V<Z no@ prod%ces an a8erage o! 1Z Drs on t e @orst soil, instead o! 1 Dr, and no@ t is is t e o!!icial prod%cti8ity !or all better soils gi8en an in8estment o! V<Z0 From no@ on, a portion o! t eir !ormer s%rpl%s-prod%ct enters into t e !ormation o! t eir necessary o%tp%t, H%st as a portion o! t eir s%rpl%s-pro!it enters into !orming t e a8erage pro!it0 3n t e ot er and, i! t e calc%lation is made %pon t e basis o! better soils, @ ere t e a8erage calc%lation does not alter t e absol%te s%rpl%s at all, beca%se !or t em t e general price o! prod%ction is t e limit !or t e in8estment o! capital, t en a D%arter !rom t e !irst in8estment o! capital costs V3 and t e < Drs !rom t e second in8estment cost only V1Z eac 0 5 is @o%ld t ereby gi8e rise to a grain-rent o! 1 Dr and a money-rent o! V3 on ?, b%t t e 3 Drs @o%ld be sold !or t e old price o! V*0 &! a t ird in8estment o! V<Z @ere made %nder conditions o! t e same prod%cti8eness as t e second in8estment, t en t e total @o%ld be + Drs !or a price o! prod%ction o! V*0 &! t e indi8id%al a8erage price o! prod%ction o! ? s o%ld remain t e reg%lating price, t en a D%arter @o%ld no@ be sold at V1 2N+0 5 e a8erage price @o%ld a8e !allen once more I not t ro%g a ne@ rise in prod%cti8eness o! t e t ird in8estment o! capital, b%t merely t ro%g t e addition o! a ne@ in8estment o! capital a8ing t e same additional prod%cti8eness as t e second0 &nstead o! raising t e rent as on t e rent-bearing soils, t e s%ccessi8e in8estments o! capital in soil ? o! ig er, b%t constant prod%cti8eness @o%ld proportionally lo@er t e price o! prod%ction and

+<6

; apter J'&4

t ereby, e8eryt ing else being eD%al, t e di!!erential rent on all ot er soils0 3n t e ot er and, i! t e !irst in8estment o! capital @ ic prod%ces 1 Dr at a price o! prod%ction o! V3 s o%ld in itsel! remain reg%lating, t en + Drs @o%ld be sold !or V1+, and t e di!!erential rent o! t e later in8estments o! capital in soil ? @o%ld amo%nt to V60 5 e additional capital per acre o! soil ?, o@e8er it is applied, @o%ld be an impro8ement in t is case, and @o%ld make t e original portion o! capital more prod%cti8e0 &t @o%ld be ridic%lo%s to say t at X o! t e capital ad prod%ced 2 Dr and t e ot er W I 2 Drs0 For V* per acre @o%ld al@ays prod%ce + Drs, @ ile V3 @o%ld prod%ce only 1 Dr0 W et er or not a rent @o%ld arise ere, @ et er or not a s%rpl%s-pro!it @o%ld be deri8ed, @o%ld depend @ olly %pon t e circ%mstances0 -ormally t e reg%lating price o! prod%ction @o%ld a8e to !all0 5 is @o%ld be t e case, i! t is impro8ed b%t more expensi8e c%lti8ation o! soil ? s o%ld occ%r only beca%se it also takes place on t e better soils, in ot er @ords, i! a general re8ol%tion in agric%lt%re s o%ld occ%r# so t at @ en @e no@ re!er to t e nat%ral !ertility o! soil ?, it is ass%med t at it is @orked @it V6 or V* instead o! V30 5 is @o%ld partic%larly apply i! t e b%lk o! c%lti8ated acres o! soil ?, @ ic !%rnis t e main s%pply o! a gi8en co%ntry, s o%ld employ t is ne@ met od0 A%t i! t e impro8ement s o%ld at !irst extend only to a small area o! ?, t en t is better c%lti8ated portion @o%ld yield a s%rpl%s-pro!it, @ ic t e landlord @o%ld be D%ick to trans!orm @ olly or in part into rent, and to !ix in t e !orm o! rent0 &n t is @ay I i! t e demand kept pace @it t e increasing s%pply I as more and more o! soil ? began to employ t e ne@ met od o! c%lti8ation, rent mig t be grad%ally !ormed on all soil o! D%ality ?, and t e s%rpl%s-prod%cti8ity mig t be eliminated @ olly or in part, depending on market conditions0 5 e eD%alisation o! t e price o! prod%ction o! ? to t e a8erage price o! its prod%ce obtained %nder conditions o! increased o%tlay o! capital mig t t %s be pre8ented by !ixing t e s%rpl%s-pro!it o! t is increased in8estment o! capital in t e !orm o! rent0 5 %s, as @as pre8io%sly seen to be t e case !or t e better soils @ en t e prod%cti8eness o! t e additional capital decreased, it @o%ld again be t e trans!ormation o! s%rpl%s-pro!it into gro%nd-rent, i0e0, t e inter8ention o! property in land, @ ic @o%ld raise t e price o! prod%ction, instead o! t e di!!erential rent merely being t e res%lt o! t e di!!erence bet@een t e indi8id%al and t e general price o! prod%ction0 &t @o%ld pre8ent, in t e case o! soil ?, t e coincidence o! bot prices beca%se it @o%ld inter!ere @it t e reg%lation o! t e price o! prod%ction by t e a8erage price o! prod%ction on ?# it @o%ld t %s maintain a ig er price o! prod%ction t an necessary and t ereby create rent0 E8en i! grain @ere !reely imported !rom abroad, t e same res%lt co%ld be bro%g t abo%t or perpet%ated by compelling !armers to %se soil capable o! competing in grain c%lti8ation @it o%t yielding rent, at t e price o! prod%ction reg%lated !rom abroad, !or ot er p%rposes, e0g0, past%rage, so t at only rent-bearing soils @o%ld be %sed !or grain c%lti8ation, i0e0, only soils @ ose indi8id%al a8erage price o! prod%ction per D%arter @ere belo@ t at determined !rom abroad0 3n t e @ ole, it is to be ass%med t at in t e gi8en case, t e price o! prod%ction @ill !all, b%t not to t e le8el o! its a8erage# it @ill be ig er t an t e a8erage, b%t belo@ t e price o! prod%ction o! t e @orst c%lti8ated soil ?, so t at t e competition !rom ne@ soil ? is limited0 <C "hen the productiveness of additional capitals is decreasing 0 'et %s ass%me t at soil ? - 1 reD%ires V2 to prod%ce t e additional D%arter, @ ereas soil ? prod%ces it !or V3`, i0e0, more c eaply, b%t still V` more dearly t an t e D%arter prod%ced by its !irst in8estment o! capital0 &n t is case, t e total price o! t e t@o D%arters prod%ced %pon ? @o%ld R V6`# t %s t e a8erage price per D%arter R V3 3N80 5 e price o! prod%ction @o%ld rise, b%t only by V3N8, @ ereas it @o%ld rise by anot er 3N8 or to V3`, i! t e additional capital @ere in8ested in ne@ land @ ic prod%ced at V3`, and it @o%ld t %s bring abo%t a proportional increase in all ot er di!!erential rents0 5 e price o! prod%ction o! V3 3N8 per D%arter !or ? @o%ld t %s be eD%alised to its a8erage price o! prod%ction @it an increased in8estment o! capital, and @o%ld be t e reg%lating price# t %s, it @o%ld not yield any rent, since it @o%ld not prod%ce any s%rpl%s-pro!it0 6o@e8er, i! t is D%arter, prod%ced by t e second in8estment o! capital, @ere sold !or V3`, soil ? @o%ld no@ yield a rent o! V`, and indeed, on all acres o! ? in @ ic no additional in8estment o!

+<>

; apter J'&4

capital ad taken place and @ ic t %s @o%ld still prod%ce at V3 per D%arter0 $o long as any %nc%lti8ated !ields o! ? remain, t e price co%ld rise only temporarily to V3`0 ;ompetition !rom ne@ !ields o! ? @o%ld old t e price o! prod%ction at V3 %ntil all land o! type ?, @ ose !a8o%rable location enables it to prod%ce a D%arter at less t an V3`, @o%ld be ex a%sted0 5 is is t en @ at @e @o%ld ass%me, alt o%g t e landlord, so long as an acre o! land yields rent, @ill not let a tenant !armer a8e anot er acre rent-!ree0 &t @o%ld again depend to @ at extent a second in8estment o! capital in t e a8ailable soil ? ad become general, @ et er t e price o! prod%ction is eD%alised at t e a8erage price or @ et er t e indi8id%al price o! prod%ction o! t e second in8estment o! capital becomes reg%lating at V3`0 5 e latter occ%rs only @ en t e lando@ner as s%!!icient time %ntil demand is satis!ied to !ix as rent t e s%rpl%s-pro!it deri8ed at t e price o! V3` per Dr0 ;oncerning decreasing prod%cti8eness o! t e soil @it s%ccessi8e in8estments o! capital, see 'iebig0 /'iebig, Die Chemie in ihrer +nwendung auf +gricultur und &hysiologie , Ara%nsc @eig, 186<0 I 0d.1 We a8e obser8ed t at t e s%ccessi8e decrease in s%rpl%s-prod%cti8eness o! in8ested capital in8ariably increases t e rent per acre, so long as t e price o! prod%ction remains constant, and t at t is may occ%r e8en @it a !alling price o! prod%ction0 A%t, in general, t e !ollo@ing is to be noted0 From t e standpoint o! t e capitalist mode o! prod%ction, a relati8e increase in t e price o! prod%cts al@ays takes place @ en t ese prod%cts cannot be sec%red %nless an expendit%re or payment not pre8io%sly made is inc%rred0 For by t e replacement o! capital cons%med in prod%ction @e mean only t e replacement o! 8al%es represented by certain means o! prod%ction0 -at%ral elements entering as agents into prod%ction, and @ ic cost not ing, no matter @ at role t ey play in prod%ction, do not enter as components o! capital, b%t as a !ree gi!t o! -at%re to capital, t at is, as a !ree gi!t o! -at%re"s prod%cti8e po@er to labo%r, @ ic , o@e8er, appears as t e prod%cti8eness o! capital, as all ot er prod%cti8ity %nder t e capitalist mode o! prod%ction0 5 ere!ore, i! s%c a nat%ral po@er, @ ic originally costs not ing, takes part in prod%ction, it does not enter into t e determination o! price, so long as t e prod%ct @ ic it elped to prod%ce s%!!ices to meet t e demand0 A%t i! in t e co%rse o! de8elopment, a larger o%tp%t is demanded t an t at @ ic can be s%pplied @it t e elp o! t is nat%ral po@er, i0e0, i! t is additional o%tp%t m%st be created @it o%t t e elp o! t is nat%ral po@er, or by assisting it @it %man labo%rpo@er, t en a ne@ additional element enters into capital0 ? relati8ely larger in8estment o! capital is t %s reD%ired in order to sec%re t e same o%tp%t0 ?ll ot er circ%mstances remaining t e same, a rise in t e price o! prod%ction takes place0 BFrom a note-book Kbeg%n in mid-Febr%ary 18>60L /'.0.1C Differential rent and rent as mere interest on capital incorporated in the soil 0 5 e so-called permanent impro8ements I @ ic c ange t e p ysical, and, in part, also t e c emical conditions o! t e soil by means o! operations reD%iring an expendit%re o! capital, and @ ic may be regarded as an incorporation o! capital in t e soil I nearly all amo%nt to gi8ing a partic%lar piece o! land in a certain limited locality s%c properties as are nat%rally possessed by some ot er piece o! land else@ ere, sometimes D%ite near by0 3ne piece o! land is nat%rally le8el, anot er as to be le8elled# one possesses nat%ral drainage, anot er reD%ires arti!icial drainage# one is endo@ed by -at%re @it a deep layer o! top soil, anot er needs arti!icial deepening# one clay soil is nat%rally mixed @it t e proper amo%nt o! sand, anot er as to be treated to obtain t is proportion# one meado@ is nat%rally irrigated or co8ered @it layers o! silt, anot er reD%ires labo%r to obtain t is condition, or, in t e lang%age o! bo%rgeois economics, it reD%ires capital0 &t is indeed a tr%ly am%sing t eory, @ ereby ere, in t e case o! one piece o! land @ ose comparati8e ad8antages a8e been acD%ired, rent is interest, @ ereas in t e case o! anot er piece o! land @ ic possesses t ese ad8antages nat%rally, it is not interest0 B&n !act, t is is so distorted in practice t at since rent really coincides in t e one case @it interest, it is !alsely also called

+<8

; apter J'&4

interest in t e ot er cases, @ ere t is is positi8ely not t e case0C 6o@e8er, land yields rent a!ter capital is in8ested not beca%se capital is in8ested, b%t beca%se t e in8ested capital makes t is land more prod%cti8e t an it !ormerly @as0 ?ss%ming t at all t e land o! a gi8en co%ntry reD%ires t is in8estment o! capital, e8ery piece o! land @ ic as not recei8ed it m%st !irst pass t ro%g t is stage, and t e rent Binterest yielded in t e gi8en caseC borne by land already pro8ided @it in8estment o! capital constit%tes di!!erential rent H%st as t o%g it nat%rally possessed t is ad8antage and t e ot er land ad !irst to acD%ire it arti!icially0 5 is rent too, @ ic may be resol8ed into interest, becomes p%re di!!erential rent as soon as t e in8ested capital is amortised0 3t er@ise, one and t e same capital @o%ld a8e to exist t@ice as capital0 ? most am%sing p enomenon is t at all opponents o! )icardo @ o oppose t e idea t at 8al%e determination is based excl%si8ely on labo%r rat er t an regarding di!!erential rent as arising !rom di!!erences in soil, point o%t t at ere -at%re rat er t an labo%r determines 8al%e# b%t at t e same time t ey credit t is determination to t e location o! t e land, or I and to an e8en greater extent I t e interest on capital p%t into t e land d%ring its c%lti8ation0 5 e same labo%r prod%ces t e same 8al%e in a prod%ct created d%ring a gi8en period o! time# b%t t e magnit%de or D%ant%m o! t is prod%ct, and conseD%ently also t e portion o! 8al%e associated @it some aliD%ot part o! t is prod%ct, depends !or a gi8en D%antity o! labo%r solely %pon t e D%ant%m o! prod%ct, and t e latter, in t%rn, depends %pon t e prod%cti8ity o! t e gi8en D%ant%m o! labo%r rat er t an t e absol%te magnit%de o! t is D%ant%m0 &t is immaterial @ et er t is prod%cti8ity is d%e to -at%re or to society0 3nly in t e case @ en t e prod%cti8ity itsel! costs labo%r, and conseD%ently capital, does it increase t e price o! prod%ction by a ne@ element I @ ic -at%re by itsel! does not do0

Chapter 45. -9solute +round-Rent

&n t e analysis o! di!!erential rent @e proceeded !rom t e ass%mption t at t e @orst soil does not pay any gro%nd-rent# or, to p%t it more generally, only s%c land pays gro%nd-rent @ ose prod%ct as an indi8id%al price o! prod%ction belo@ t e price o! prod%ction reg%lating t e market, so t at in t is manner a s%rpl%s-pro!it arises @ ic is trans!ormed into rent0 &t is to be noted, to begin @it , t at t e la@ o! di!!erential rent as s%c is entirely independent o! t e correctness or incorrectness o! t is ass%mption0 'et %s call t e general price o! prod%ction, by @ ic t e market is reg%lated, ,0 5 en, , coincides @it t e indi8id%al price o! prod%ction o! t e o%tp%t o! t e @orst soil ?# i0e0, its price pays !or t e constant and 8ariable capital cons%med in prod%ction pl%s t e a8erage pro!it B R pro!it o! enterprise pl%s interestC0 5 e rent in t is case is eD%al to Eero0 5 e indi8id%al price o! prod%ction o! t e next better soil A is R ,l, and , ^ ,l# t at is, , pays !or more t an t e act%al price o! prod%ction o! t e prod%ct o! soil A0 'et %s no@ ass%me t at , - ,l R d# d, t e excess o! , o8er ,l, is t ere!ore t e s%rpl%s-pro!it @ ic t e !armer o! soil type A realises0 5 is d is trans!ormed into rent, @ ic m%st be paid to t e landlord0 'et ,ll be t e act%al price o! prod%ction o! t e t ird type o! soil ;, and , - ,ll R <d# t en t is <d is con8erted into rent# similarly, let ,lll be t e indi8id%al price o! prod%ction o! t e !o%rt type o! soil 7, and , - ,lll R 3d, @ ic is trans!ormed into gro%nd-rent, etc0 -o@ let %s ass%me t e premise !or soil ?, t at rent R = and t ere!ore t e price o! its prod%ct R , U =, is erroneo%s0 ?ss%me rat er t at it, too, yields rent R r0 &n t at case, t@o di!!erent concl%sions !ollo@0 'irst: 5 e price o! t e prod%ct o! soil ? @o%ld not be reg%lated by t e price o! prod%ction on t e latter, b%t @o%ld incl%de an excess abo8e t is price, i0e0, @o%ld be R , U r0 Aeca%se ass%ming t e capitalist mode o! prod%ction to be !%nctioning normally, t at is, ass%ming t at t e excess r @ ic t e !armer pays to t e landlord represents neit er a ded%ction !rom @ages nor !rom t e a8erage pro!it o! capital, t e !armer can only pay it by selling t e prod%ct abo8e its price o! prod%ction, t %s, yielding im s%rpl%s-pro!it i! e did not a8e to t%rn o8er t is excess to t e landlord in t e !orm o! rent0 5 e reg%lating market-price o! t e total o%tp%t on t e market deri8ed !rom all soils @o%ld t en not be t e price o! prod%ction @ ic capital generally yields in all sp eres o! prod%ction, i0e0, a price eD%al to costs pl%s a8erage pro!it, b%t rat er t e price o! prod%ction pl%s t e rent, , U r, and not ,0 For t e price o! t e prod%ct o! soil ? represents generally t e limit o! t e reg%lating general market-price, i0e0, t e price at @ ic t e total prod%ct can be s%pplied, and to t at extent it reg%lates t e price o! t is total prod%ct0 A%t secondly: ?lt o%g t e general price o! agric%lt%ral prod%cts @o%ld in t is case be signi!icantly modi!ied, t e la@ o! di!!erential rent @o%ld ne8ert eless in no @ay lose its !orce0 For i! t e price o! t e prod%ct o! soil ?, and t ereby t e general market-price R , U r, t e price !or soils A, ;, 7, etc0, @o%ld like@ise R , U r0 A%t since , - ,l R d !or soil A, t en B, U rC - B,l U rC @o%ld like@ise R d, and , - ,ll R B, U rC - B,ll U rC R <d !or soil ;# and !inally , - ,lll R B, U rC B,lll U rC R 3d !or soil 7, etc0 5 %s t e di!!erential rent @o%ld be t e same as be!ore and @o%ld be reg%lated by t e same la@, alt o%g t e rent @o%ld incl%de an element independent o! t is la@ and @o%ld s o@ a general increase toget er @it t e price o! t e agric%lt%ral prod%ct0 &t !ollo@s, t en, t at no matter @ at t e case may be as regards t e rent o! t e least !ertile soils, t e la@ o! di!!erential rent is not only independent o! it, b%t t at t e only manner o! grasping di!!erential rent in keeping @it its c aracter is to let t e rent on soil ? R =0 W et er t is act%ally R = or ^ = is immaterial so !ar as t e di!!erential rent is concerned, and, in !act, does not come into consideration0

+3=

; apter J'4

5 e la@ o! di!!erential rent, t en, is independent o! t e res%lts o! t e !ollo@ing st%dy0 &! @e @ere no@ to inD%ire more deeply into t e basis o! t e ass%mption t at t e prod%ct o! t e @orst soil ? does not yield any rent, t e ans@er @o%ld o! necessity be as !ollo@s: &! t e marketprice o! t e agric%lt%ral prod%ct, say grain, attains t at le8el @ ere an additional in8estment o! capital in soil ? res%lts in t e %s%al price o! prod%ction, i0e0, t e %s%al a8erage pro!it on t e capital is yielded, t en t is condition s%!!ices !or in8esting t e additional capital in soil ?0 &n ot er @ords, t is condition is s%!!icient !or t e capitalist to in8est ne@ capital yielding t e %s%al pro!it and to employ it in t e normal manner0 &t s o%ld be noted ere t at in t is case, too, t e market-price m%st be ig er t an t e price o! prod%ction o! ?0 For as soon as t e additional s%pply is created, it is e8ident t at t e relation bet@een s%pply and demand becomes altered0 Formerly t e s%pply @as ins%!!icient0 -o@ it is s%!!icient0 6ence t e price m%st !all0 &n order to !all, it m%st a8e been ig er t an t e price o! prod%ction o! ?0 A%t d%e to t e !act t at soil ? ne@ly taken %nder c%lti8ation is less !ertile, t e price does not !all again as lo@ as @ en t e price o! prod%ction o! soil A reg%lated t e market0 5 e price o! prod%ction o! ? constit%tes t e limit, not !or t e temporary b%t !or t e relati8ely permanent rise o! t e market-price0 3n t e ot er and, i! t e ne@ soil taken %nder c%lti8ation is more !ertile t an t e it erto reg%lating soil ?, and yet only s%!!ices to meet t e increased demand, t en t e market-price remains %nc anged0 5 e in8estigation o! t e D%estion @ et er t e poorest type o! soil yields rent, o@e8er, coincides in t is case too @it o%r present inD%iry, !or ere too t e ass%mption t at soil ? does not yield any rent @o%ld be explained by t e !act t at t e market-price is s%!!icient !or t e capitalist !armer to exactly co8er, @it t is price, t e in8ested capital pl%s t e a8erage pro!it# in brie!, it @o%ld be explained by t e !act t at t e market-price yields im t e price o! prod%ction o! is commodities0 ?t any rate, t e capitalist !armer can c%lti8ate soil ? %nder t ese conditions, inasm%c as e, as capitalist, as s%c po@er o! decision0 5 e prereD%isite !or t e normal expansion o! capital in soil ? is no@ present0 A%t !rom t e premise t at t e capitalist !armer can no@ in8est capital in soil ? %nder a8erage conditions !or t e expansion o! capital, e8en i! e did not a8e to pay any rent, it no@ise !ollo@s t at t is land, belonging to category ?, is no@ at t e disposal o! t e !armer @it o%t !%rt er ado0 5 e !act t at t e tenant !armer co%ld realise t e %s%al pro!it on is capital did e not a8e to pay any rent, is by no means a basis !or t e landlord to lend is land gratis to t e !armer and to become so p ilant ropic as to grant cr7dit gratuit !or t e sake o! a b%siness !riends ip0 $%c an ass%mption @o%ld mean t e abstraction o! landed property, t e elimination o! land-o@ners ip, and it is precisely t e existence o! t e latter t at constit%tes a limitation to t e in8estment o! capital and t e !ree expansion o! capital in t e land0 5 is limitation does not at all disappear be!ore t e simple re!lection o! t e !armer t at t e le8el o! grain prices @o%ld enable im to realise t e %s%al pro!it !rom t e in8estment o! is capital in t e exploitation o! soil ? did e not a8e to pay any rent# in ot er @ords, i! e co%ld proceed in e!!ect as t o%g landed property did not exist0 A%t di!!erential rent pres%pposes t e existence o! a monopoly in land o@ners ip, landed property as a limitation to capital, !or @it o%t it s%rpl%s-pro!it @o%ld not be trans!ormed into gro%nd-rent nor !all to t e s are o! t e landlord instead o! t e !armer0 ?nd landed property as a limitation contin%es to exist e8en @ en rent in t e !orm o! di!!erential rent disappears, i0e0, on soil ?0 &! @e consider t e cases in a co%ntry @it capitalist prod%ction, @ ere t e in8estment o! capital in t e land can take place @it o%t payment o! rent, @e s all !ind t at t ey are all based on a de facto abolition o! landed property, i! not also t e legal abolition# t is, o@e8er, can only take place %nder 8ery speci!ic circ%mstances @ ic are by t eir 8ery nat%re accidental0 'irst: W en t e landlord is imsel! a capitalist, or t e capitalist is imsel! a landlord0 &n t is case e may himself manage is land as soon as market-price as risen s%!!iciently to enable im to get, !rom @ at is no@ soil ?, t e price o! prod%ction, t at is, replacement o! capital pl%s a8erage pro!it0 A%t @ yQ Aeca%se !or im landed property does not constit%te an obstacle to t e

+31

; apter J'4

in8estment o! capital0 6e can treat is land simply as an element o! -at%re and t ere!ore be g%ided solely by considerations o! expansion o! is capital, by capitalist considerations0 $%c cases occ%r in practice, b%t only as exceptions0 P%st as capitalist c%lti8ation o! t e soil pres%pposes t e separation o! !%nctioning capital !rom landed property, so does it as a r%le excl%de sel!-management o! landed property0 &t is immediately e8ident t at t is case is a p%rely accidental one0 &! t e increased demand !or grain reD%ires t e c%lti8ation o! a larger area o! soil type ? t an is in t e ands o! sel!-managing proprietors, in ot er @ords, i! a part o! it m%st be rented to be at all c%lti8ated, t en t is ypot etical li!ting o! t e limitation created by landed property to t e in8estment o! capital at once collapses0 &t is an abs%rd contradiction to start o%t @it t e di!!erentiation %nder t e capitalist mode o! prod%ction bet@een capital and land, !armers and landlords, and t en to t%rn ro%nd and ass%me t at landlords, as a r%le, manage t eir o@n land @ ere8er and @ ene8er capital @o%ld not dra@ rent !rom t e c%lti8ation o! t e soil i! landed property @ere not separate and distinct !rom it0 B$ee t e passage by ?dam $mit concerning mining rent, D%oted belo@0C 5 is abolition o! landed property is !ort%ito%s0 &t may or may not occ%r0 Secondly: &n t e total area o! a lease old t ere may be certain portions @ ic do not yield any rent at t e existing le8el o! market-prices, so t at t ey are in !act loaned gratis# b%t t e landlord does not look %pon it in t at lig t, beca%se e sees t e total rental o! t e leased land, not t e speci!ic rent o! t e indi8id%al component plots0 &n t is case, as regards t e rentless component plots o! t e lease old, landed property as a limitation to t e in8estment o! capital is eliminated !or t e capitalist !armer# and t is, indeed, by contract @it t e landlord imsel!0 A%t e does not pay rent !or t ese plots merely beca%se e pays rent !or t e land associated @it t em0 ? combination is ere pres%pposed @ ereby poorer soil ? does not a8e to be resorted to as a distinctly ne@ !ield o! prod%ction in order to prod%ce t e de!icit s%pply, b%t rat er @ ereby it merely constit%tes an inseparable part o! t e better land0 A%t t e case to be in8estigated is precisely t at in @ ic certain pieces o! land o! soil type ? m%st be independently managed, i0e0, !or t e conditions generally pre8ailing %nder t e capitalist mode o! prod%ction, t ey m%st be independently leased0 4hirdly: ? !armer may in8est additional capital in t e same lease old e8en i! t e additional prod%ct sec%red in t is manner yields im only t e price o! prod%ction at t e pre8ailing marketprices, i0e0, pro8ides im @it t e %s%al pro!it b%t does not enable im to pay any additional rent0 6e t %s pays gro%nd-rent @it one portion o! t e capital in8ested in t e land, b%t not @it t e ot er0 6o@ little t is ass%mption elps to sol8e t e problem, o@e8er, is seen !rom t e !ollo@ing: &! t e market-price Band t e !ertility o! t e soilC enables im to obtain an additional yield @it is additional capital, @ ic , as in t e case o! t e old capital, yields a s%rpl%s-pro!it in addition to t e price o! prod%ction, e is able to pocket t is s%rpl%s-pro!it so long as is lease does not expire0 A%t @ yQ Aeca%se t e limitation placed by landed property on t e in8estment o! is capital in land as been eliminated !or t e d%ration o! t e lease0 A%t t e simple !act t at additional soil o! poorer D%ality m%st be independently cleared and independently leased in order !or im to sec%re t is s%rpl%s-pro!it pro8es irre!%tably t at t e in8estment o! additional capital in t e old soil no longer s%!!ices to prod%ce t e reD%ired increased s%pply0 3ne ass%mption excl%des t e ot er0 &t is tr%e t at no@ one mig t say: 5 e rent on t e @orst soil ? is itsel! di!!erential rent I @ et er t e comparison is made @it respect to t e land c%lti8ated by t e o@ner imsel! Bt is occ%rs, o@e8er, as a p%rely c ance exceptionC or @it respect to t e additional in8estment o! capital in t e old lease olds @ ic do not yield any rent0 6o@e8er, t is @o%ld be 1C a di!!erential rent @ ic does not arise !rom t e di!!erence in !ertility o! t e 8ario%s categories o! soil, and @ ic t ere!ore @o%ld not pres%ppose t at soil ? does not yield any rent and its prod%ce sells at t e price o! prod%ction# and <C t e circ%mstance @ et er additional in8estments o! capital in t e same lease old yield rent or not is H%st as irrele8ant to t e D%estion as to @ et er t e ne@ soil o! class ? to be taken %nder c%lti8ation pays rent or not, as it is irrele8ant to, say, t e establis ment o! a ne@ and independent man%!act%ring b%siness @ et er anot er man%!act%rer in t e same line

+3<

; apter J'4

in8ests a portion o! is capital in interest-bearing paper beca%se e cannot %se all o! it in is b%siness, or @ et er e makes certain impro8ements @ ic do not yield im t e !%ll pro!it, b%t ne8ert eless do yield more t an interest0 5 is is o! secondary importance to im0 5 e additional ne@ establis ments, on t e ot er and, m%st yield t e a8erage pro!it and are organised in t e ope o! obtaining t is a8erage pro!it0 &t is tr%e, to be s%re, t at t e additional in8estments o! capital in t e old lease olds and t e additional c%lti8ation o! ne@ land o! soil type ? m%t%ally restrict one anot er0 5 e limit, %p to @ ic additional capital may be in8ested in t e same lease old %nder less !a8o%rable conditions o! prod%ction, is determined by t e competing ne@ in8estments in soil ?# on t e ot er and, t e rent @ ic t is category o! soil can yield is limited by t e competing additional in8estments o! capital in t e old lease olds0 A%t all t is d%bio%s s%bter!%ge does not sol8e t e problem, @ ic , simply stated, is t is: ?ss%me t e market-price o! grain B@ ic in t is inD%iry stands !or prod%cts o! t e soil in generalC to be s%!!icient to permit taking portions o! soil ? %nder c%lti8ation and t at t e capital in8ested in t ese ne@ !ields co%ld ret%rn t e price o! prod%ction, i0e0, replace capital pl%s a8erage pro!it0 5 %s ass%me t at conditions exist !or t e normal expansion o! capital on soil ?0 &s t is s%!!icientQ ;an t is capital t en really be in8estedQ 3r m%st t e market-price rise to t e point @ ere e8en t e @orst soil ? yields rentQ &n ot er @ords, does t e lando@nerGs monopoly inder t e in8estment o! capital @ ic @o%ld not be t e case !rom t e p%rely capitalist standpoint in t e absence o! t is monopolyQ &t !ollo@s !rom t e @ay in @ ic t e D%estion itsel! is posed t at i!, e0g0, additional capitals are in8ested in t e old lease olds, yielding t e a8erage pro!it at t e gi8en market-price, b%t no rent, t is circ%mstance in no @ay ans@ers t e D%estion @ et er capital may no@ really be in8ested in soil ?, @ ic also yields t e a8erage pro!its b%t no rent0 A%t t is is precisely t e D%estion be!ore %s0 5 e !act t at additional in8estments o! capital not yielding any rent do not satis!y t e demand is pro8ed by t e necessity o! taking ne@ land o! soil type ? %nder c%lti8ation0 P%st t@o alternati8es are possible i! t e additional c%lti8ation o! soil ? takes place only in so !ar as it yields rent, t at is, yields more t an t e price o! prod%ction0 Eit er t e market-price m%st be s%c t at e8en t e last additional in8estments o! capital in t e old lease olds yield s%rpl%s-pro!it, @ et er pocketed by t e !armer or by t e landlord0 5 is rise in price and t is s%rpl%s-pro!it !rom t e last additional in8estments o! capital @o%ld t en res%lt !rom t e !act t at soil ? cannot be c%lti8ated @it o%t yielding rent0 For i! t e price o! prod%ction @ere s%!!icient !or c%lti8ation to take place, merely yielding a8erage pro!it, t e price @o%ld not a8e risen so ig , and competition !rom ne@ plots @o%ld a8e been !elt as soon as t ey H%st yielded t is price o! prod%ction0 ;ompeting @it t e additional in8estments in old lease olds not yielding any rent @o%ld t en be in8estments in soil ?, @ ic like@ise do not yield any rent0 I 3r, t e last in8estments in t e old lease olds do not yield any rent, b%t ne8ert eless t e market-price as risen s%!!iciently to make it possible !or soil ? to be taken %nder c%lti8ation and to yield rent0 &n t is case, t e additional in8estment o! capital not yielding any rent @as only possible beca%se soil ? cannot be c%lti8ated %ntil t e market-price permits it to pay rent0 Wit o%t t is condition, its c%lti8ation @o%ld a8e already beg%n at a lo@er price le8el# and t ose later in8estments o! capital in t e old lease olds, @ ic reD%ire t e ig market-price in order to yield t e %s%al pro!it @it o%t rent, co%ld not a8e taken place0 ?t t e ig market-price, it is tr%e, t ey yield only t e a8erage pro!it0 ?t a lo@er market-price, @ ic @o%ld a8e become t e reg%lating price o! prod%ction !rom t e time soil ? came %nder c%lti8ation, t ey @o%ld t %s not a8e yielded t is a8erage pro!it, i0e0, t e in8estments @o%ld t %s not a8e taken place at all %nder s%c conditions0 &n t is @ay, t e rent !rom soil ? @o%ld indeed constit%te di!!erential rent compared @it t e in8estments in t e old lease olds not yielding any rent0 A%t t at s%c di!!erential rent is !ormed on t e land areas o! ? is b%t a conseD%ence o! t e !act t at t e latter are not at all a8ailable to c%lti8ation, %nless t ey yield rent# i0e0, t at t e necessity !or t is rent exists, @ ic , in itsel!, is not determined by any di!!erences in soil types, and @ ic constit%tes t e barrier to possible in8estment o! additional capitals in t e old lease olds0 &n eit er case, t e rent !rom soil ? @o%ld

+33

; apter J'4

not be simply a conseD%ence o! t e rise in grain prices, b%t, con8ersely, t e !act t at t e @orst soil m%st yield rent in order to make its c%lti8ation at all possible, @o%ld be t e ca%se !or t e rise in t e grain price to t e point @ ere t is condition may be !%l!illed0 7i!!erential rent as t e pec%liarity t at landed property ere merely intercepts t e s%rpl%s-pro!it @ ic @o%ld ot er@ise !lo@ into t e pocket o! t e !armer, and @ ic t e latter may act%ally pocket %nder certain circ%mstances d%ring t e period o! is lease0 'anded property is ere merely t e ca%se !or trans!erring a portion o! t e commodity-price @ ic arises @it o%t t e property a8ing anyt ing to do @it it Bindeed, in conseD%ence o! t e !act t at t e price o! prod%ction @ ic reg%lates t e market-price is determined by competitionC and @ ic resol8es itsel! into s%rpl%s-pro!it I t e ca%se !or trans!erring t is portion o! t e price !rom one person to anot er, !rom t e capitalist to t e landlord0 A%t landed property is not t e ca%se @ ic creates t is portion o! t e price, or t e rise in price %pon @ ic t is portion o! t e price is premised0 3n t e ot er and, i! t e @orst soil ? cannot be c%lti8ated I alt o%g its c%lti8ation @o%ld yield t e price o! prod%ction I %ntil it prod%ces somet ing in excess o! t e price o! prod%ction, rent, t en landed property is t e creati8e ca%se o! this rise in price0 ,anded property itself has created rent 0 5 is !act is not altered, i!, as in t e second case mentioned, t e rent no@ paid on soil ? constit%tes di!!erential rent compared @it t e last additional in8estment o! capital in old lease olds, @ ic pay only t e price o! prod%ction0 For t e circ%mstance t at soil ? cannot be c%lti8ated %ntil t e reg%lating market-price as risen ig eno%g to permit rent to be yielded !rom soil ? I only t is circ%mstance is t e basis ere !or t e !act t at t e market-price rises to a point @ ic enables t e last in8estments in t e old lease olds to yield, indeed, only t eir price o! prod%ction, b%t a price o! prod%ction @ ic , at t e same time, yields rent on soil ?0 5 e !act t at t e latter as to pay rent at all is, in t is case, t e ca%se !or t e di!!erential rent bet@een soil ? and t e last in8estments in t e old lease olds0 W en stating, in general, t at soil ? does not pay any rent I ass%ming t e price o! grain is reg%lated by t e price o! prod%ction I @e mean rent in t e categorical sense o! t e @ord0 &! t e !armer pays Klease moneyL @ ic constit%tes a ded%ction !rom t e normal @ages o! is labo%rers, or !rom is o@n normal a8erage pro!it, e does not pay rent, i0e0, an independent component o! t e price o! is commodities distinct !rom @ages and pro!it0 We a8e already indicated t at t is contin%ally takes place in practice0 &n so !ar as t e @ages o! t e agric%lt%ral labo%rers in a gi8en co%ntry are, in general, depressed belo@ t e normal a8erage le8el o! @ages, so t at a ded%ction !rom @ages, a part o! t e @ages, as a general r%le enters into rent, t is does not constit%te an exceptional case !or t e !armer c%lti8ating t e @orst soil0 &n t e same price o! prod%ction @ ic makes c%lti8ation o! t e @orst soil possible t ese lo@ @ages already !orm a constit%ent element, and t e sale o! t e prod%ct at t e price o! prod%ction does not t ere!ore enable t e !armer c%lti8ating t is soil to pay any rent0 5 e landlord can also lease is land to some labo%rer, @ o may be satis!ied to pay to t e !ormer in t e !orm o! rent, all or t e largest part o! t at @ ic e realises in t e selling price o8er and abo8e t e @ages0 &n all t ese cases, o@e8er, no real rent is paid in spite o! t e !act t at lease money is paid0 A%t @ ere8er conditions correspond to t ose %nder t e capitalist mode o! prod%ction, rent and lease money m%st coincide0 .et it is precisely t is normal condition @ ic m%st be analysed ere0 $ince e8en t e cases considered abo8e I @ ere, %nder t e capitalist mode o! prod%ction, in8estments o! capital in t e land may act%ally take place @it o%t yielding rent I do not contrib%te to t e sol%tion o! o%r problem, so m%c less does re!erence to colonial conditions0 5 e criterion establis ing a colony as a colony I @e are re!erring ere only to tr%e agric%lt%ral colonies I is not merely t e pre8ailing 8ast area o! !ertile land in a nat%ral state0 &t is rat er t e circ%mstance t at t is land as not been appropriated, as not been s%bHected to pri8ate o@ners ip0 6erein lies t e enormo%s di!!erence, as regards t e land, bet@een old co%ntries and colonies: t e legal or act%al non-existence o! landed property, as Wake!ield xl8 correctly remarks, and as Mirabea% p2re, t e p ysiocrat, and ot er elder economists, ad disco8ered long be!ore

+32

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im0 &t is D%ite immaterial ere @ et er t e colonists simply appropriate t e land, or @ et er t ey act%ally pay to t e state, in t e !orm o! a nominal land price, a !ee !or a 8alid legal title to t e land0 &t is also immaterial t at t e colonists already settled t ere may be t e legal o@ners o! t e land0 &n !act, landed property constit%tes no limitation ere to t e in8estment o! capital I and also o! labo%r @it o%t capital# t e appropriation o! some o! t e land by t e colonists already establis ed t ere does not pre8ent t e ne@comers !rom employing t eir capital or t eir labo%r %pon ne@ land0 5 ere!ore, @ en it is necessary to in8estigate t e in!l%ence o! landed property %pon t e prices o! prod%cts o! t e land and %pon rent I in t ose cases @ ere landed property restricts land as an in8estment sp ere o! capital I it is ig ly abs%rd to speak o! !ree bo%rgeois colonies @ ere, in agric%lt%re, neit er t e capitalist mode o! prod%ction exists, nor t e !orm o! landed property corresponding to it I @ ic , in !act, does not exist at all0 )icardo, e0g0, does so in is c apter on gro%nd-rent0 &n t e pre!ace e states t at e intends to in8estigate t e e!!ect o! t e appropriation o! land %pon t e 8al%e o! t e prod%cts o! t e soil, and directly t erea!ter e takes t e colonies as an ill%stration, @ ereby e ass%mes t at t e land exists in a relati8ely elementary !orm and t at its exploitation is not limited by t e monopoly o! landed property0 5 e mere legal o@ners ip o! land does not create any gro%nd-rent !or t e o@ner0 A%t it does, indeed, gi8e im t e po@er to @it dra@ is land !rom exploitation %ntil economic conditions permit im to %tilise it in s%c a manner as to yield im a s%rpl%s, be it %sed !or act%al agric%lt%ral or ot er prod%ction p%rposes, s%c as b%ildings, etc0 6e cannot increase or decrease t e absol%te magnit%de o! t is sp ere, b%t e can c ange t e D%antity o! land placed on t e market0 6ence, as Fo%rier already obser8ed, it is a c aracteristic !act t at in all ci8ilised co%ntries a comparati8ely appreciable portion o! land al@ays remains %nc%lti8ated0 5 %s, ass%ming t e demand reD%ires t at ne@ land be taken %nder c%lti8ation, @ ose soil, let %s say, is less !ertile t an t at it erto c%lti8ated I @ill t e landlord lease it !or not ing, H%st beca%se t e market-price o! t e prod%ct o! t e land as risen s%!!iciently to ret%rn to t e !armer t e price o! prod%ction, and t ereby t e %s%al pro!it, on is in8estment in t is landQ Ay no means0 5 e in8estment o! capital m%st yield im rent0 6e does not lease is land %ntil e can be paid lease money !or it0 5 ere!ore, t e market-price m%st rise to a point abo8e t e price o! prod%ction, i0e0, to , U r, so t at rent can be paid to t e landlord0 $ince according to o%r ass%mption, landed property does not yield anyt ing %ntil it is leased, is economically 8al%eless %ntil t en, a small rise in t e market-price abo8e t e price o! prod%ction s%!!ices to bring t e ne@ land o! poorest D%ality on t e market0 5 e !ollo@ing D%estion no@ arises: 7oes it !ollo@ !rom t e !act t at t e @orst soil yields gro%ndrent @ ic cannot be deri8ed !rom any di!!erence in !ertility t at t e price o! t e prod%ct o! t e land is necessarily a monopoly price in t e %s%al sense, or a price into @ ic t e rent enters like a tax, @it t e sole distinction t at t e landlord le8ies t e tax instead o! t e stateQ &t goes @it o%t saying t at t is tax as its speci!ic economic limits0 &t is limited by additional in8estments o! capital in t e old lease olds, by competition !rom prod%cts o! t e land coming !rom abroad I ass%ming t eir import is %nrestricted I by competition among t e landlords t emsel8es, and !inally by t e needs o! t e cons%mers and t eir ability to pay0 A%t t is is not t e D%estion ere0 5 e point is @ et er t e rent paid on t e @orst soil enters into t e price o! t e prod%cts o! t is soil I @ ic price reg%lates t e general market-price according to o%r ass%mption I in t e same @ay as a tax placed on a commodity enters into its price, i0e0, as an element t at is independent o! t e 8al%e o! t e commodity0 5 is, by no means, necessarily !ollo@s, and t e contention t at it does as been made only beca%se t e distinction bet@een t e 8al%e o! commodities and t eir price o! prod%ction as ereto!ore not been %nderstood0 We a8e seen t at t e price o! prod%ction o! a commodity is not at all identical @it its 8al%e, alt o%g t e prices o! prod%ction o! commodities, considered in t eir totality, are reg%lated only by t eir total 8al%e, and alt o%g t e mo8ement o! prod%ction prices o! 8ario%s kinds o! commodities, all ot er circ%mstances being eD%al, is determined

+3+

; apter J'4

excl%si8ely by t e mo8ement o! t eir 8al%es0 &t as been s o@n t at t e price o! prod%ction o! a commodity may lie abo8e or belo@ its 8al%e, and coincides @it its 8al%e only by @ay o! exception0 6ence, t e !act t at prod%cts o! t e land are sold abo8e t eir price o! prod%ction does not at all pro8e t at t ey are sold abo8e t eir 8al%e# H%st as t e !act t at prod%cts o! ind%stry, on t e a8erage, are sold at t eir price o! prod%ction does not pro8e t at t ey are sold at t eir 8al%e0 &t is possible !or agric%lt%ral prod%cts to be sold abo8e t eir price o! prod%ction and belo@ t eir 8al%e, @ ile, on t e ot er and, many ind%strial prod%cts yield t e price o! prod%ction only beca%se t ey are sold abo8e t eir 8al%e0 5 e relation o! t e price o! prod%ction o! a commodity to its 8al%e is determined solely by t e ratio o! t e 8ariable part o! t e capital @it @ ic t e commodity is prod%ced to its constant part, or by t e organic composition o! t e capital prod%cing it0 &! t e composition o! t e capital in a gi8en sp ere o! prod%ction is lo@er t an t at o! t e a8erage social capital, i0e0, i! its 8ariable portion, @ ic is %sed !or @ages, is larger in its relation to t e constant portion, %sed !or t e material conditions o! labo%r, t an is t e case in t e a8erage social capital, t en t e 8al%e o! its prod%ct m%st lie abo8e t e price o! prod%ction0 &n ot er @ords, beca%se s%c capital employs more li8ing labo%r, it prod%ces more s%rpl%s-8al%e, and t ere!ore more pro!it, ass%ming eD%al exploitation o! labo%r, t an an eD%ally large aliD%ot portion o! t e social a8erage capital0 5 e 8al%e o! its prod%ct, t ere!ore, is abo8e t e price o! prod%ction, since t is price o! prod%ction is eD%al to capital replacement pl%s a8erage pro!it, and t e a8erage pro!it is lo@er t an t e pro!it prod%ced in t is commodity0 5 e s%rpl%s-8al%e prod%ced by t e a8erage social capital is less t an t e s%rpl%s-8al%e prod%ced by a capital o! t is lo@er composition0 5 e opposite is t e case @ en t e capital in8ested in a certain sp ere o! prod%ction is o! a bigger composition t an t e social a8erage capital0 5 e 8al%e o! commodities prod%ced by it lies belo@ t eir price o! prod%ction, @ ic is generally t e case @it prod%cts o! t e most de8eloped ind%stries0 &! t e capital in a certain sp ere o! prod%ction is o! a lo@er composition t an t e a8erage social capital, t en t is is, in t e !irst place, merely anot er @ay o! saying t at t e prod%cti8ity o! t e social labo%r in t is partic%lar sp ere o! prod%ction is belo@ t e a8erage# !or t e le8el o! prod%cti8ity attained is mani!ested in t e relati8e preponderance o! constant o8er 8ariable capital, or in t e contin%al decrease I !or t e gi8en capital I o! t e portion %sed !or @ages0 3n t e ot er and, i! t e capital in a certain sp ere o! prod%ction is o! a ig er composition, t en t is re!lects a de8elopment o! prod%cti8eness t at is abo8e t e a8erage0 'ea8ing aside act%al @orks o! art, @ ose consideration by t eir 8ery nat%re is excl%ded !rom o%r disc%ssion, it is sel!-e8ident, moreo8er, t at di!!erent sp eres o! prod%ction reD%ire di!!erent proportions o! constant and 8ariable capital in accordance @it t eir speci!ic tec nical !eat%res, and t at li8ing labo%r m%st play a bigger role in some, and smaller in ot ers0 For instance, in t e extracti8e ind%stries, @ ic m%st be clearly disting%is ed !rom agric%lt%re, ra@ material as an element o! constant capital is @ olly absent, and e8en a%xiliary material rarely plays an important role0 &n t e mining ind%stry, o@e8er, t e ot er part o! constant capital, i0e0, !ixed capital, plays an important role0 -e8ert eless, ere too, progress may be meas%red by t e relati8e increase o! constant capital in relation to 8ariable capital0 &! t e composition o! capital in agric%lt%re proper is lo@er t an t at o! t e a8erage social capital, t en, prima facie, t is expresses t e !act t at in co%ntries @it de8eloped prod%ction agric%lt%re as not progressed to t e same extent as t e processing ind%stries0 $%c a !act co%ld be explained I aside !rom all ot er circ%mstances, incl%ding in part decisi8e economic ones I by t e earlier and more rapid de8elopment o! t e mec anical sciences, and in partic%lar t eir application compared @it t e later and in part D%ite recent de8elopment o! c emistry, geology and p ysiology, and again, in partic%lar, t eir application to agric%lt%re0 &ncidentally, it is an ind%bitable and long-kno@n !act xl8i t at t e progress o! agric%lt%re itsel! is constantly expressed by a relati8e gro@t o! constant capital as compared @it 8ariable capital0 W et er t e composition o! agric%lt%ral capital is lo@er t an t at o! t e a8erage social capital in a speci!ic

+36

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co%ntry @ ere capitalist prod%ction pre8ails, !or instance England, is a D%estion @ ic can only be decided statistically, and !or o%r p%rposes it is s%per!l%o%s to go into it in detail0 &n any case, it is t eoretically establis ed t at t e 8al%e o! agric%lt%ral prod%cts can be ig er t an t eir price o! prod%ction only on t is ass%mption0 &n ot er @ords, a capital o! a certain siEe in agric%lt%re prod%ces more s%rpl%s-8al%e, or @ at amo%nts to t e same, sets in motion and commands more s%rpl%s-labo%r Band @it it employs more li8ing labo%r generallyC t an a capital o! t e same siEe o! a8erage social composition0 5 is ass%mption, t en, s%!!ices !or t at !orm o! rent @ ic @e are analysing ere, and @ ic can obtain only so long as t is ass%mption olds good0 W ere8er t is ass%mption no longer olds, t e corresponding !orm o! rent like@ise no longer olds0 6o@e8er, t e mere existence o! an excess in t e 8al%e o! agric%lt%ral prod%cts o8er t eir price o! prod%ction @o%ld not in itsel! s%!!ice to explain t e existence o! a gro%nd-rent @ ic is independent o! di!!erences in !ertility o! 8ario%s soil types and in s%ccessi8e in8estments o! capital on t e same land I a rent, in s ort, @ ic is to be clearly disting%is ed in concept !rom di!!erential rent and @ ic @e may t ere!ore call absolute rent0 M%ite a n%mber o! man%!act%red prod%cts are c aracterised by t e !act t at t eir 8al%e is ig er t an t eir price o! prod%ction, @it o%t t ereby yielding any excess abo8e t e a8erage pro!it, or a s%rpl%s-pro!it, @ ic co%ld be con8erted into rent0 ;on8ersely, t e existence and concept o! price o! prod%ction and general rate o! pro!it, @ ic it implies, rest %pon t e !act t at indi8id%al commodities are not sold at t eir 8al%e0 ,rices o! prod%ction arise !rom an eD%alisation o! t e 8al%es o! commodities0 ?!ter replacing t e respecti8e capital-8al%es %sed %p in t e 8ario%s sp eres o! prod%ction, t is distrib%tes t e entire s%rpl%s-8al%e, not in proportion to t e amo%nt prod%ced in t e indi8id%al sp eres o! prod%ction and t %s incorporated in t eir commodities, b%t in proportion to t e magnit%de o! ad8anced capitals0 3nly in t is manner do a8erage pro!it and price o! prod%ction arise, @ ose c aracteristic element t e !ormer is0 &t is t e perpet%al tendency o! capitals to bring abo%t t ro%g competition t is eD%alisation in t e distrib%tion o! s%rpl%s-8al%e prod%ced by t e total capital, and to o8ercome all obstacles to t is eD%alisation0 6ence it is t eir tendency to tolerate only s%c s%rpl%s-pro!its as arise, %nder all circ%mstances, not !rom t e di!!erence bet@een t e 8al%es and prices o! prod%ction o! commodities b%t rat er !rom t e di!!erence bet@een t e general price o! prod%ction go8erning t e market and t e indi8id%al prices o! prod%ction di!!ering !rom it# s%rpl%s-pro!its @ ic obtain @it in a certain sp ere o! prod%ction, t ere!ore, and not bet@een t@o di!!erent sp eres, and t %s do not a!!ect t e general prices o! prod%ction o! t e 8ario%s sp eres, i0e0, t e general rate o! pro!it, b%t rat er pres%ppose t e trans!ormation o! 8al%es into prices o! prod%ction and a general rate o! pro!it0 5 is s%pposition rests, o@e8er, as pre8io%sly disc%ssed, %pon t e constantly c anging proportional distrib%tion o! t e total social capital among t e 8ario%s sp eres o! prod%ction, %pon t e perpet%al in!lo@ and o%t!lo@ o! capitals, %pon t eir trans!erability !rom one sp ere to anot er, in s ort, %pon t eir !ree mo8ement bet@een t e 8ario%s sp eres o! prod%ction, @ ic represent so many a8ailable !ields o! in8estment !or t e independent components o! t e total social capital0 5 e premise in t is case is t at no barrier, or H%st an accidental and temporary barrier, inter!eres @it t e competition o! capitals I !or instance, in a sp ere o! prod%ction, in @ ic t e commodity-8al%es are ig er t an t e prices o! prod%ction, or @ ere t e s%rpl%s-8al%e prod%ced exceeds t e a8erage pro!it I to red%ce t e 8al%e to t e price o! prod%ction and t ereby proportionally distrib%te t e excess s%rpl%s-8al%e o! t is sp ere o! prod%ction among all sp eres exploited by capital0 A%t i! t e re8erse occ%rs, i! capital meets an alien !orce @ ic it can b%t partially, or not at all, o8ercome, and @ ic limits its in8estment in certain sp eres, admitting it only %nder conditions @ ic @ olly or partly excl%de t at general eD%alisation o! s%rpl%s-8al%e to an a8erage pro!it, t en it is e8ident t at t e excess o! t e 8al%e o! commodities in s%c sp eres o! prod%ction o8er t eir price o! prod%ction @o%ld gi8e rise to a s%rpl%s-pro!it, @ ic co%ld be con8erted into rent and s%c made independent @it respect to pro!it0 $%c an alien !orce and barrier are presented by landed

+3>

; apter J'4

property, @ en con!ronting capital in its endea8o%r to in8est in land# s%c a !orce is t e landlord 8is-O-8is t e capitalist0 'anded property is ere t e barrier @ ic does not permit any ne@ in8estment o! capital in it erto %nc%lti8ated or %nrented land @it o%t le8ying a tax, or in ot er @ords, @it o%t demanding a rent, alt o%g t e land to be ne@ly bro%g t %nder c%lti8ation may belong to a category @ ic does not yield any di!!erential rent and @ ic , @ere it not !or landed property, co%ld a8e been c%lti8ated e8en at a small increase in market-price, so t at t e reg%lating marketprice @o%ld a8e netted to t e c%lti8ator o! t is @orst soil solely is price o! prod%ction0 A%t o@ing to t e barrier raised by landed property, t e market-price m%st rise to a le8el at @ ic t e land can yield a s%rpl%s o8er t e price o! prod%ction, i0e0, yield a rent0 6o@e8er, since t e 8al%e o! t e commodities prod%ced by agric%lt%ral capital is ig er t an t eir price o! prod%ction, according to o%r ass%mption, t is rent Bsa8e !or one case @ ic @e s all disc%ss !ort @it C !orms t e excess o! 8al%e o8er t e price o! prod%ction, or a part o! it0 W et er t e rent eD%als t e entire di!!erence bet@een t e 8al%e and price o! prod%ction, or only a greater or lesser part o! it, @ill depend @ olly on t e relation bet@een s%pply and demand and on t e area o! land ne@ly taken %nder c%lti8ation0 $o long as t e rent does not eD%al t e excess o! t e 8al%e o! agric%lt%ral prod%cts o8er t eir price o! prod%ction, a portion o! t is excess @ill al@ays enter into t e general eD%alisation and proportional distrib%tion o! all s%rpl%s-8al%e among t e 8ario%s indi8id%al capitals0 ?s soon as t e rent does eD%al t e excess o! t e 8al%e o8er t e price o! prod%ction, t is entire portion o! s%rpl%s-8al%e o8er and abo8e t e a8erage pro!it @ill be @it dra@n !rom t is eD%alisation0 A%t @ et er t is absol%te rent eD%als t e @ ole excess o! 8al%e o8er t e price o! prod%ction, or H%st a part o! it, t e agric%lt%ral prod%cts @ill al@ays be sold at a monopoly price, not beca%se t eir price exceeds t eir 8al%e, b%t beca%se it eD%als t eir 8al%e, or beca%se t eir price is lo@er t an t eir 8al%e b%t ig er t an t eir price o! prod%ction0 5 eir monopoly @o%ld consist in t e !act t at, %nlike ot er prod%cts o! ind%stry @ ose 8al%e is ig er t an t e general price o! prod%ction, t ey are not le8elled o%t to t e price o! prod%ction0 $ince one portion o! t e 8al%e, as @ell as o! price o! prod%ction, is an act%ally gi8en constant, namely t e cost-price, representing t e capital R k %sed %p in prod%ction, t eir di!!erence consists in t e ot er, t e 8ariable portion, t e s%rpl%s-8al%e, @ ic eD%als p, t e pro!it, in t e price o! prod%ction, i0e0, eD%als t e total s%rpl%s-8al%e calc%lated on t e social capital and on e8ery indi8id%al capital as an aliD%ot part o! t e social capital# b%t @ ic in t e 8al%e o! commodities eD%als t e act%al s%rpl%s8al%e created by t is partic%lar capital, and !orms an integral part o! t e commodity-8al%es prod%ced by t is capital0 &! t e 8al%e o! commodities is ig er t an t eir price o! prod%ction, t en t e price o! prod%ction R k U p, and t e 8al%e R k U p U d, so t at p U d R t e s%rpl%s-8al%e contained t erein0 5 e di!!erence bet@een t e 8al%e and t e price o! prod%ction, t ere!ore, R d, t e excess o! s%rpl%s-8al%e created by t is capital o8er t e s%rpl%s-8al%e allocated to it t ro%g t e general rate o! pro!it0 &t !ollo@s !rom t is t at t e price o! agric%lt%ral prod%cts may lie ig er t an t eir price o! prod%ction, @it o%t reac ing t eir 8al%e0 &t !ollo@s, !%rt ermore, t at a permanent increase in t e price o! agric%lt%ral prod%cts may take place %p to a certain point, be!ore t eir price reac es t eir 8al%e0 &t !ollo@s like@ise t at t e excess in t e 8al%e o! agric%lt%ral prod%cts o8er t eir price o! prod%ction can become a determining element o! t eir general market-price solely as a conseD%ence o! t e monopoly in landed property0 &t !ollo@s, !inally, t at in t is case t e increase in t e price o! t e prod%ct is not t e ca%se o! rent, b%t rat er t at rent is t e ca%se o! t e increase in t e price o! t e prod%ct0 &! t e price o! t e prod%ct !rom a %nit area o! t e @orst soil R , U r, t en all di!!erential rents @ill rise by corresponding m%ltiples o! r, since t e ass%mption is t at , U r becomes t e reg%lating market-price0 &! t e a8erage composition o! t e non-agric%lt%ral social capital @ere R 8+ c U 1+8, and t e rate o! s%rpl%s-8al%e R 1==T, t en t e price o! prod%ction @o%ld R 11+0 &! t e composition o! t e agric%lt%ral capital @ere R >+c U <+8 and t e rate o! s%rpl%s-8al%e @ere t e same, t en t e 8al%e o! t e agric%lt%ral prod%ct and t e reg%lating market-price @o%ld R 1<+0 &! t e agric%lt%ral and t e

+38

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non-agric%lt%ral prod%ct s o%ld be eD%alised to t e same a8erage price B@e ass%me !or t e sake o! bre8ity t e total capital in bot lines o! prod%ction to be eD%alC, t en t e total s%rpl%s-8al%e @o%ld R 2=, or <=T, on t e <== o! capital0 5 e prod%ct o! t e one as @ell as t e ot er @o%ld be sold at 1<=0 &n an eD%alisation into prices o! prod%ction, t e a8erage market-prices o! t e nonagric%lt%ral prod%ct @o%ld t %s lie abo8e, and t ose o! t e agric%lt%ral prod%ct belo@, t eir 8al%e0 &! t e agric%lt%ral prod%cts @ere sold at t eir !%ll 8al%e, t ey @o%ld be ig er by +, and t e ind%strial prod%cts lo@er by +, t an t ey are in t e eD%alisation0 &! market conditions do not permit t e sale o! t e agric%lt%ral prod%cts at t eir !%ll 8al%e, to t e !%ll s%rpl%s abo8e t e price o! prod%ction, t en t e e!!ect lies bet@een t e t@o extremes# t e ind%strial prod%cts are sold some@ at abo8e t eir 8al%e, and t e agric%lt%ral prod%cts some@ at abo8e t eir price o! prod%ction0 ?lt o%g landed property may dri8e t e price o! agric%lt%ral prod%ce abo8e its price o! prod%ction, it does not depend on t is, b%t rat er on t e general state o! t e market, to @ at degree market-price exceeds t e price o! prod%ction and approac es t e 8al%e, and to @ at extent t ere!ore t e s%rpl%s-8al%e created in agric%lt%re o8er and abo8e t e gi8en a8erage pro!it s all eit er be trans!ormed into rent or enter into t e general eD%alisation o! t e s%rpl%s-8al%e to a8erage pro!it0 ?t any rate t is absol%te rent arising o%t o! t e excess o! 8al%e o8er t e price o! prod%ction is b%t a portion o! t e agric%lt%ral s%rpl%s-8al%e, a con8ersion o! t is s%rpl%s-8al%e into rent, its being !ilc ed by t e landlord# H%st as t e di!!erential rent arises o%t o! t e con8ersion o! s%rpl%s-pro!it into rent, its being !ilc ed by t e landlord %nder a generally reg%lating price o! prod%ction0 5 ese t@o !orms o! rent are t e only normal ones0 ?part !rom t em t e rent can be based only %pon an act%al monopoly price, @ ic is determined neit er by price o! prod%ction nor by 8al%e o! commodities, b%t by t e b%yersG needs and ability to pay0 &ts analysis belongs %nder t e t eory o! competition, @ ere t e act%al mo8ement o! market-prices is considered0 &! all t e land s%itable !or agric%lt%re in a certain co%ntry @ere leased I ass%ming t e capitalist mode o! prod%ction and normal conditions to be general I t ere @o%ld not be any land not paying rent# b%t t ere mig t be some capitals, certain parts o! capitals in8ested in land, t at mig t not yield any rent0 For as soon as t e land as been rented, landed property ceases to act as an absol%te barrier against t e in8estment o! necessary capital0 $till, it contin%es to act as a relati8e barrier e8en a!ter t at, in so !ar as t e re8ersion to t e landlord o! t e capital incorporated in t e land circ%mscribes t e acti8ity o! t e tenant @it in 8ery de!inite limits0 3nly in t is case all rent @o%ld be trans!ormed into di!!erential rent, alt o%g t is @o%ld not be a di!!erential rent determined by any di!!erence in soil !ertility, b%t rat er by t e di!!erence bet@een t e s%rpl%spro!its arising !rom t e last in8estments o! capital in a partic%lar soil type and t e rent paid !or t e lease o! t e @orst D%ality land0 'anded property acts as an absol%te barrier only to t e extent t at t e landlord exacts a trib%te !or making land at all accessible to t e in8estment o! capital0 W en s%c access as been gained, e can no longer set any absol%te limits to t e siEe o! any in8estment o! capital in a gi8en plot o! land0 &n general, o%sing constr%ction meets a barrier in t e o@ners ip by a t ird party o! t e land %pon @ ic t e o%ses are to be b%ilt0 A%t, once t is land as been leased !or t e p%rpose o! o%sing constr%ction, it depends %pon t e tenant @ et er e @ill b%ild a large or a small o%se0 &! t e a8erage composition o! agric%lt%ral capital @ere eD%al to, or ig er t an, t at o! t e a8erage social capital, t en absol%te rent I again in t e sense H%st described I @o%ld disappear# i0e0, rent @ ic di!!ers eD%ally !rom di!!erential rent as @ell as t at based %pon an act%al monopoly price0 5 e 8al%e o! agric%lt%ral prod%ce, t en, @o%ld not lie abo8e its price o! prod%ction, and t e agric%lt%ral capital @o%ld not set any more labo%r in motion, and t ere!ore @o%ld also not realise any more s%rpl%s-labo%r t an t e non-agric%lt%ral capital0 5 e same @o%ld take place, @ere t e composition o! agric%lt%ral capital to become eD%al to t at o! t e a8erage social capital @it t e progress o! ci8ilisation0

+3*

; apter J'4

&t seems to be a contradiction, at !irst glance, to ass%me t at, on t e one and, t e composition o! agric%lt%ral capital rises, in ot er @ords, t at its constant component increases @it respect to its 8ariable, and, on t e ot er and, t at t e price o! t e agric%lt%ral prod%ct s o%ld rise ig eno%g to permit rent to be yielded by ne@ and @orse soil t an t at pre8io%sly c%lti8ated, a rent @ ic in t is case co%ld originate only !rom an excess o! market-price o8er t e 8al%e and price o! prod%ction, in s ort, a rent deri8ed solely !rom a monopoly price o! t e prod%ct0 &t is necessary to make a distinction ere0 &n t e !irst place, it @as noted in considering t e manner in @ ic rate o! pro!it is !ormed, t at capitals, @ ic a8e t e same composition tec nologically speaking, i0e0, @ ic set eD%i8alent amo%nts o! labo%r in motion relati8e to mac inery and ra@ materials, may nonet eless a8e di!!erent compositions o@ing to di!!erent 8al%es o! t e constant portions o! t ese capitals0 5 e ra@ materials or mac inery may be dearer in one case t an in anot er0 For t e same D%antity o! labo%r to be set in motion Band t is @o%ld be reD%ired, according to o%r ass%mption, to @ork %p t e same mass o! ra@ materialsC, a larger capital @o%ld a8e to be ad8anced in t e one case t an in t e ot er, since t e same amo%nt o! labo%r cannot be set in motion @it , say, a capital o! 1== i! t e cost o! ra@ material, @ ic m%st be co8ered o%t o! t e 1==, is 2= in one case and <= in anot er0 A%t it @o%ld become immediately e8ident t at t ese t@o capitals are o! t e same tec nical composition, as soon as t e price o! t e dearer ra@ material !ell to t e le8el o! t e c eaper one0 5 e 8al%e ratio bet@een constant and 8ariable capital @o%ld a8e become t e same in t at case, alt o%g no c ange ad taken place in t e tec nical proportions bet@een t e li8ing labo%r and t e mass and nat%re o! t e conditions o! labo%r employed by t is capital0 3n t e ot er band, a capital o! lo@er organic composition co%ld ass%me t e appearance o! being in t e same class @it one o! a ig er organic composition, merely !rom a rise in t e 8al%e o! its constant portions, solely !rom t e 8ie@point o! its 8al%e-composition0 $%ppose one capital R 6= c U 2=8, beca%se it employs m%c mac inery and ra@ material compared to li8ing labo%r-po@er, and anot er capital R 2=c U 6=8, beca%se it employs m%c li8ing labo%r B6=TC, little mac inery Be0g0, 1=TC and compared to labo%r-po@er less and c eaper ra@ material Be0g0, 3=TC0 5 en a simple rise in t e 8al%e o! ra@ and a%xiliary materials !rom 3= to 8= co%ld eD%alise t e composition, so t at no@ t e second capital @o%ld consist o! 8= ra@ material and 6= labo%r-po@er !or 1= in mac ines, or *=c U 6=8, @ ic , in percentages, @o%ld also R 6= c U 2=8, @it no c ange a8ing taken place in t e tec nical composition0 &n ot er @ords, capitals o! eD%al organic composition may be o! di!!erent 8al%e-composition, and capitals @it identical percentages o! 8al%ecomposition may s o@ 8arying degrees o! organic composition and t %s express di!!erent stages in t e de8elopment o! t e social prod%cti8ity o! labo%r0 5 e mere circ%mstance, t en, t at agric%lt%ral capital mig t be on t e general le8el o! 8al%e-composition, @o%ld not pro8e t at t e social prod%cti8ity o! labo%r is eD%ally ig -de8eloped in it0 &t @o%ld merely s o@ t at its o@n prod%ct, @ ic again !orms a part o! its conditions o! prod%ction, is dearer, or t at a%xiliary materials, s%c as !ertiliser, @ ic %sed to be close by, m%st no@ be bro%g t !rom a!ar, etc0 A%t aside !rom t is, t e pec%liar nat%re o! agric%lt%re m%st be taken into acco%nt0 $%ppose labo%r-sa8ing mac inery, c emical aids, etc0, are more extensi8ely %sed in agric%lt%re, and t at t ere!ore constant capital increases tec nically, not merely in 8al%e, b%t also in mass, as compared @it t e mass o! employed labo%r-po@er, t en in agric%lt%re Bas in miningC it is not only a matter o! t e social, b%t also o! t e nat%ral, prod%cti8ity o! labo%r @ ic depends on t e nat%ral conditions o! labo%r0 &t is possible !or t e increase o! social prod%cti8ity in agric%lt%re to barely compensate, or not e8en compensate, !or t e decrease in nat%ral po@er I t is compensation @ill ne8ert eless be e!!ecti8e only !or a s ort time I so t at despite tec nical de8elopment t ere, no c eapening o! t e prod%ct occ%rs, b%t only a still greater increase in price is a8erted0 &t is also possible t at t e absol%te mass o! prod%cts decreases @it rising grain prices, @ ile t e relati8e s%rpl%s-prod%ct increases# namely, in t e case o! a relati8e increase in constant capital @ ic consists c ie!ly o! mac inery or animals reD%iring only replacement o! @ear and

+2=

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tear, and @it a corresponding decrease in 8ariable capital @ ic is expended in @ages reD%iring constant replacement in !%ll o%t o! t e prod%ct0 Moreo8er, it is also possible t at @it progress in agric%lt%re only a moderate rise in market-price abo8e t e a8erage is necessary, in order to c%lti8ate and dra@ a rent !rom poorer soil, @ ic @o%ld a8e reD%ired a greater rise in market-price i! tec nical aids @ere less de8eloped0 5 e !act t at in larger-scale cattle-raising, !or example, t e mass o! employed labo%r-po@er is 8ery small compared @it constant capital as represented in cattle itsel!, co%ld be taken to re!%te t e assertion t at more labo%r-po@er, on a percentage basis, is set in motion by agric%lt%ral capital t an by t e a8erage social capital o%tside o! agric%lt%re0 A%t it s o%ld be noted ere t at @e a8e taken as determining !or rent analysis t at portion o! agric%lt%ral capital @ ic prod%ces t e principal plant !oodst%!!s pro8iding t e c ie! means o! s%bsistence among ci8ilised nations0 ?dam $mit I and t is is one o! is merits I as already demonstrated t at a D%ite di!!erent determination o! prices is to be obser8ed in cattle-raising, and, !or t at matter, generally !or capitals in8ested in land @ ic are not engaged in raising t e principal means o! s%bsistence, e0g0, grain0 -amely in t at case t e price is determined in s%c a @ay t at t e price o! t e prod%ct o! t e land I @ ic is %sed !or cattle-raising, say as an arti!icial past%re, b%t @ ic co%ld H%st as easily a8e been trans!ormed into corn!ields o! a certain D%ality I m%st rise ig eno%g to prod%ce t e same rent as on arable land o! t e same D%ality0 &n ot er @ords, t e rent o! corn!ields becomes a determining element in t e price o! cattle, and !or t is reason )amsay as H%stly remarked t at t e price o! cattle is in t is manner arti!icially raised by t e rent, by t e economic expression o! landed property, in s ort, t ro%g landed property0 /:0 )amsay, +n 0ssay on the Distribution of "ealth, Edinb%rg , 1836, pp0 <>8->*0 I 0d.1 KAy t e extension o! c%lti8ation t e %nimpro8ed @ilds become ins%!!icient to s%pply t e demand !or b%tc erGs meat0 ? great part o! t e c%lti8ated lands m%st be employed in rearing and !attening cattle, o! @ ic t e price, t ere!ore, m%st be s%!!icient to pay, not only t e labo%r necessary !or tending t em, b%t t e rent @ ic t e landlord and t e pro!it @ ic t e !armer co%ld a8e dra@n !rom s%c land, employed in tillage0 5 e cattle bred %pon t e most %nc%lti8ated moors, @ en bro%g t to t e same market, are, in proportion to t eir @eig t or goodness, sold at t e same price as t ose @ ic are reared %pon t e most impro8ed land0 5 e proprietors o! t ose moors pro!it by it, and raise t e rent o! t eir land in proportion to t e price o! t eir cattle0L B?dam $mit , Aook &, ; 0 J&, ,art 10C &n t is case, like@ise, as distinct !rom grain-rent, t e di!!erential rent is in !a8o%r o! t e @orst soil0 ?bsol%te rent explains some p enomena, @ ic , at !irst sig t, seem to make merely a monopoly price responsible !or t e rent0 5o go on @it ?dam $mit Gs example, take t e o@ner o! some -or@egian !orest, !or instance, @ ic exists independent o! %man acti8ity, i0e0, it is not a prod%ct o! sil8ic%lt%re0 &! t e proprietor o! t is !orest recei8es a rent !rom a capitalist @ o as t e

+21

; apter J'4

timber !elled, per aps in conseD%ence o! a demand !rom England, or i! t is o@ner as t e timber !elled imsel! acting in t e capacity o! capitalist, t en a greater or smaller amo%nt o! rent @ill accr%e to im in timber, apart !rom t e pro!it on in8ested capital0 5 is appears to be a p%re monopoly c arge deri8ed !rom a p%re prod%ct o! -at%re0 A%t, as a matter o! !act, t e capital ere consists almost excl%si8ely o! a 8ariable component expended in labo%r, and t %s sets more s%rpl%s-labo%r in motion t an anot er capital o! t e same siEe0 5 e 8al%e o! t e timber, t en, contains a greater s%rpl%s o! %npaid labo%r, or o! s%rpl%s-8al%e, t an t at o! a prod%ct o! a capital o! a ig er organic composition0 For t is reason t e a8erage pro!it can be deri8ed !rom t is timber, and a considerable s%rpl%s in t e !orm o! rent can !all to t e s are o! t e o@ner o! t e !orest0 ;on8ersely, it may be ass%med t at, o@ing to t e ease @it @ ic timber-!elling may be extended, in ot er @ords, its prod%ction rapidly increased, t e demand m%st rise 8ery considerably !or t e price o! timber to eD%al its 8al%e, and t ereby !or t e entire s%rpl%s o! %npaid labo%r Bo8er and abo8e t at portion @ ic !alls to t e capitalist as a8erage pro!itC to accr%e to t e o@ner in t e !orm o! rent0 We a8e ass%med t at t e land ne@ly bro%g t %nder c%lti8ation is o! still in!erior D%ality to t e @orst pre8io%sly c%lti8ated0 &! it is better, it yields a di!!erential rent0 A%t ere @e are analysing precisely t e case @ erein rent does not appear as a di!!erential rent0 5 ere are only t@o cases possible0 5 e ne@ly c%lti8ated soil is eit er in!erior to, or H%st as good as t e pre8io%sly c%lti8ated soil0 &! in!erior, t en t e matter as already been analysed0 &t remains only to analyse t e case in @ ic it is H%st as good0 ?s already de8eloped in o%r analysis o! di!!erential rent, t e progress o! c%lti8ation may H%st as @ell bring eD%ally good, or e8en better soils %nder t e plo%g as @orse soil0 'irst0 Aeca%se in di!!erential rent Bor any rent in general, since e8en in t e case o! non-di!!erential rent t e D%estion al@ays arises @ et er, on t e one and, t e soil !ertility in general, and, on t e ot er and, its location, admit o! its c%lti8ation at t e reg%lating market-price so as to yield a pro!it and rentC t@o conditions @ork in opposing directions, no@ cancelling one anot er, no@ alternately exerting t e determining in!l%ence0 5 e rise in market-price I pro8ided t e cost-price o! c%lti8ation as not !allen, i0e0, no tec nical progress as gi8en a ne@ impet%s to !%rt er c%lti8ation I may bring %nder c%lti8ation more !ertile soil !ormerly excl%ded !rom competition by 8irt%e o! its location0 3r it may so en ance t e ad8antage o! t e location o! t e in!erior soil t at its lesser !ertility is co%nterbalanced by it0 3r, @it o%t any rise in market-price t e location may bring better soils into competition t ro%g impro8ement in means o! comm%nication, as can be obser8ed on a large scale in t e prairie $tates o! -ort ?merica0 &n co%ntries o! older ci8ilisation t e same also takes place constantly i! not to t e same extent as in t e colonies, @ ere, as Wake!ield correctly obser8es, location is decisi8e0 //E0 Wake!ield1 0ngland and +merica. + Comparison of the Social and &olitical State of both $ations , 4ol0 &, 'ondon, 1833, pp0 <12-1+0 I 0d01 5o s%m %p, t en, t e contradictory in!l%ences o! location and !ertility, and t e 8ariableness o! t e location !actor, @ ic is contin%ally co%nterbalanced and perpet%ally passes t ro%g progressi8e c anges tending to@ards eD%alisation, alternately carry eD%ally good, better or @orse land areas into ne@ competition @it t e older ones %nder c%lti8ation0 Secondly0 Wit t e de8elopment o! nat%ral science and agronomy t e soil !ertility is also c anged by c anging t e means t ro%g @ ic t e soil constit%ents may be rendered immediately ser8iceable0 &n t is @ay, lig t soil types in France and in t e eastern co%nties o! England, @ ic @ere regarded as in!erior at one time, a8e recently risen to !irst place0 B$ee ,assy0 /60 ,assy, 9ente du sol0 &n: 7ictionnaire de lGFconomie politiD%e, 5ome &&0 ,aris0 18+2, p0 +1+0 I 0d01C 3n t e ot er and, soil considered in!erior not !or bad c emical composition b%t !or certain mec anical and p ysical obstacles t at indered its c%lti8ation, is con8erted into good land as soon as means to o8ercome t ese obstacles a8e been disco8ered0 4hirdly0 &n all ancient ci8ilisations, old istorical and traditional relations, !or instance, in t e !orm o! state-o@ned lands, comm%nal lands, etc0, a8e p%rely arbitrarily @it eld !rom

+2<

; apter J'4

c%lti8ation large tracts o! land, @ ic only ret%rn to it little by little0 5 e s%ccession in @ ic t ey are bro%g t %nder c%lti8ation depends neit er %pon t eir good D%ality nor siting, b%t %pon @ olly external circ%mstances0 &n tracing t e istory o! Englis comm%nal lands t%rned s%ccessi8ely into pri8ate property t ro%g t e Enclos%re Aills and bro%g t %nder t e plo%g , not ing @o%ld be more ridic%lo%s t an t e !antastic idea t at a modern agric%lt%ral c emist, s%c as 'iebig, ad indicated t e selection o! land in t is s%ccession, designating certain !ields !or c%lti8ation o@ing to c emical properties and excl%ding ot ers0 W at @as more decisi8e in t is case @as t e opport%nity @ ic makes t e t ie!# t e more or less pla%sible legalistic s%bter!%ges o! t e big landlords to H%sti!y t eir appropriation0 'ourthly0 ?part !rom t e !act t at t e stage o! de8elopment reac ed at any time by t e pop%lation and capital increase sets certain limits, e8en t o%g elastic, to t e extension o! c%lti8ation, and apart !rom c ance e!!ects @ ic temporarily in!l%ence t e market-price I s%c as a series o! good or bad seasons I t e extension o! agric%lt%re o8er a larger area depends on t e o8erall state o! t e capital market and b%siness conditions in a co%ntry0 &n periods o! stringency it @ill not s%!!ice !or %nc%lti8ated soil to yield t e tenant an a8erage pro!it I no matter @ et er e pays any rent or not I in order t at additional capital be in8ested in agric%lt%re0 &n ot er periods @ en t ere is a plet ora o! capital, it @ill po%r into agric%lt%re e8en @it o%t a rise in market-price i! only ot er normal conditions are present0 Aetter soil t an it erto c%lti8ated @o%ld in !act be excl%ded !rom competition solely on t e basis o! %n!a8o%rable location, or i! it erto ins%rmo%ntable obstacles to its employment existed, or t ro%g c ance0 For t is reason @e s o%ld only concern o%rsel8es @it soils @ ic are H%st as good as t ose last c%lti8ated0 6o@e8er, t ere still exists t e di!!erence in cost o! clearing !or c%lti8ation bet@een t e ne@ soil and t e one last c%lti8ated0 ?nd it depends %pon t e le8el o! market-prices and credit conditions @ et er t is @ill be %ndertaken or not0 ?s soon as t is soil t en act%ally enters into competition, t e market-price @ill !all once more to its !ormer le8el, ass%ming ot er conditions to be eD%al, and t e ne@ soil @ill t en yield t e same rent as t e corresponding old soil0 5 e ass%mption t at it does not yield any rent is pro8ed by its ad8ocates by ass%ming precisely @ at t ey are called %pon to pro8e, namely t at t e last soil did not yield any rent0 3ne mig t pro8e in t e same manner t at o%ses @ ic @ere t e last b%ilt do not yield any rent !or t e b%ilding o%tside o! o%se-rent proper, e8en t o%g t ey are leased0 &n !act, o@e8er, t ey do yield rent e8en be!ore yielding any o%se-rent, @ en t ey !reD%ently remain 8acant !or a long period0 P%st as s%ccessi8e in8estments o! capital in a certain piece o! land may bring a proportional s%rpl%s and t ereby t e same rent as t e !irst in8estment, so !ields o! t e same D%ality as t ose last c%lti8ated may bring t e same proceeds !or t e same cost0 3t er@ise it @o%ld be altoget er inexplicable o@ !ields o! t e same D%ality are e8er bro%g t s%ccessi8ely %nder c%lti8ation# it seems t at eit er it @o%ld be necessary to take all toget er, or rat er not a single one o! t em, in order not to bring all t e remaining ones into competition0 5 e landlord is al@ays ready to dra@ a rent, i0e0, to recei8e somet ing !or not ing0 A%t capital reD%ires certain conditions to !%l!il is @is 0 ;ompetition bet@een pieces o! land does not, t ere!ore, depend %pon t e landlord desiring t em to compete, b%t %pon t e capital existing @ ic seeks to compete @it ot er capitals in t e ne@ !ields0 5o t e extent t at t e agric%lt%ral rent proper is p%rely a monopoly price, t e latter can only be small, H%st as t e absol%te rent can only be small ere %nder normal conditions @ ate8er t e excess o! t e prod%ctGs 8al%e o8er its price o! prod%ction0 5 e essence o! absol%te rent, t ere!ore, consists in t is: :i8en t e same rate o! s%rpl%s-8al%e, or degree o! labo%r exploitation, eD%ally large capitals in 8ario%s sp eres o! prod%ction prod%ce di!!erent amo%nts o! s%rpl%s-8al%e, in accordance @it t eir 8arying a8erage composition0 &n ind%stry t ese 8ario%s masses o! s%rpl%s8al%e are eD%alised into an a8erage pro!it and distrib%ted %ni!ormly among t e indi8id%al capitals as aliD%ot parts o! t e social capital0 'anded property inders s%c an eD%alisation among capitals, in8ested in land, @ ene8er prod%ction reD%ires land !or eit er agric%lt%re or extraction o! ra@ materials, and takes old o! a portion o! t e s%rpl%s-8al%e, @ ic @o%ld ot er@ise take part

+23

; apter J'4

in eD%alising to t e general rate o! pro!it0 5 e rent, t en, !orms a portion o! t e 8al%e, or, more speci!ically, s%rpl%s-8al%e, o! commodities, and instead o! !alling into t e lap o! t e capitalists, @ o a8e extracted it !rom t eir labo%rers, it !alls to t e s are o! t e landlords, @ o extract it !rom t e capitalists0 &t is ereby ass%med t at t e agric%lt%ral capital sets more labo%r in motion t an an eD%ally large portion o! non-agric%lt%ral capital0 6o@ !ar t e discrepancy goes, or @ et er it exists at all, depends %pon t e relati8e de8elopment o! agric%lt%re as compared @it ind%stry0 &t is in t e nat%re o! t e case t at t is di!!erence m%st decrease @it t e progress o! agric%lt%re, %nless t e proportionate decrease o! 8ariable as compared @it constant capital is still greater in t e case o! ind%strial t an in t e case o! agric%lt%ral capital0 5 is absol%te rent plays an e8en more important role in t e extracti8e ind%stry proper, @ ere one element o! constant capital, ra@ material, is @ olly lacking and @ ere, excl%ding t ose lines in @ ic capital consisting o! mac inery and ot er !ixed capital is 8ery considerable, by !ar t e lo@est composition o! capital pre8ails0 ,recisely ere, @ ere t e rent appears entirely attrib%table to a monopoly price, %n%s%ally !a8o%rable market conditions are necessary !or commodities to be sold at t eir 8al%e, or !or rent to eD%al t e entire excess o! a commodityGs s%rpl%s-8al%e o8er its price o! prod%ction0 5 is applies, !or instance, to rent !rom !is eries, stone D%arries, nat%ral !orests, etc0 xl8ii

Chapter 4". (uildin) Site Rent. Rent in 1inin). Price of 3and

W ere8er rent exists at all, di!!erential rent appears at all times and is go8erned by t e same la@s, as agric%lt%ral di!!erential rent0 W ere8er nat%ral !orces can be monopolised and g%arantee a s%rpl%s-pro!it to t e ind%strial capitalist %sing t em, be it @ater!alls, ric mines, @aters teeming @it !is , or a !a8o%rably located b%ilding site, t ere t e person @ o by 8irt%e o! title to a portion o! t e globe as become t e proprietor o! t ese nat%ral obHects @ill @rest t is s%rpl%s-pro!it !rom !%nctioning capital in t e !orm o! rent0 ?dam $mit as set !ort , as concerns land !or b%ilding p%rposes, t at t e basis o! its rent, like t at o! all non-agric%lt%ral land, is reg%lated by agric%lt%ral rent proper BAook &, ; 0 J&, < and 3C0 5 is rent is disting%is ed, in t e !irst place, by t e preponderant in!l%ence exerted ere by location %pon di!!erential rent B8ery signi!icant, e0g0, in 8ineyards and b%ilding sites in large citiesC# secondly, by t e palpable and complete passi8eness o! t e o@ner, @ ose sole acti8ity consists Bespecially in minesC in exploiting t e progress o! social de8elopment, to@ard @ ic e contrib%tes not ing and !or @ ic e risks not ing, %nlike t e ind%strial capitalist# and !inally by t e pre8alence o! monopoly prices in many cases, partic%larly t ro%g t e most s ameless exploitation o! po8erty B!or po8erty is more l%crati8e !or o%se-rent t an t e mines o! ,otosi e8er @ere !or $pain xl8iiiC, and t e monstro%s po@er @ielded by landed property, @ en %nited and in and @it ind%strial capital, enables it to be %sed against labo%rers engaged in t eir @age str%ggle as a means o! practically expelling t em !rom t e eart as a d@elling-place0xlix 3ne part o! society t %s exacts trib%te !rom anot er !or t e permission to in abit t e eart , as landed property in general assigns t e landlord t e pri8ilege o! exploiting t e terrestrial body, t e bo@els o! t e eart , t e air, and t ereby t e maintenance and de8elopment o! li!e0 -ot only t e pop%lation increase and @it it t e gro@ing demand !or s elter, b%t also t e de8elopment o! !ixed capital, @ ic is eit er incorporated in land, or takes root in it and is based %pon it, s%c as all ind%strial b%ildings, rail@ays, @are o%ses, !actory b%ildings, docks, etc0, necessarily increase t e b%ilding rent0 ? con!%sion o! o%se-rent, in so !ar as it constit%tes interest and amortisation on capital in8ested in a o%se, and rent !or t e mere land, is not possible in t is case, e8en @it all t e good@ill o! a person like ;arey, partic%larly @ en landlord and b%ilding spec%lator are di!!erent persons, as is tr%e in England0 5@o elements s o%ld be considered ere: on t e one and, t e exploitation o! t e eart !or t e p%rpose o! reprod%ction or extraction# on t e ot er and, t e space reD%ired as an element o! all prod%ction and all %man acti8ity0 ?nd property in land demands its trib%te in bot senses0 5 e demand !or b%ilding sites raises t e 8al%e o! land as space and !o%ndation, @ ile t ereby t e demand !or elements o! t e terrestrial body ser8ing as b%ilding material gro@s sim%ltaneo%sly0 l 5 at it is t e gro%nd-rent, and not t e o%se, @ ic !orms t e act%al obHect o! b%ilding spec%lation in rapidly gro@ing cities, especially @ ere constr%ction is carried on as an ind%stry, e0g0, in 'ondon, as already been ill%strated in Aook &&, ; apter J&&, in t e testimony o! a big b%ilding spec%lator in 'ondon, Ed@ard ;apps, gi8en be!ore t e $elect ;ommittee on Aank ?cts o! 18+>0 6e stated t ere, -o0+23+: K& t ink a man @ o @is es to rise in t e @orld can ardly expect to rise by !ollo@ing o%t a !air trade 000it is necessary !or im to add spec%lati8e b%ilding to it, and t at m%st be done not on a small scale# 000!or t e

+2+

; apter J'4&

b%ilder makes 8ery little pro!it o%t o! t e b%ildings t emsel8es# e makes t e principal part o! t e pro!it o%t o! t e impro8ed gro%nd-rents0 ,er aps e takes a piece o! gro%nd, and agrees to gi8e V3== a year !or it# by laying it o%t @it care, and p%tting certain descriptions o! b%ildings %pon it, e may s%cceed in making V2== or V2+= a year o%t o! it, and is pro!it @o%ld be t e increased gro%nd-rent o! V1== or V1+= a year, rat er t an t e pro!it o! t e b%ildings at @ ic 000in many instances, e scarcely looks at all0L ?nd parent etically it s o%ld not be !orgotten t at a!ter t e lapse o! t e lease, generally at t e end o! ** years, t e land @it all its b%ildings and its gro%nd-rent I %s%ally increased in t e interim t@ice or t ree times, re8erts !rom t e b%ilding spec%lator or is legal s%ccessor to t e original last landlord0 Mining rent proper is determined in t e same @ay as agric%lt%ral rent0 K5 ere are some mines, o! @ ic t e prod%ce is barely s%!!icient to pay t e labo%r and replace, toget er @it its ordinary pro!its, t e stock employed in @orking t em0 5 ey a!!ord some pro!it to t e %ndertaker o! t e @ork, b%t no rent to t e landlord0 5 ey can be @ro%g t ad8antageo%sly by nobody b%t t e landlord, @ o, being imsel! t e %ndertaker o! t e @ork, gets t e ordinary pro!it o! t e capital @ ic e employs in it0 Many coal mines in $cotland are @ro%g t in t is manner, and can be @ro%g t in no ot er0 5 e landlord @ill allo@ nobody else to @ork t em @it o%t paying some rent, and nobody can a!!ord to pay any0L B?dam $mit , Aook &, ; 0 J&, <0C &t m%st be disting%is ed, @ et er t e rent springs !rom a monopoly price, beca%se a monopoly price o! t e prod%ct or t e land exists independently o! it, or @ et er t e prod%cts are sold at a monopoly price, beca%se a rent exists0 W en @e re!er to a monopoly price, @e mean in general a price determined only by t e p%rc asers" eagerness to b%y and ability to pay, independent o! t e price determined by t e general price o! prod%ction, as @ell as by t e 8al%e o! t e prod%cts0 ? 8ineyard prod%cing @ine o! 8ery extraordinary D%ality @ ic can be prod%ced only in relati8ely small D%antities yields a monopoly price0 5 e @ine-gro@er @o%ld realise a considerable s%rpl%spro!it !rom t is monopoly price, @ ose excess o8er t e 8al%e o! t e prod%ct @o%ld be @ olly determined by t e means and !ondness o! t e discriminating @ine-drinker0 5 is s%rpl%s-pro!it, @ ic accr%es !rom a monopoly price, is con8erted into rent and in t is !orm !alls into t e lap o! t e landlord, t anks to is title to t is piece o! t e globe endo@ed @it sing%lar properties0 6ere, t en, t e monopoly price creates t e rent0 3n t e ot er and, t e rent @o%ld create a monopoly

+26

; apter J'4&

price i! grain @ere sold not merely abo8e its price o! prod%ction, b%t also abo8e its 8al%e, o@ing to t e limits set by landed property to t e in8estment o! capital in %nc%lti8ated land @it o%t payment o! rent0 5 at it is only t e title o! a n%mber o! persons to t e possession o! t e globe enabling t em to appropriate to t emsel8es as trib%te a portion o! t e s%rpl%s-labo%r o! society and !%rt ermore to a constantly increasing extent @it t e de8elopment o! prod%ction, is concealed by t e !act t at t e capitalised rent, i0e0, precisely t is capitalised trib%te, appears as t e price o! land, @ ic may t ere!ore be sold like any ot er article o! commerce0 5 e b%yer, t ere!ore, does not !eel t at is title to t e rent is obtained gratis, and @it o%t t e labo%r, risk, and spirit o! enterprise o! t e capitalist, b%t rat er t at e as paid !or it @it an eD%i8alent0 5o t e b%yer, as pre8io%sly indicated, t e rent appears merely as interest on t e capital @it @ ic e as p%rc ased t e land and conseD%ently is title to t e rent0 &n t e same @ay, t e sla8e- older considers a -egro, @ om e as p%rc ased, as is property, not beca%se t e instit%tion o! sla8ery as s%c entitles im to t at -egro, b%t beca%se e as acD%ired im like any ot er commodity, t ro%g sale and p%rc ase0 A%t t e title itsel! is simply trans!erred, and not created by t e sale0 5 e title m%st exist be!ore it can be sold, and a series o! sales can no more create t is title t ro%g contin%ed repetition t an a single sale can0 W at created it in t e !irst place @ere t e prod%ction relations0 ?s soon as t ese a8e reac ed a point @ ere t ey m%st s ed t eir skin, t e material so%rce o! t e title, H%sti!ied economically and istorically and arising !rom t e process @ ic creates social li!e, !alls by t e @ayside, along @it all transactions based %pon it0 From t e standpoint o! a ig er economic !orm o! society, pri8ate o@ners ip o! t e globe by single indi8id%als @ill appear D%ite as abs%rd as pri8ate o@ners ip o! one man by anot er0 E8en a @ ole society, a nation, or e8en all sim%ltaneo%sly existing societies taken toget er, are not t e o@ners o! t e globe0 5 ey are only its possessors, its %s%!r%ct%aries, and, like boni patres familias, t ey m%st and it do@n to s%cceeding generations in an impro8ed condition0 &n t e !ollo@ing analysis o! t e price o! land @e lea8e o%t o! consideration all !l%ct%ations o! competition, all land spec%lation, and also small landed property, in @ ic land !orms t e principal instr%ment o! prod%cers and m%st, t ere!ore, be bo%g t by t em at any price0 &0 5 e price o! land may rise @it o%t t e rent rising, namely: 1C by a mere !all in interest rate, @ ic ca%ses t e rent to be sold more dearly, and t ereby t e capitalised rent, or price o! land, rises# <C beca%se t e interest on capital incorporated in t e land rises0 &&0 5 e price o! land may rise, beca%se t e rent increases0 5 e rent may increase, beca%se t e price o! t e prod%ct o! t e land rises, in @ ic case t e rate o! di!!erential rent al@ays rises, @ et er t e rent on t e @orst c%lti8ated soil be large, small or nonexistent0 Ay rate @e mean t e ratio o! t at portion o! s%rpl%s-8al%e con8erted into rent to t e in8ested capital @ ic prod%ces t e agric%lt%ral prod%ct0 5 is di!!ers !rom t e ratio o! s%rpl%sprod%ct to total prod%ct, !or t e total prod%ct does not comprise t e entire in8ested capital, namely, t e !ixed capital, @ ic contin%es to exist alongside t e prod%ct0 3n t e ot er and, it co8ers t e !act t at on soils yielding di!!erential rent an increasing portion o! t e prod%ct is trans!ormed into an excess o! s%rpl%s-prod%ct0 5 e increase in price o! agric%lt%ral prod%ct o! t e @orst soil !irst creates rent and t ereby t e price o! land0 5 e rent, o@e8er, may also increase @it o%t a rise in price o! t e agric%lt%ral prod%ct0 5 is price may remain constant, or e8en decrease0 &! t e price remains constant, t e rent can gro@ only Bapart !rom monopoly pricesC beca%se, on t e one and, gi8en t e same amo%nt o! capital in8ested in t e old lands, ne@ lands o! better D%ality are c%lti8ated, @ ic merely s%!!ice, o@e8er, to co8er t e increased demand, so t at t e reg%lating market-price remains %nc anged0 &n t is case, t e price o! t e old lands does not rise, b%t t e price o! t e ne@ly c%lti8ated lands rises abo8e t at o! t e old ones0

+2>

; apter J'4&

3r, on t e ot er and, t e rent rises beca%se t e mass o! capital exploiting t e land increases, ass%ming t at t e relati8e prod%cti8ity and market-price remain t e same0 ?lt o%g t e rent t %s remains t e same compared @it t e in8ested capital, still its mass, !or instance, may be do%bled, beca%se t e capital itsel! as do%bled0 $ince no !all in price as occ%rred, t e second in8estment o! capital yields a s%rpl%s-pro!it H%st as @ell as t e !irst, and it like@ise is trans!ormed into rent a!ter t e expiration o! t e lease0 5 e mass o! rent rises ere, beca%se t e mass o! capital prod%cing a rent increases0 5 e contention t at 8ario%s s%ccessi8e in8estments o! capital in t e same piece o! land can prod%ce rent only in so !ar as t eir yield is %neD%al, so t at a di!!erential rent t %s arises, is red%ced to t e contention t at @ en t@o capitals o! V1,=== eac are in8ested in t@o !ields o! eD%al prod%cti8ity, only one o! t em can prod%ce a rent, alt o%g bot !ields belong to a better soil type, @ ic prod%ces di!!erential rent0 B5 e mass o! rental, t e total rent o! a co%ntry, gro@s t ere!ore @it t e mass o! capital in8ested, @it o%t t e price o! t e indi8id%al pieces o! land, or t e rate o! rent, or e8en t e mass o! rent on indi8id%al pieces o! land, necessarily increasing# t e amo%nt o! rental gro@s in t is case @it t e extension o! c%lti8ation o8er a @ider area0 5 is may e8en be combined @it a decrease in rent on indi8id%al oldings0C 3t er@ise, t is contention @o%ld lead to t e ot er, namely, t at t e in8estment o! capital in t@o di!!erent pieces o! land existing side by side !ollo@s di!!erent la@s t an t e s%ccessi8e in8estment o! capital in t e same plot, @ ereas di!!erential rent is deri8ed precisely !rom t e identity o! t e la@ in bot cases, !rom t e increased prod%cti8eness o! capital in8ested eit er in t e same !ield or in di!!erent !ields0 5 e only modi!ication @ ic exists ere and is o8erlooked is t at s%ccessi8e in8estments o! capital, @ en applied to di!!erent pieces o! land, meet t e barrier o! landed property, @ ic is not t e case @it s%ccessi8e in8estments o! capital in t e same piece o! land0 5 is acco%nts !or t e opposing tendencies by @ ic t ese t@o di!!erent !orms o! in8estment c%rb eac ot er in practice0 -o di!!erence in capital e8er appears ere0 &! t e composition o! t e capital remains t e same, and similarly t e rate o! s%rpl%s-8al%e, t e rate o! pro!it remains %naltered, so t at t e mass o! pro!it is do%bled @ en t e capital is do%bled0 &n like manner t e rate o! rent remains t e same %nder t e ass%med conditions0 &! a capital o! V1,=== prod%ces a rent o! x, t en a capital o! V<,===, %nder t e ass%med conditions, prod%ces a rent o! <x0 A%t calc%lated @it re!erence to t e area o! land, @ ic as remained %naltered, since, according to o%r ass%mption, t e do%bled capital operates in t e same !ield, t e le8el o! rent as also risen as a conseD%ence o! its increase in mass0 5 e same acre @ ic yielded a rent o! V<, no@ yields V20 li 5 e relation o! a portion o! t e s%rpl%s-8al%e, o! money-rent I !or money is t e independent expression o! 8al%e I to t e land is in itsel! abs%rd and irrational# !or t e magnit%des @ ic are ere meas%red by one anot er are incommens%rable I a partic%lar %se-8al%e, a piece o! land o! so many and so many sD%are !eet, on t e one and, and 8al%e, especially s%rpl%s-8al%e, on t e ot er0 5 is expresses in !act not ing more t an t at, %nder t e gi8en conditions, t e o@ners ip o! so many sD%are !eet o! land enables t e lando@ner to @rest a certain D%antity o! %npaid labo%r, @ ic t e capital @allo@ing in t ese sD%are !eet like a og in potatoes as realised0 /Written in t e man%script ere in brackets, b%t crossed o%t, is t e name K'iebigL01 A%t prima facie t e expression is t e same as i! one desired to speak o! t e relation o! a !i8e-po%nd note to t e diameter o! t e eart 0 6o@e8er, t e reconciliation o! irrational !orms in @ ic certain economic relations appear and assert t emsel8es in practice does not concern t e acti8e agents o! t ese relations in t eir e8eryday li!e0 ?nd since t ey are acc%stomed to mo8e abo%t in s%c relations, t ey !ind not ing strange t erein0 ? complete contradiction o!!ers not t e least mystery to t em0 5 ey !eel as m%c at ome as a !is in @ater among mani!estations @ ic are separated !rom t eir internal connections and abs%rd @ en isolated by t emsel8es0 W at 6egel says @it re!erence to certain mat ematical !orm%las applies ere: t at @ ic seems irrational to ordinary common sense is rational, and t at @ ic seems rational to it is itsel! irrational0 /6egel, 0ncyclopXdie der philosophischen "issenschaften in Grundrisse, 10 5eil, Die ,ogi-. &n: "er-e, Aand 6, Aerlin, 182=, $0 2=20 I 0d.1 W en considered in connection @it t e land area itsel!, a

+28

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rise in t e mass o! rent is t %s expressed in t e same @ay as a rise in t e rate o! rent, and ence t e embarrassment experienced @ en t e conditions @ ic @o%ld explain t e one case are lacking in t e ot er0 5 e price o! land, o@e8er, may also rise e8en @ en t e price o! t e agric%lt%ral prod%ct decreases0 &n t is case, t e di!!erential rent, and @it it t e price o! t e better lands, may a8e risen, o@ing to !%rt er di!!erentiations0 3r, i! t is is not t e case, t e price o! t e agric%lt%ral prod%ct may a8e !allen by 8irt%e o! greater labo%r prod%cti8ity b%t in s%c a manner t at t e increased prod%ction more t an co%nterbalances t is0 'et %s ass%me t at one D%arter cost 6= s illings0 -o@, i! t e same acre, @it t e same capital, s o%ld prod%ce t@o D%arters instead o! one, and t e price o! one D%arter s o%ld !all to 2= s illings, t en t@o D%arters @o%ld cost 8= s illings, so t at t e 8al%e o! t e prod%ct o! t e same capital in8ested in t e same acre @o%ld a8e risen by one-t ird, despite t e !all in price per D%arter by one-t ird0 6o@ t is is possible @it o%t selling t e prod%ct abo8e its price o! prod%ction or abo8e its 8al%e, as been de8eloped in t e analysis o! di!!erential rent0 ?s a matter o! !act it is possible only in t@o @ays0 Eit er bad soil is excl%ded !rom competition, b%t t e price o! t e better soil increases @it t e increase in di!!erential rent, i0e0, t e general impro8ement a!!ects t e 8ario%s soil types di!!erently0 3r, t e same price o! prod%ction Band t e same 8al%e, i! absol%te rent is paidC expresses itsel! on t e @orst soil t ro%g a larger mass o! prod%cts, @ en labo%r prod%cti8ity as become greater0 5 e prod%ct represents t e same 8al%e as be!ore, b%t t e price o! its aliD%ot parts as !allen, @ ile t eir n%mber as increased0 5 is is impossible @ en t e same capital as been employed# !or in t is case t e same 8al%e al@ays expresses itsel! t ro%g any portion o! t e prod%ct0 &t is possible, o@e8er, @ en additional capital as been expended !or gyps%m, g%ano, etc0, in s ort, !or impro8ements t e e!!ects o! @ ic extend o8er se8eral years0 5 e stip%lation is t at t e price o! an indi8id%al D%arter !alls, b%t not to t e same extent as t e n%mber o! D%arters increases0 &&&0 5 ese di!!erent conditions %nder @ ic rent may rise, and @it it t e price o! land in general, or o! partic%lar kinds o! land, may partly compete, or partly excl%de one anot er, and can only act alternately0 A%t it !ollo@s !rom t e !oregoing t at t e conseD%ence o! a rise in t e price o! land does not necessarily signi!y also a rise in rent, or t at a rise in rent, @ ic al@ays brings @it it a rise in t e price o! land, is not necessarily contingent %pon an increase in t e agric%lt%ral prod%ct0lii )at er t an tracing to t eir origin t e real nat%ral ca%ses leading to an ex a%stion o! t e soil, @ ic , incidentally, @ere %nkno@n to all economists @riting on di!!erential rent o@ing to t e le8el o! agric%lt%ral c emistry in t eir day, t e s allo@ conception @as seiEed %pon t at any amo%nt o! capital cannot be in8ested in a limited area o! land# as t e 0dinburgh 9eview, /5ome '&4, ?%g%st-7ecember 1831, pp0 *2-*+0 I 0d01 !or instance, arg%ed against )ic ard Pones t at all o! England cannot be !ed t ro%g t e c%lti8ation o! $o o $D%are0 &! t is be considered a special disad8antage o! agric%lt%re, precisely t e opposite is tr%e0 &t is possible to in8est capital ere s%ccessi8ely @it !r%it!%l res%lts, beca%se t e soil itsel! ser8es as an instr%ment o! prod%ction, @ ic is not t e case @it a !actory, or olds only to a limited extent, since it ser8es only as a !o%ndation, as a place and a space pro8iding a basis o! operations0 &t is tr%e t at, compared @it scattered andicra!ts, large-scale ind%stry may concentrate m%c prod%ction in a small area0 -e8ert eless a de!inite amo%nt o! space is al@ays reD%ired at any gi8en le8el o! prod%cti8ity, and t e constr%ction o! tall b%ildings also as its practical limitations0 Aeyond t is any expansion o! prod%ction also demands an extension o! land area0 5 e !ixed capital in8ested in mac inery, etc0, does not impro8e t ro%g %se, b%t on t e contrary, @ears o%t0 -e@ in8entions may indeed permit some impro8ement in t is respect, b%t @it any gi8en de8elopment in prod%cti8e po@er, mac ines @ill al@ays deteriorate0 &! prod%cti8ity is rapidly de8eloped, all o! t e old mac inery m%st be replaced by t e more ad8antageo%s# in ot er @ords, it is lost0 5 e soil, o@e8er, i!

+2*

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properly treated, impro8es all t e time0 5 e ad8antage o! t e soil, permitting s%ccessi8e in8estments o! capital to bring gains @it o%t loss o! pre8io%s in8estments, implies t e possibility o! di!!erences in yield !rom t ese s%ccessi8e in8estments o! capital0

Chapter 4$. +enesis of Capitalist +round-Rent

I. Introductor# )emar2s
We m%st clari!y in o%r minds @ erein lies t e real di!!ic%lty in analysing gro%nd-rent !rom t e 8ie@point o! modern economics, as t e t eoretical expression o! t e capitalist mode o! prod%ction0 E8en many o! t e more modern @riters a8e not as yet grasped t is, as e8idenced by eac rene@ed attempt to Kne@lyL explain gro%nd-rent0 5 e no8elty almost in8ariably consists in a relapse into long o%t-o!-date 8ie@s0 5 e di!!ic%lty is not to explain t e s%rpl%s-prod%ct prod%ced by agric%lt%ral capital and its corresponding s%rpl%s-8al%e in general0 5 is D%estion is sol8ed in t e analysis o! t e s%rpl%s-8al%e prod%ced by all prod%cti8e capital, in @ ate8er sp ere it may be in8ested0 5 e di!!ic%lty consists rat er in s o@ing t e so%rce o! t e excess o! s%rpl%s-8al%e paid t e landlord by capital in8ested in land in t e !orm o! rent, a!ter eD%alisation o! t e s%rpl%s-8al%e to t e a8erage pro!it among t e 8ario%s capitals, a!ter t e 8ario%s capitals a8e s ared in t e total s%rpl%s-8al%e prod%ced by t e social capital in all sp eres o! prod%ction in proportion to t eir relati8e siEe# in ot er @ords, t e so%rce s%bseD%ent to t is eD%alisation and t e apparently already completed distrib%tion o! all s%rpl%s-8al%e @ ic , in general, is to be distrib%ted0 M%ite apart !rom t e practical moti8es, @ ic prodded modern economists as spokesmen o! ind%strial capital against landed property to in8estigate t is D%estion I moti8es @ ic @e s all point o%t more clearly in t e c apter on istory o! gro%nd-rent I t e D%estion @as o! paramo%nt interest to t em as t eorists0 5o admit t at t e appearance o! rent !or capital in8ested in agric%lt%re is d%e to some partic%lar e!!ect prod%ced by t e sp ere o! in8estment itsel!, d%e to sing%lar D%alities o! t e eart Gs cr%st itsel!, is tantamo%nt to gi8ing %p t e conception o! 8al%e as s%c , t %s tantamo%nt to abandoning all attempts at a scienti!ic %nderstanding o! t is !ield0 E8en t e simple obser8ation t at rent is paid o%t o! t e price o! agric%lt%ral prod%ce I @ ic takes place e8en @ ere rent is paid in kind i! t e !armer is to reco8er is price o! prod%ction I s o@ed t e abs%rdity o! attempting to explain t e excess o! t is price o8er t e ordinary price o! prod%ction# in ot er @ords, to explain t e relati8e dearness o! agric%lt%ral prod%cts on t e basis o! t e excess o! nat%ral prod%cti8ity o! agric%lt%ral prod%ction o8er t e prod%cti8ity o! ot er lines o! prod%ction0 For t e re8erse is tr%e: t e more prod%cti8e labo%r is, t e c eaper is e8ery aliD%ot part o! its prod%ct, beca%se so m%c greater is t e mass o! %se-8al%es incorporating t e same D%antity o! labo%r, i0e0, t e same 8al%e0 5 e @ ole di!!ic%lty in analysing rent, t ere!ore, consists in explaining t e excess o! agric%lt%ral pro!it o8er t e a8erage pro!it, not t e s%rpl%s-8al%e, b%t t e excess o! s%rpl%s-8al%e c aracteristic o! t is sp ere o! prod%ction# in ot er @ords, not t e Knet prod%ctL, b%t t e excess o! t is net prod%ct o8er t e net prod%ct o! ot er branc es o! ind%stry0 5 e a8erage pro!it itsel! is a prod%ct !ormed %nder 8ery de!inite istorical prod%ction relations by t e mo8ement o! social processes, a prod%ct @ ic , as @e a8e seen, reD%ires 8ery complex adH%stment0 5o be able to speak at all o! a s%rpl%s o8er t e a8erage pro!it, t is a8erage pro!it itsel! m%st already be establis ed as a standard and as a reg%lator o! prod%ction in general as is t e case %nder capitalist prod%ction0 For t is reason t ere can be no talk o! rent in t e modern sense, a rent consisting o! a s%rpl%s o8er t e a8erage pro!it, i0e0, o8er and abo8e t e proportional s are o! eac indi8id%al capital in t e s%rpl%s-8al%e prod%ced by t e total social capital, in social !ormations @ ere it is not capital @ ic per!orms t e !%nction o! en!orcing all s%rpl%s-labo%r and appropriating directly all s%rpl%s8al%e0 ?nd @ ere t ere!ore capital as not yet completely, or only sporadically, bro%g t social labo%r %nder its control0 &t re!lects nah8etF, e0g0, o! a person like ,assy Bsee belo@C, @ en e speaks o! rent in primiti8e society as a s%rpl%s o8er pro!it /,assy, 9ente du sol. &n: 7ictionnaire

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de lGFconomie politiD%e, 5ome &&0 ,aris, 18+2, p0 +110 I 0d01 I a istorically de!ined social !orm o! s%rpl%s-8al%e, b%t @ ic , according to ,assy, mig t almost as @ell exist @it o%t any society0 For t e older economists, @ o in general merely begin analysing t e capitalist mode o! prod%ction, still %nde8eloped in t eir day, t e analysis o! rent o!!ers eit er no di!!ic%lty at all, or only a di!!ic%lty o! a completely di!!erent kind0 ,etty, ;antillon, and in general t ose @riters @ o are closer to !e%dal times, ass%me gro%nd-rent to be t e normal !orm o! s%rpl%s-8al%e in general, / /,etty1 + 4reatise on 4a es and Contributions, 'ondon, 166>, pp0 <3-<2# /)ic ard ;antillon1 0ssai sur la nature du commerce en g7neral, ?msterdam, 1>+60 I 0d01 @ ereas pro!it to t em is still amorp o%sly combined @it @ages, or at best appears to be a portion o! s%rpl%s-8al%e extorted by t e capitalist !rom t e landlord0 5 ese @riters t %s take as t eir point o! depart%re a sit%ation @ ere, in t e !irst place, t e agric%lt%ral pop%lation still constit%tes t e o8er@ elming maHority o! t e nation, and, secondly, t e landlord still appears as t e person appropriating at !irst and t e s%rpl%s-labo%r o! t e direct prod%cers by 8irt%e o! is monopoly o! landed property, @ ere landed property, t ere!ore, still appears as t e main condition o! prod%ction0 For t ese @riters t e D%estion co%ld not yet be posed, @ ic , in8ersely, seeks to in8estigate !rom t e 8ie@point o! capitalist prod%ction o@ landed property manages to @rest back again !rom capital a portion o! t e s%rpl%s-8al%e prod%ced by it Bt at is, !ilc ed by it !rom t e direct prod%cersC and already appropriated directly0 5 e physiocrats are tro%bled by di!!ic%lties o! anot er nat%re0 ?s t e act%ally !irst systematic spokesmen o! capital, t ey attempt to analyse t e nat%re o! s%rpl%s-8al%e in general0 For t em, t is analysis coincides @it t e analysis o! rent, t e only !orm o! s%rpl%s-8al%e @ ic t ey recognise0 5 ere!ore, t ey consider rent-yielding, or agric%lt%ral, capital to be t e only capital prod%cing s%rpl%s-8al%e, and t e agric%lt%ral labo%r set in motion by it, t e only labo%r prod%cing s%rpl%s-8al%e, @ ic !rom a capitalist 8ie@point is D%ite properly considered t e only prod%cti8e labo%r0 5 ey are D%ite rig t in considering t e creation o! s%rpl%s-8al%e as decisi8e0 ?part !rom ot er merits to be set !ort in Aook &4, t ey deser8e credit primarily !or going back !rom merc antGs capital, @ ic !%nctions solely in t e sp ere o! circ%lation, to prod%cti8e capital, in opposition to t e mercantile system, @ ic , @it its cr%de realism, constit%tes t e act%al 8%lgar economy o! t at period, p%s ing into t e backgro%nd in !a8o%r o! its o@n practical interests t e beginnings o! scienti!ic analysis made by ,etty and is s%ccessors0 &n t is critiD%e o! t e mercantile system, incidentally, only its conceptions o! capital and s%rpl%s-8al%e are dealt @it 0 &t as already been indicated pre8io%sly t at t e monetary system correctly proclaims prod%ction !or t e @orld-market and t e trans!ormation o! t e o%tp%t into commodities, and t %s into money, as t e prereD%isite and condition o! capitalist prod%ction0 &n t is systemGs !%rt er de8elopment into t e mercantile system, it is no longer t e trans!ormation o! commodity-8al%e into money, b%t t e creation o! s%rpl%s-8al%e @ ic is decisi8e I b%t !rom t e meaningless 8ie@point o! t e circ%lation sp ere and, at t e same time, in s%c manner t at t is s%rpl%s 8al%e is represented as s%rpl%s money, as t e balance o! trade s%rpl%s0 ?t t e same time, o@e8er, t e c aracteristic !eat%re o! t e interested merc ants and man%!act%rers o! t at period, @ ic is in keeping @it t e stage o! capitalist de8elopment represented by t em, is t at t e trans!ormation o! !e%dal agric%lt%ral societies into ind%strial ones and t e corresponding ind%strial str%ggle o! nations on t e @orld-market depends on an accelerated de8elopment o! capital, @ ic is not to be arri8ed at along t e so-called nat%ral pat , b%t rat er by means o! coerci8e meas%res0 &t makes a tremendo%s di!!erence @ et er national capital is grad%ally and slo@ly trans!ormed into ind%strial capital, or @ et er t is de8elopment is accelerated by means o! a tax @ ic t ey impose t ro%g protecti8e d%ties mainly %pon lando@ners, middle and small peasants, and andicra!tsmen, by @ay o! accelerated expropriation o! t e independent direct prod%cers, and t ro%g t e 8iolently accelerated acc%m%lation and concentration o! capital, in s ort by means o! t e accelerated establis ment o! conditions o! capitalist prod%ction0 &t sim%ltaneo%sly makes an enormo%s di!!erence in t e capitalist and ind%strial exploitation o! t e nat%ral national prod%cti8e po@er0

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6ence t e national c aracter o! t e mercantile system is not merely a p rase on t e lips o! its spokesmen0 (nder t e pretext o! concern solely !or t e @ealt o! t e nation and t e reso%rces o! t e state, t ey, in !act, prono%nce t e interests o! t e capitalist class and t e amassing o! ric es in general to be t e %ltimate aim o! t e state, and t %s proclaim bo%rgeois society in place o! t e old di8ine state0 A%t at t e same time t ey are conscio%sly a@are t at t e de8elopment o! t e interests o! capital and o! t e capitalist class, o! capitalist prod%ction, !orms t e !o%ndation o! national po@er and national ascendancy in modern society0 5 e p ysiocrats, !%rt ermore, are correct in stating t at in !act all prod%ction o! s%rpl%s-8al%e, and t %s all de8elopment o! capital, as !or its nat%ral basis t e prod%cti8eness o! agric%lt%ral labo%r0 &! man @ere not capable o! prod%cing in one @orking-day more means o! s%bsistence, @ ic signi!ies in t e strictest sense more agric%lt%ral prod%cts t an e8ery labo%rer needs !or is o@n reprod%ction, i! t e daily expendit%re o! is entire labo%r po@er s%!!iced merely to prod%ce t e means o! s%bsistence indispensable !or is o@n indi8id%al reD%irements, t en one co%ld not speak at all eit er o! s%rpl%s-prod%ct or s%rpl%s-8al%e0 ?n agric%lt%ral labo%r prod%cti8ity exceeding t e indi8id%al reD%irements o! t e labo%rer is t e basis o! all societies, and is abo8e all t e basis o! capitalist prod%ction, @ ic disengages a constantly increasing portion o! society !rom t e prod%ction o! basic !oodst%!!s and trans!orms t em into K!ree eads,L as $te%art /$te%art, +n Dn3uiry Dnto the &rinciples of &olitical 0conomy, 4ol0 &, 7%blin, 1>>=, p0 3*60 I 0d.1 as it, making t em a8ailable !or exploitation in ot er sp eres0 A%t @ at can be said o! more recent @riters on economics, s%c as 7aire, ,assy, etc0, @ o parrot t e most primiti8e conceptions concerning t e nat%ral conditions o! s%rpl%s-labo%r and t ereby s%rpl%s-8al%e in general, in t e t@ilig t o! classical economy, indeed on its 8ery deat -bed, and @ o imagine t at t ey are t %s propo%nding somet ing ne@ and striking on gro%nd-rent /7aire, Dntroduction. DnI &hysiocrats, ;. 5eil, ,aris, 1826# ,assy, 9ente du sol. &n: 7ictionnaire de lGFconomie politiD%e, 5ome &&, ,aris, 18+2, p0 +110 I 0d.1 long a!ter t is gro%nd-rent as been in8estigated as a special !orm and become a speci!ic portion o! s%rpl%s-8al%eQ &t is partic%larly c aracteristic o! 8%lgar economy t at it ec oes @ at @as ne@, original, pro!o%nd and H%sti!ied d%ring a speci!ic o%tgro@n stage o! de8elopment, in a period @ en it as t%rned platit%dino%s, stale, and !alse0 &t t %s con!esses its complete ignorance o! t e problems @ ic concerned classical economy0 &t con!o%nds t em @it D%estions t at co%ld only a8e been posed on a lo@er le8el o! de8elopment o! bo%rgeois society0 5 e same olds tr%e o! its incessant and sel!complacent r%mination o! t e p ysiocratic p rases concerning !ree trade0 5 ese p rases a8e long since lost all t eoretical interest, no matter o@ m%c t ey may engage t e practical attention o! t is or t at state0 &n nat%ral economy proper, @ en no part o! t e agric%lt%ral prod%ct, or b%t a 8ery insigni!icant portion, enters into t e process o! circ%lation, and t en only a relati8ely small portion o! t at part o! t e prod%ct @ ic represents t e landlordGs re8en%e, as, e0g0, in many )oman lati!%ndia, or %pon t e 8illas o! ; arlemagne, or more or less d%ring t e entire Middle ?ges Bsee 4inmard, (istoire du travailC, t e prod%ct and s%rpl%s-prod%ct o! t e large estates consists by no means p%rely o! prod%cts o! agric%lt%ral labo%r0 &t encompasses eD%ally @ell t e prod%cts o! ind%strial labo%r0 7omestic andicra!ts and man%!act%ring labo%r as secondary occ%pations o! agric%lt%re, @ ic !orms t e basis, are t e prereD%isite o! t at mode o! prod%ction %pon @ ic nat%ral economy rests I in E%ropean antiD%ity and t e Middle ?ges as @ell as in t e present-day &ndian comm%nity, in @ ic t e traditional organisation as not yet been destroyed0 5 e capitalist mode o! prod%ction completely abolis es t is relations ip# a process @ ic may be st%died on a large scale partic%larly in England d%ring t e last t ird o! t e 18t cent%ry0 5 inkers like 6errensc @and, @ o ad gro@n %p in more or less semi-!e%dal societies, still consider, e0g0, as late as t e close o! t e 18t cent%ry, t is separation o! man%!act%re !rom agric%lt%re as a !ool ardy social ad8ent%re, as an %nt inkably risky mode o! existence0 ?nd e8en in t e agric%lt%ral economies o! antiD%ity s o@ing t e greatest analogy to capitalist agric%lt%re, namely

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;art age and )ome, t e similarity to a plantation economy is greater t an to a !orm corresponding to t e really capitalist mode o! exploitation0 liii ? !ormal analogy, @ ic , sim%ltaneo%sly, o@e8er, t%rns o%t to be completely ill%sory in all essential points to a person !amiliar @it t e capitalist mode o! prod%ction, @ o does not, like 6err Mommsen, li8 disco8er a capitalist mode o! prod%ction in e8ery monetary economy, is not to be !o%nd at all in continental &taly d%ring antiD%ity, b%t at best only in $icily, since t is island ser8ed )ome as an agric%lt%ral trib%tary so t at its agric%lt%re @as aimed c ie!ly at export0 Farmers in t e modern sense existed t ere0 ?n erroneo%s conception o! t e nat%re o! rent is based %pon t e !act t at rent in kind, partly as tit es to t e c %rc and partly as a c%riosity perpet%ated by long-establis ed contracts, as been dragged o8er into modern times !rom t e nat%ral economy o! t e Middle ?ges, completely in contradiction to t e conditions o! t e capitalist mode o! prod%ction0 &t t ereby creates t e impression t at rent does not arise !rom t e price o! t e agric%lt%ral prod%ct, b%t !rom its mass, t %s not !rom social conditions, b%t !rom t e eart 0 We a8e pre8io%sly s o@n t at alt o%g s%rpl%s-8al%e is mani!ested in a s%rpl%s-prod%ct t e con8erse does not old t at a s%rpl%sprod%ct, representing a mere increase in t e mass o! prod%ct, constit%tes s%rpl%s-8al%e0 &t may represent a min%s D%antity in 8al%e0 3t er@ise t e cotton ind%stry o! 186=, compared @it t at o! 182=, @o%ld s o@ an enormo%s s%rpl%s-8al%e, @ ereas on t e contrary t e price o! t e yarn as !allen0 )ent may increase enormo%sly as a res%lt o! a s%ccession o! crop !ail%res, beca%se t e price o! grain rises, alt o%g t is s%rpl%s-8al%e appears as an absol%tely decreasing mass o! dearer @ eat0 ;on8ersely, t e rent may !all in conseD%ence o! a s%ccession o! bo%nti!%l years, beca%se t e price !alls, alt o%g t e red%ced rent appears as a greater mass o! c eaper @ eat0 ?s regards rent in kind, it s o%ld be noted no@ t at, in t e !irst place, it is a mere tradition carried o8er !rom an obsolete mode o! prod%ction and managing to prolong its existence as a s%r8i8al0 &ts contradiction to t e capitalist mode o! prod%ction is s o@n by its disappearance o! itsel! !rom pri8ate contracts, and its being !orcibly s aken o!! as an anac ronism, @ ere8er legislation @as able to inter8ene as in t e case o! c %rc tit es in England0 $econdly, o@e8er, @ ere rent in kind persisted on t e basis o! capitalist prod%ction, it @as no more, and co%ld be no more, t an an expression o! money-rent in medie8al garb0 W eat, !or instance, is D%oted at 2= s illings per D%arter0 3ne portion o! t is @ eat m%st replace t e @ages contained t erein, and m%st be sold to become a8ailable !or rene@ed expendit%re0 ?not er portion m%st be sold to pay its proportionate s are o! taxes0 $eed and e8en a portion o! !ertiliser enter as commodities into t e process o! reprod%ction, @ ere8er t e capitalist mode o! prod%ction and @it it di8ision o! social labo%r are de8eloped, i0e0, t ey m%st be p%rc ased !or replacement p%rposes# and t ere!ore anot er portion o! t is D%arter m%st be sold to obtain money !or t is0 &n so !ar as t ey need not be bo%g t as act%al commodities, b%t are taken o%t o! t e prod%ct itsel! in kind, in order to enter into its reprod%ction ane@ as conditions o! prod%ction I as occ%rs not only in agric%lt%re, b%t in many ot er lines o! prod%ction prod%cing constant capital I t ey !ig%re in t e books as money o! acco%nt and are ded%cted as elements o! t e cost-price0 5 e @ear and tear o! mac inery, and o! !ixed capital in general, m%st be made good in money0 ?nd !inally comes pro!it, @ ic is calc%lated on t is s%m, expressed as costs eit er in act%al money or in money o! acco%nt0 5 is pro!it is represented by a de!inite portion o! t e gross prod%ct, @ ic is determined by its price0 ?nd t e excess portion @ ic t en remains !orms rent0 &! t e rent in kind stip%lated by contract is greater t an t is remainder determined by t e price, t en it does not constit%te rent, b%t a ded%ction !rom pro!it0 3@ing to t is possibility alone, rent in kind is an obsolete !orm, in so !ar as it does not re!lect t e price o! t e prod%ct, b%t may be greater or smaller t an t e real rent, and t %s may comprise not only a ded%ction !rom pro!it, b%t also !rom t ose elements reD%ired !or capital replacement0 &n !act, t is rent in kind, so !ar as it is rent not merely in name b%t also in essence, is excl%si8ely determined by t e excess o! t e price o! t e prod%ct o8er its price o! prod%ction0 3nly it pres%pposes t at t is 8ariable is a constant magnit%de0 A%t it is s%c a

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com!orting re!lection t at t e prod%ct in kind s o%ld s%!!ice, !irst, to maintain t e labo%rer, secondly, to lea8e t e capitalist tenant !armer more !ood t an e needs, and !inally, t at t e remainder s o%ld constit%te t e nat%ral rent0 M%ite like a man%!act%rer prod%cing <==,=== yards o! cotton goods0 5 ese yards o! goods not only s%!!ice to clot e is labo%rers# to clot e is @i!e, all is o!!spring and imsel! ab%ndantly# b%t also lea8e o8er eno%g cotton !or sale, in addition to paying an enormo%s rent in terms o! cotton goods0 &t is all so simpleS 7ed%ct t e price o! prod%ction !rom <==,=== yards o! cotton goods, and a s%rpl%s o! cotton goods m%st remain !or rent0 A%t it is indeed a nai8e conception to ded%ct t e price o! prod%ction o!, say, V1=,=== !rom <==,=== yards o! cotton goods, @it o%t kno@ing t e selling price, to ded%ct money !rom cotton goods, to ded%ct an exc ange-8al%e !rom a %se-8al%e as s%c , and t %s to determine t e s%rpl%s o! yards o! cotton goods o8er po%nds sterling0 &t is @orse t an sD%aring t e circle, @ ic is at least based %pon t e conception t at t ere is a limit at @ ic straig t lines and c%r8es imperceptibly !lo@ toget er0 A%t s%c is t e prescription o! M0 ,assy0 7ed%ct money !rom cotton goods, be!ore t e cotton goods a8e been con8erted into money, eit er in oneGs mind or in realityS W at remains is t e rent, @ ic , o@e8er, is to be grasped naturaliter Bsee, !or instance, Karl ?rnd /K0 ?rnd, Die naturgemXsse Lol-swirtschaft, gegenber dem Monopoliengeiste und dem Communismus, 6ana%, 182+, $0 261-6<0 I 0d01C and not by de8iltries o! sop istry0 5 e entire restoration o! rent in kind is !inally red%ced to t is !oolis ness, t e ded%ction o! t e price o! prod%ction !rom so many and so many b%s els o! @ eat, and t e s%btraction o! a s%m o! money !rom a c%bic meas%re0

II. Labour rent

&! @e consider gro%nd-rent in its simplest !orm, t at o! labour rent, @ ere t e direct prod%cer, %sing instr%ments o! labo%r Bplo%g , cattle, etc0C @ ic act%ally or legally belong to im, c%lti8ates soil act%ally o@ned by im d%ring part o! t e @eek, and @orks d%ring t e remaining days %pon t e estate o! t e !e%dal lord @it o%t any compensation !rom t e !e%dal lord, t e sit%ation ere is still D%ite clear, !or in t is case rent and s%rpl%s-8al%e are identical0 )ent, not pro!it, is t e !orm ere t ro%g @ ic %npaid s%rpl%s-labo%r expresses itsel!0 5o @ at extent t e labo%rer Ba sel!-s%staining ser!C can sec%re in t is case a s%rpl%s abo8e is indispensable necessities o! li!e, i0e0, a s%rpl%s abo8e t at @ ic @e @o%ld call @ages %nder t e capitalist mode o! prod%ction, depends, ot er circ%mstances remaining %nc anged, %pon t e proportion in @ ic is labo%r-time is di8ided into labo%r-time !or imsel! and en!orced labo%r-time !or is !e%dal lord0 5 is s%rpl%s abo8e t e indispensable reD%irements o! li!e, t e germ o! @ at appears as pro!it %nder t e capitalist mode o! prod%ction, is t ere!ore @ olly determined by t e amo%nt o! gro%ndrent, @ ic in t is case is not only directly %npaid s%rpl%s-labo%r, b%t also appears as s%c 0 &t is %npaid s%rpl%s-labo%r !or t e Ko@nerL o! t e means o! prod%ction, @ ic ere coincide @it t e land, and so !ar as t ey di!!er !rom it, are mere accessories to it0 5 at t e prod%ct o! t e ser! m%st ere s%!!ice to reprod%ce is conditions o! labo%r, in addition to is s%bsistence, is a circ%mstance @ ic remains t e same %nder all modes o! prod%ction0 For it is not t e res%lt o! t eir speci!ic !orm, b%t a nat%ral reD%isite o! all contin%o%s and reprod%cti8e labo%r in general, o! any contin%ing prod%ction, @ ic is al@ays sim%ltaneo%sly reprod%ction, i0e0, incl%ding reprod%ction o! its o@n operating conditions0 &t is !%rt ermore e8ident t at in all !orms in @ ic t e direct labo%rer remains t e KpossessorL o! t e means o! prod%ction and labo%r conditions necessary !or t e prod%ction o! is o@n means o! s%bsistence, t e property relations ip m%st sim%ltaneo%sly appear as a direct relation o! lords ip and ser8it%de, so t at t e direct prod%cer is not !ree# a lack o! !reedom @ ic may be red%ced !rom ser!dom @it en!orced labo%r to a mere trib%tary relations ip0 5 e direct prod%cer, according to o%r ass%mption, is to be !o%nd ere in possession o! is o@n means o! prod%ction, t e necessary material labo%r conditions reD%ired !or t e realisation o! is labo%r and t e prod%ction o! is means o! s%bsistence0 6e cond%cts is agric%lt%ral acti8ity and t e r%ral ome ind%stries connected @it it independently0 5 is

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independence is not %ndermined by t e circ%mstance t at t e small peasants may !orm among t emsel8es a more or less nat%ral prod%ction comm%nity, as t ey do in &ndia, since it is ere merely a D%estion o! independence !rom t e nominal lord o! t e manor0 (nder s%c conditions t e s%rpl%s-labo%r !or t e nominal o@ner o! t e land can only be extorted !rom t em by ot er t an economic press%re, @ ate8er t e !orm ass%med may be0 l8 5 is di!!ers !rom sla8e or plantation economy in t at t e sla8e @orks %nder alien conditions o! prod%ction and not independently0 5 %s, conditions o! personal dependence are reD%isite, a lack o! personal !reedom, no matter to @ at extent, and being tied to t e soil as its accessory, bondage in t e tr%e sense o! t e @ord0 $ o%ld t e direct prod%cers not be con!ronted by a pri8ate lando@ner, b%t rat er, as in ?sia, %nder direct s%bordination to a state @ ic stands o8er t em as t eir landlord and sim%ltaneo%sly as so8ereign, t en rent and taxes coincide, or rat er, t ere exists no tax @ ic di!!ers !rom t is !orm o! gro%nd-rent0 (nder s%c circ%mstances, t ere need exist no stronger political or economic press%re t an t at common to all s%bHection to t at state0 5 e state is t en t e s%preme lord0 $o8ereignty ere consists in t e o@ners ip o! land concentrated on a national scale0 A%t, on t e ot er and, no pri8ate o@ners ip o! land exists, alt o%g t ere is bot pri8ate and common possession and %se o! land0 5 e speci!ic economic !orm, in @ ic %npaid s%rpl%s-labo%r is p%mped o%t o! direct prod%cers, determines t e relations ip o! r%lers and r%led, as it gro@s directly o%t o! prod%ction itsel! and, in t%rn, reacts %pon it as a determining element0 (pon t is, o@e8er, is !o%nded t e entire !ormation o! t e economic comm%nity @ ic gro@s %p o%t o! t e prod%ction relations t emsel8es, t ereby sim%ltaneo%sly its speci!ic political !orm0 &t is al@ays t e direct relations ip o! t e o@ners o! t e conditions o! prod%ction to t e direct prod%cers I a relation al@ays nat%rally corresponding to a de!inite stage in t e de8elopment o! t e met ods o! labo%r and t ereby its social prod%cti8ity I @ ic re8eals t e innermost secret, t e idden basis o! t e entire social str%ct%re and @it it t e political !orm o! t e relation o! so8ereignty and dependence, in s ort, t e corresponding speci!ic !orm o! t e state0 5 is does not pre8ent t e same economic basis I t e same !rom t e standpoint o! its main conditions I d%e to inn%merable di!!erent empirical circ%mstances, nat%ral en8ironment, racial relations, external istorical in!l%ences, etc0 !rom s o@ing in!inite 8ariations and gradations in appearance, @ ic can be ascertained only by analysis o! t e empirically gi8en circ%mstances0 $o m%c is e8ident @it respect to labo%r rent, t e simplest and most primiti8e !orm o! rent: )ent is ere t e prime8al !orm o! s%rpl%s-labo%r and coincides @it it0 A%t t is identity o! s%rpl%s8al%e @it %npaid labo%r o! ot ers need not be analysed ere beca%se it still exists in its 8isible, palpable !orm, since t e labo%r o! t e direct prod%cer !or imsel! is still separated in space and time !rom is labo%r !or t e landlord and t e latter appears directly in t e br%tal !orm o! en!orced labo%r !or a t ird person0 &n t e same @ay t e Kattrib%teL possessed by t e soil to prod%ce rent is ere red%ced to a tangibly open secret, !or t e disposition to !%rnis rent ere also incl%des %man labo%r-po@er bo%nd to t e soil, and t e property relation @ ic compels t e o@ner o! labo%rpo@er to dri8e it on and acti8ate it beyond s%c meas%re as is reD%ired to satis!y is o@n indispensable needs0 )ent consists directly in t e appropriation o! t is s%rpl%s expendit%re o! labo%r-po@er by t e landlord# !or t e direct prod%cer pays im no additional rent0 6ere, @ ere s%rpl%s-8al%e and rent are not only identical b%t @ ere s%rpl%s-8al%e as t e tangible !orm o! s%rpl%s-labo%r, t e nat%ral conditions or limits o! rent, being t ose o! s%rpl%s-8al%e in general, are plainly clear0 5 e direct prod%cer m%st 1C possess eno%g labo%r-po@er, and <C t e nat%ral conditions o! is labo%r, abo8e all t e soil c%lti8ated by im, m%st be prod%cti8e eno%g , in a @ord, t e nat%ral prod%cti8ity o! is labo%r m%st be big eno%g to gi8e im t e possibility o! retaining some s%rpl%s-labo%r o8er and abo8e t at reD%ired !or t e satis!action o! is o@n indispensable needs0 &t is not t is possibility @ ic creates t e rent, b%t rat er comp%lsion @ ic t%rns t is possibility into reality0 A%t t e possibility itsel! is conditioned by s%bHecti8e and obHecti8e nat%ral circ%mstances0 ?nd ere too lies not ing at all mysterio%s0 $ o%ld labo%r-po@er

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be min%te, and t e nat%ral conditions o! labo%r scanty, t en t e s%rpl%s-labo%r is small, b%t in s%c a case so are t e @ants o! t e prod%cers on t e one and and t e relati8e n%mber o! exploiters o! s%rpl%s-labo%r on t e ot er, and !inally so is t e s%rpl%s-prod%ct, @ ereby t is barely prod%cti8e s%rpl%s-labo%r is realised !or t ose !e@ exploiting lando@ners0 Finally, labo%r rent in itsel! implies t at, all ot er circ%mstances remaining eD%al, it @ill depend @ olly %pon t e relati8e amo%nt o! s%rpl%s-labo%r, or en!orced labo%r, to @ at extent t e direct prod%cer s all be enabled to impro8e is o@n condition, to acD%ire @ealt , to prod%ce an excess o8er and abo8e is indispensable means o! s%bsistence, or, i! @e @is to anticipate t e capitalist mode o! expression, @ et er e s all be able to prod%ce a pro!it !or imsel!, and o@ m%c o! a pro!it, i0e0, an excess o8er is @ages @ ic a8e been prod%ced by imsel!0 )ent ere is t e normal, all-absorbing, so to say legitimate !orm o! s%rpl%s-labo%r, and !ar !rom being excess o8er pro!it, @ ic means in t is case being abo8e any ot er excess o8er @ages, it is rat er t at t e amo%nt o! s%c pro!it, and e8en its 8ery existence, depends, ot er circ%mstances being eD%al, %pon t e amo%nt o! rent, i0e0, t e en!orced s%rpl%s-labo%r to be s%rrendered to t e lando@ners0 $ince t e direct prod%cer is not t e o@ner, b%t only a possessor, and since all is s%rpl%s-labo%r de Yure act%ally belongs to t e landlord, some istorians a8e expressed astonis ment t at it s o%ld be at all possible !or t ose s%bHect to en!orced labo%r, or ser!s, to acD%ire any independent property, or relati8ely speaking, @ealt , %nder s%c circ%mstances0 6o@e8er, it is e8ident t at tradition m%st play a dominant role in t e primiti8e and %nde8eloped circ%mstances on @ ic t ese social prod%ction relations and t e corresponding mode o! prod%ction are based0 &t is !%rt ermore clear t at ere as al@ays it is in t e interest o! t e r%ling section o! society to sanction t e existing order as la@ and to legally establis its limits gi8en t ro%g %sage and tradition0 ?part !rom all else, t is, by t e @ay, comes abo%t o! itsel! as soon as t e constant reprod%ction o! t e basis o! t e existing order and its !%ndamental relations ass%mes a reg%lated and orderly !orm in t e co%rse o! time0 ?nd s%c reg%lation and order are t emsel8es indispensable elements o! any mode o! prod%ction, i! it is to ass%me social stability and independence !rom mere c ance and arbitrariness0 5 ese are precisely t e !orm o! its social stability and t ere!ore its relati8e !reedom !rom mere arbitrariness and mere c ance0 (nder back@ard conditions o! t e prod%ction process as @ell as t e corresponding social relations, it ac ie8es t is !orm by mere repetition o! t eir 8ery reprod%ction0 &! t is as contin%ed on !or some time, it entrenc es itsel! as c%stom and tradition and is !inally sanctioned as an explicit la@0 6o@e8er, since t e !orm o! t is s%rpl%s-labo%r, en!orced labo%r, is based %pon t e imper!ect de8elopment o! all social prod%cti8e po@ers and t e cr%deness o! t e met ods o! labo%r itsel!, it @ill nat%rally absorb a relati8ely m%c smaller portion o! t e direct prod%cerGs total labo%r t an %nder de8eloped modes o! prod%ction, partic%larly t e capitalist mode o! prod%ction0 5ake it, !or instance, t at t e en!orced labo%r !or t e landlord originally amo%nted to t@o days per @eek0 5 ese t@o days o! en!orced labo%r per @eek are t ereby !ixed, are a constant magnit%de, legally reg%lated by prescripti8e or @ritten la@0 A%t t e prod%cti8ity o! t e remaining days o! t e @eek, @ ic are at t e disposal o! t e direct prod%cer imsel!, is a 8ariable magnit%de, @ ic m%st de8elop in t e co%rse o! is experience, H%st as t e ne@ @ants e acD%ires, and H%st as t e expansion o! t e market !or is prod%ct and t e increasing ass%rance @it @ ic e disposes o! t is portion o! is labo%r-po@er @ill sp%r im on to a greater exertion o! is labo%r-po@er, @ ereby it s o%ld not be !orgotten t at t e employment o! is labo%r-po@er is by no means con!ined to agric%lt%re, b%t incl%des r%ral ome ind%stry0 5 e possibility is ere presented !or de!inite economic de8elopment taking place, depending, o! co%rse, %pon !a8o%rable circ%mstances, inborn racial c aracteristics, etc0

III. )ent In 4ind

5 e trans!ormation o! labo%r rent into rent in kind c anges not ing !rom t e economic standpoint in t e nat%re o! gro%nd-rent0 5 e latter consists, in t e !orms considered ere, in t at rent is t e

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sole pre8ailing and normal !orm o! s%rpl%s-8al%e, or s%rpl%s-labo%r0 5 is is !%rt er expressed in t e !act t at it is t e only s%rpl%s-labo%r, or t e only s%rpl%s-prod%ct, @ ic t e direct prod%cer, @ o is in possessiono! t e labo%r conditions needed !or is o@n reprod%ction, m%st gi8e %p to t e owner o! t e land, @ ic in t is sit%ation is t e all-embracing condition o! labo%r0 ?nd, !%rt ermore, t at land is t e only condition o! labo%r @ ic con!ronts t e direct prod%cer as alien property, independent o! im, and personi!ied by t e landlord0 5o @ ate8er extent rent in kind is t e pre8ailing and dominant !orm o! gro%nd-rent, it is !%rt er-more al@ays more or less accompanied by s%r8i8als o! t e earlier !orm, i0e0, o! rent paid directly in labo%r, cor8Fe-labo%r, no matter @ et er t e landlord be a pri8ate person or t e state0 )ent in kind pres%pposes a ig er stage o! ci8ilisation !or t e direct prod%cer, i0e0, a ig er le8el o! de8elopment o! is labo%r and o! society in general0 ?nd it is distinct !rom t e preceding !orm in t at s%rpl%s-labo%r needs no longer be per!ormed in its nat%ral !orm, t %s no longer %nder t e direct s%per8ision and comp%lsion o! t e landlord or is representati8es: t e direct prod%cer is dri8en rat er by !orce o! circ%mstances t an by direct coercion, t ro%g legal enactment rat er t an t e @ ip, to per!orm it on is o@n responsibility0 $%rpl%s-prod%ction, in t e sense o! prod%ction beyond t e indispensable needs o! t e direct prod%cer, and @it in t e !ield o! prod%ction act%ally belonging to im, %pon t e land exploited by imsel! instead o!, as earlier, %pon t e nearby lordGs estate beyond is o@n land, as already become a sel!-%nderstood r%le ere0 &n t is relation t e direct prod%cer more or less disposes o! is entire labo%r-time, alt o%g , as pre8io%sly, a part o! t is labo%r-time, at !irst practically t e entire s%rpl%s portion o! it, belongs to t e landlord @it o%t compensation# except t at t e landlord no longer directly recei8es t is s%rpl%s-labo%r in its nat%ral !orm, b%t rat er in t e prod%ctsG nat%ral !orm in @ ic it is realised0 5 e b%rdensome, and according to t e @ay in @ ic en!orced labo%r is reg%lated, more or less dist%rbing interr%ption by @ork !or t e landlord Bsee A%c &, Kap0 4&&&, <C /Englis edition ; J, < I 0d1 BKMan%!act%rer and AoyardLC stops @ ere8er rent in kind appears in p%re !orm, or at least it is red%ced to a !e@ s ort inter8als d%ring t e year, @ en a contin%ation o! some cor8Fe-labo%r side by side @it rent in kind takes place0 5 e labo%r o! t e prod%cer !or imsel! and is labo%r !or t e landlord are no longer palpably separated by time and space0 5 is rent in kind, in its p%re !orm, @ ile it may drag !ragments along into more ig ly de8eloped modes o! prod%ction and prod%ction relations, still pres%pposes !or its existence a nat%ral economy, i0e0, t at t e conditions o! t e economy are eit er @ olly or !or t e o8er@ elming part prod%ced by t e economy itsel!, directly replaced and reprod%ced o%t o! its gross prod%ct0 &t !%rt ermore pres%pposes t e combination o! r%ral ome ind%stry @it agric%lt%re0 5 e s%rpl%s-prod%ct, @ ic !orms t e rent, is t e prod%ct o! t is combined agric%lt%ral and ind%strial !amily labo%r, no matter @ et er rent in kind contains more or less o! t e ind%strial prod%ct, as is o!ten t e case in t e Middle ?ges, or @ et er it is paid only in t e !orm o! act%al prod%cts o! t e land0 &n t is !orm o! rent it is by no means necessary !or rent in kind, @ ic represents t e s%rpl%s-labo%r, to !%lly ex a%st t e entire s%rpl%s-labo%r o! t e r%ral !amily0 ;ompared @it labo%r rent, t e prod%cer rat er as more room !or action to gain time !or s%rpl%s-labo%r @ ose prod%ct s all belong to imsel!, as @ell as t e prod%ct o! is labo%r @ ic satis!ies is indispensable needs0 $imilarly, t is !orm @ill gi8e rise to greater di!!erences in t e economic position o! t e indi8id%al direct prod%cers0 ?t least t e possibility !or s%c a di!!erentiation exists, and t e possibility !or t e direct prod%cer to a8e in t%rn acD%ired t e means to exploit ot er labo%rers directly0 5 is, o@e8er, does not concern %s ere, since @e are dealing @it rent in kind in its p%re !orm# H%st as in general @e cannot enter into t e endless 8ariety o! combinations @ erein t e 8ario%s !orms o! rent may be %nited, ad%lterated and amalgamated0 5 e !orm o! rent in kind, by being bo%nd to a de!inite type o! prod%ct and prod%ction itsel! and t ro%g its indispensable combination o! agric%lt%re and domestic ind%stry, t ro%g its almost complete sel!-s%!!iciency @ ereby t e peasant !amily s%pports itsel! t ro%g its independence !rom t e market and t e mo8ement o! prod%ction and istory o! t at section o! society lying o%tside o! its sp ere, in s ort o@ing to t e c aracter o! nat%ral economy in general, t is !orm is D%ite adapted to !%rnis ing t e basis !or stationary social conditions as @e see, e0g0, in

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?sia0 6ere, as in t e earlier !orm o! labo%r rent, gro%nd-rent is t e normal !orm o! s%rpl%s-8al%e, and t %s o! s%rpl%s-labo%r, i0e0, o! t e entire excess labo%r @ ic t e direct prod%cer m%st per!orm gratis, ence act%ally %nder comp%lsion alt o%g t is comp%lsion no longer con!ronts im in t e old br%tal !orm I !or t e bene!it o! t e o@ner o! is essential condition o! labo%r, t e land0 5 e pro!it, i! by erroneo%sly anticipating @e may t %s call t at portion o! t e direct prod%cerGs labo%r excess o8er is necessary labo%r, @ ic e retains !or imsel!, as so little to do @it determining rent in kind, t at t is pro!it, on t e contrary, gro@s %p be ind t e back o! rent and !inds its nat%ral limit in t e siEe o! rent in kind0 5 e latter may ass%me dimensions @ ic serio%sly imperil reprod%ction o! t e conditions o! labo%r, t e means o! prod%ction t emsel8es, rendering t e expansion o! prod%ction more or less impossible and red%cing t e direct prod%cers to t e p ysical minim%m o! means o! s%bsistence0 5 is is partic%larly t e case, @ en t is !orm is met @it and exploited by a conD%ering commercial nation, e0g0, t e Englis in &ndia0

IV. *one#,)ent
Ay money-rent I as distinct !rom ind%strial and commercial gro%nd-rent based %pon t e capitalist mode o! prod%ction, @ ic is b%t an excess o8er a8erage pro!it I @e ere mean t e gro%nd-rent @ ic arises !rom a mere c ange in !orm o! rent in kind, H%st as t e latter in t%rn is b%t a modi!ication o! labo%r rent0 5 e direct prod%cer ere t%rns o8er instead o! t e prod%ct, its price to t e landlord B@ o may be eit er t e state or a pri8ate indi8id%alC0 ?n excess o! prod%cts in t eir nat%ral !orm no longer s%!!ices# it m%st be con8erted !rom its nat%ral !orm into money-!orm0 ?lt o%g t e direct prod%cer still contin%es to prod%ce at least t e greater part o! is means o! s%bsistence imsel!, a certain portion o! t is prod%ct m%st no@ be con8erted into commodities, m%st be prod%ced as commodities0 5 e c aracter o! t e entire mode o! prod%ction is t %s more or less c anged0 &t loses its independence, its detac ment !rom social connection0 5 e ratio o! cost o! prod%ction, @ ic no@ comprises greater or lesser expendit%res o! money, becomes decisi8e# at any rate, t e excess o! t at portion o! gross prod%ct to be con8erted into money o8er t at portion @ ic m%st ser8e, on t e one and, as means o! reprod%ction again, and, on t e ot er, as means o! direct s%bsistence, ass%mes a determining role0 6o@e8er, t e basis o! t is type o! rent, alt o%g approac ing its dissol%tion, remains t e same as t at o! rent in kind, @ ic constit%tes its point o! depart%re0 5 e direct prod%cer as be!ore is still possessor o! t e land eit er t ro%g in eritance or some ot er traditional rig t, and m%st per!orm !or is lord, as o@ner o! is most essential condition o! prod%ction, excess cor8Fe-labo%r, t at is, %npaid labo%r !or @ ic no eD%i8alent is ret%rned, in t e !orm o! a s%rpl%s-prod%ct trans!ormed into money0 3@ners ip o! t e conditions o! labo%r as distinct !rom land, s%c as agric%lt%ral implements and ot er goods and c attels, is trans!ormed into t e property o! t e direct prod%cer e8en %nder t e earlier !orms o! rent, !irst in !act, and t en also legally, and e8en more so is t is t e precondition !or t e !orm o! money-rent0 5 e trans!ormation o! rent in kind into money-rent, taking place !irst sporadically and t en on a more or less national scale, pres%pposes a considerable de8elopment o! commerce, o! %rban ind%stry, o! commodity-prod%ction in general, and t ereby o! money circ%lation0 &t !%rt ermore ass%mes a market-price !or prod%cts, and t at t ey be sold at prices ro%g ly approximating t eir 8al%es, @ ic need not at all be t e case %nder earlier !orms0 &n Eastern E%rope @e may still partly obser8e t is trans!ormation taking place %nder o%r 8ery eyes0 6o@ %n!easible it can be @it o%t a certain de8elopment o! social labo%r prod%cti8ity is pro8ed by 8ario%s %ns%ccess!%l attempts to carry it t ro%g %nder t e )oman Empire, and by relapses into rent in kind a!ter seeking to con8ert at least t e state tax portion o! t is rent into money-rent0 5 e same transitional di!!ic%lties are e8idenced, e0g0, in pre-re8ol%tionary France, @ en money-rent @as combined @it and ad%lterated by, s%r8i8als o! its earlier !orms0 Money-rent, as a transm%ted !orm o! rent in kind, and in antit esis to it, is, ne8ert eless, t e !inal !orm, and sim%ltaneo%sly t e !orm o! dissol%tion o! t e type o! gro%nd-rent @ ic @e a8e ereto!ore considered, namely gro%nd-rent as t e normal !orm o! s%rpl%s-8al%e and o! t e %npaid

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s%rpl%s-labo%r to be per!ormed !or t e o@ner o! t e conditions o! prod%ction0 &n its p%re !orm, t is rent, like labo%r rent and rent in kind, represents no excess o8er pro!it0 &t absorbs t e pro!it, as it is %nderstood0 &n so !ar as pro!it arises beside it practically as a separate portion o! excess labo%r, money-rent like rent in its earlier !orms still constit%tes t e normal limit o! s%c embryonic pro!it, @ ic can only de8elop in relation to t e possibilities o! exploitation, be it o! oneGs o@n excess labo%r or t at o! anot er, @ ic remains a!ter t e per!ormance o! t e s%rpl%slabo%r represented by money-rent0 $ o%ld any pro!it act%ally arise along @it t is rent, t en t is pro!it does not constit%te t e limit o! rent, b%t rat er con8ersely, t e rent is t e limit o! t e pro!it0 6o@e8er, as already indicated, money-rent is sim%ltaneo%sly t e !orm o! dissol%tion o! t e gro%nd-rent considered t %s !ar, coinciding prima facie @it s%rpl%s-8al%e and s%rpl%s-labo%r, i0e0, gro%nd-rent as t e normal and dominant !orm o! s%rpl%s-8al%e0 &n its !%rt er de8elopment money-rent m%st lead I aside !rom all intermediate !orms, e0g0, t e small peasant tenant !armer I eit er to t e trans!ormation o! land into peasantsG !ree old, or to t e !orm corresponding to t e capitalist mode o! prod%ction, t at is, to rent paid by t e capitalist tenant !armer0 Wit money-rent pre8ailing, t e traditional and c%stomary legal relations ip bet@een landlord and s%bHects @ o possess and c%lti8ate a part o! t e land, is necessarily t%rned into a p%re money relations ip !ixed contract%ally in accordance @it t e r%les o! positi8e la@0 5 e possessor engaged in c%lti8ation t %s becomes 8irt%ally a mere tenant0 5 is trans!ormation ser8es on t e one and, pro8ided ot er general prod%ction relations permit, to expropriate more and more t e old peasant possessors and to s%bstit%te capitalist tenants in t eir stead0 3n t e ot er and, it leads to t e !ormer possessor b%ying imsel! !ree !rom is rent obligation and to is trans!ormation into an independent peasant @it complete o@ners ip o! t e land e tills0 5 e trans!ormation o! rent in kind into money-rent is !%rt ermore not only ine8itably accompanied, b%t e8en anticipated, by t e !ormation o! a class o! propertyless day-labo%rers, @ o ire t emsel8es o%t !or money0 7%ring t eir genesis, @ en t is ne@ class appears b%t sporadically, t e c%stom necessarily de8elops among t e more prospero%s peasants s%bHect to rent payments o! exploiting agric%lt%ral @age-labo%rers !or t eir o@n acco%nt, m%c as in !e%dal times, @ en t e more @ell-to-do peasant ser!s t emsel8es also eld ser!s0 &n t is @ay, t ey grad%ally acD%ire t e possibility o! acc%m%lating a certain amo%nt o! @ealt and t emsel8es becoming trans!ormed into !%t%re capitalists0 5 e old sel!-employed possessors o! land t emsel8es t %s gi8e rise to a n%rsery sc ool !or capitalist tenants, @ ose de8elopment is conditioned by t e general de8elopment o! capitalist prod%ction beyond t e bo%nds o! t e co%ntry-side0 5 is class s oots %p 8ery rapidly @ en partic%larly !a8o%rable circ%mstances come to its aid, as in England in t e 16t cent%ry, @ ere t e t en progressi8e depreciation o! money enric ed t em %nder t e c%stomary long leases at t e expense o! t e landlords0 F%rt ermore: as soon as rent ass%mes t e !orm o! money-rent, and t ereby t e relations ip bet@een rent-paying peasant and landlord becomes a relations ip !ixed by contract I a de8elopment @ ic is only possible generally @ en t e @orld-market, commerce and man%!act%re a8e reac ed a certain relati8ely ig le8el I t e leasing o! land to capitalists ine8itably also makes its appearance0 5 e latter it erto stood beyond t e r%ral limits and no@ carry o8er to t e co%ntryside and agric%lt%re t e capital acD%ired in t e cities and @it it t e capitalist mode o! operation de8eloped I i0e0, creating a prod%ct as a mere commodity and solely as a means o! appropriating s%rpl%s-8al%e0 5 is !orm can become t e general r%le only in t ose co%ntries @ ic dominate t e @orld-market in t e period o! transition !rom t e !e%dal to t e capitalist mode o! prod%ction0 W en t e capitalist tenant !armer steps in bet@een landlord and act%al tiller o! t e soil, all relations @ ic arose o%t o! t e old r%ral mode o! prod%ction are torn as%nder0 5 e !armer becomes t e act%al commander o! t ese agric%lt%ral labo%rers and t e act%al exploiter o! t eir s%rpl%s-labo%r, @ ereas t e landlord maintains a direct relations ip, and indeed simply a money and contract%al relations ip, solely @it t is capitalist tenant0 5 %s, t e nat%re o!

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rent is also trans!ormed, not merely in !act and by c ance, as occ%rred in part e8en %nder earlier !orms, b%t normally, in its recognised and pre8ailing !orm0 From t e normal !orm o! s%rpl%s8al%e and s%rpl%s-labo%r, it descends to a mere excess o! t is s%rpl%s-labo%r o8er t at portion o! it appropriated by t e exploiting capitalist in t e !orm o! pro!it# H%st as t e total s%rpl%s-labo%r, pro!it and excess o8er pro!it, is extracted directly by im, collected in t e !orm o! t e total s%rpl%s-prod%ct, and t%rned into cas 0 &t is only t e excess portion o! t is s%rpl%s-8al%e @ ic is extracted by im !rom t e agric%lt%ral labo%rer by direct exploitation, by means o! is capital, @ ic e t%rns o8er to t e landlord as rent0 6o@ m%c or o@ little e t%rns o8er to t e latter depends, on t e a8erage, %pon t e limits set by t e a8erage pro!it @ ic is realised by capital in t e non-agric%lt%ral sp eres o! prod%ction, and by t e prices o! non-agric%lt%ral prod%ction reg%lated by t is a8erage pro!it0 From a normal !orm o! s%rpl%s-8al%e and s%rpl%s-labo%r, rent as no@ become trans!ormed into an excess o8er t at portion o! t e s%rpl%s-labo%r claimed in ad8ance by capital as its legitimate and normal s are, and c aracteristic o! t is partic%lar sp ere o! prod%ction, t e agric%lt%ral sp ere o! prod%ction0 ,ro!it, instead o! rent, as no@ become t e normal !orm o! s%rpl%s-8al%e and rent still exists solely as a !orm, not o! s%rpl%s-8al%e in general, b%t o! one o! its o!!s oots, s%rpl%s-pro!it, @ ic ass%mes an independent !orm %nder partic%lar circ%mstances0 &t is not necessary to elaborate t e manner in @ ic a grad%al trans!ormation in t e mode o! prod%ction itsel! corresponds to t is trans!ormation0 5 is already !ollo@s !rom t e !act t at it is normal !or t e capitalist tenant !armer to prod%ce agric%lt%ral prod%cts as commodities, and t at, @ ile !ormerly only t e excess o8er is means o! s%bsistence @as con8erted into commodities, no@ b%t a relati8ely insigni!icant part o! t ese commodities is directly %sed by im as means o! s%bsistence0 &t is no longer t e land, b%t rat er capital, @ ic as no@ bro%g t e8en agric%lt%ral labo%r %nder its direct s@ay and prod%cti8eness0 5 e a8erage pro!it and t e price o! prod%ction reg%lated t ereby are !ormed o%tside o! relations in t e co%ntry-side and @it in t e sp ere o! %rban trade and man%!act%re0 5 e pro!it o! t e rentpaying peasant does not enter into it as an eD%alising !actor, !or is relation to t e landlord is not a capitalist one0 &n so !ar as e makes pro!it, i0e0, realises an excess abo8e is necessary means o! s%bsistence, eit er by is o@n labo%r or t ro%g exploiting ot er peopleGs labo%r, it is done be ind t e back o! t e normal relations ip, and ot er circ%mstances being eD%al, t e siEe o! t is pro!it does not determine rent, b%t on t e contrary, it is determined by t e rent as its limit0 5 e ig rate o! pro!it in t e Middle ?ges is not entirely d%e to t e lo@ composition o! capital, in @ ic t e 8ariable component in8ested in @ages predominates0 &t is d%e to s@indling on t e land, t e appropriation o! a portion o! t e landlordGs rent and o! t e income o! is 8assals0 &! t e co%ntry-side exploits t e to@n politically in t e Middle ?ges, @ ere8er !e%dalism as not been broken do@n by exceptional %rban de8elopment I as in &taly, t e to@n, on t e ot er and, exploits t e land economically e8ery@ ere and @it o%t exception, t ro%g its monopoly prices, its system o! taxation, its g%ild organisation, its direct commercial !ra%d%lence and its %s%ry0 3ne mig t imagine t at t e mere appearance o! t e capitalist !armer in agric%lt%ral prod%ction @o%ld pro8e t at t e price o! agric%lt%ral prod%cts, @ ic !rom time immemorial a8e paid rent in one !orm or anot er, m%st be ig er, at least at t e time o! t is appearance, t an t e prices o! prod%ction o! man%!act%re @ et er it be beca%se t e price o! s%c agric%lt%ral prod%cts as reac ed a monopoly price le8el, or as risen as ig as t e 8al%e o! t e agric%lt%ral prod%cts, and t eir 8al%e act%ally is abo8e t e price o! prod%ction reg%lated by t e a8erage pro!it0 For @ere t is not so, t e capitalist !armer co%ld not at all realise, at t e existing prices o! agric%lt%ral prod%ce, !irst t e a8erage pro!it o%t o! t e price o! t ese prod%cts, and t en pay o%t o! t e same price an excess abo8e t is pro!it in t e !orm o! rent0 3ne mig t concl%de !rom t is t at t e general rate o! pro!it, @ ic g%ides t e capitalist !armer in is contract @it t e landlord, as been !ormed @it o%t incl%ding rent, and, t ere!ore, as soon as it ass%mes a reg%lating role in agric%lt%ral prod%ction, it !inds t is excess at and and pays it to t e landlord0 &t is in t is traditional manner t at, !or instance, 6err )odbert%s explains t e matter0 /P0 )odbert%s, Sociale Griefe an von

+61

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Hirchmann, Dritter GriefI "iderlegung der 9icardo!schen ,ehre von der Grundrente und Gegrndung einer neuen 9ententheorie. $ee also K0 Marx, 4heorien ber den Mehrwert. <0 5eil,;A>@, pp. 3-1=6, 12<-+20 I 0d.1 A%t: 'irst0 5 is appearance o! capital as an independent and leading !orce in agric%lt%re does not take place all at once and generally, b%t grad%ally and in partic%lar lines o! prod%ction0 &t encompasses at !irst, not agric%lt%re proper, b%t s%c branc es o! prod%ction as cattle-breeding, especially s eep-raising, @ ose principal prod%ct, @ool, o!!ers at t e early stages a constant excess o! market-price o8er price o! prod%ction d%ring t e rise o! ind%stry, and t is does not le8el o%t %ntil later0 5 %s in England d%ring t e 16t cent%ry0 Secondly0 $ince t is capitalist prod%ction appears at !irst b%t sporadically, t e ass%mption cannot be disp%ted t at it !irst extends only to s%c land categories as are able, t ro%g t eir partic%lar !ertility, or t eir exceptionally !a8o%rable location, to generally pay a di!!erential rent0 4hirdly0 'et %s e8en ass%me t at at t e time t is mode o! prod%ction appeared I and t is indeed pres%pposes an increasing preponderance o! %rban demand I t e prices o! agric%lt%ral prod%cts @ere ig er t an t e price o! prod%ction, as @as do%btless t e case in England d%ring t e last t ird o! t e 1>t cent%ry0 -e8ert eless, as soon as t is mode o! prod%ction as some@ at extricated itsel! !rom t e mere s%bordination o! agric%lt%re to capital, and as soon as agric%lt%ral impro8ement and t e red%ction o! prod%ction costs, @ ic necessarily accompany its de8elopment, a8e taken place, t e balance @ill be restored by a reaction, a !all in t e price o! agric%lt%ral prod%ce, as appened in England in t e !irst al! o! t e 18t cent%ry0 )ent, t %s, as an excess o8er t e a8erage pro!it cannot be explained in t is traditional @ay0 W ate8er may be t e existing istorical circ%mstances at t e time rent !irst appears, once it as str%ck root it cannot exist except %nder t e modern conditions earlier described0 Finally, it s o%ld be noted in t e trans!ormation o! rent in kind into money-rent t at along @it it capitalised rent, or t e price o! land, and t %s its alienability and alienation become essential !actors, and t at t ereby not only can t e !ormer peasant s%bHect to payment o! rent be trans!ormed into an independent peasant proprietor, b%t also %rban and ot er moneyed people can b%y real estate in order to lease it eit er to peasants or capitalists and t %s enHoy rent as a !orm o! interest on t eir capital so in8ested# t at, t ere!ore, t is circ%mstance like@ise !acilitates t e trans!ormation o! t e !ormer mode o! exploitation, t e relation bet@een o@ner and act%al c%lti8ator o! t e land, and o! rent itsel!0

V. *5ta#age And Peasant Proprietorship "f Land Parcels

We a8e no@ arri8ed at t e end o! o%r elaboration o! gro%nd-rent0 &n all t ese !orms o! gro%nd-rent, @ et er labo%r rent, rent in kind, or money-rent Bas merely a c anged !orm o! rent in kindC, t e one paying rent is al@ays s%pposed to be t e act%al c%lti8ator and possessor o! t e land, @ ose %npaid s%rpl%s-labo%r passes directly into t e ands o! t e landlord0 E8en in t e last !orm, money-rent in so !ar as it is Kp%re,L i0e0, merely a c anged !orm o! rent in kind I t is is not only possible, b%t act%ally takes place0 ?s a transitory !orm !rom t e original !orm o! rent to capitalist rent, @e may consider t e metayer system, or s are-cropping, %nder @ ic t e manager B!armerC !%rnis es labo%r B is o@n or anot erGsC, and also a portion o! @orking capital, and t e landlord !%rnis es, aside !rom land, anot er portion o! @orking capital Be0g0, cattleC, and t e prod%ct is di8ided bet@een tenant and landlord in de!inite proportions @ ic 8ary !rom co%ntry to co%ntry0 3n t e one and, t e !armer ere lacks s%!!icient capital reD%ired !or complete capitalist management0 3n t e ot er and, t e s are ere appropriated by t e landlord does not bear t e p%re !orm o! rent0 &t may act%ally incl%de interest on t e capital ad8anced by im and an excess rent0 &t may also absorb practically t e entire s%rpl%s-labo%r o! t e !armer, or lea8e im a greater or smaller portion o! t is s%rpl%s-

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labo%r0 A%t, essentially, rent no longer appears ere as t e normal !orm o! s%rpl%s-8al%e in general0 3n t e one and, t e s arecropper, @ et er e employs is o@n or anot erGs labo%r, is to lay claim to a portion o! t e prod%ct not in is capacity as labo%rer, b%t as possessor o! part o! t e instr%ments o! labo%r, as is o@n capitalist0 3n t e ot er and, t e landlord claims is s are not excl%si8ely on t e basis o! is land-o@ners ip, b%t also as lender o! capital0 l8i ? s%r8i8al o! t e old comm%nal o@ners ip o! land, @ ic ad end%red a!ter t e transition to independent peasant !arming, e0g0, in ,oland and )%mania, ser8ed t ere as a s%bter!%ge !or e!!ecting a transition to t e lo@er !orms o! gro%nd-rent0 ? portion o! t e land belongs to t e indi8id%al peasant and is tilled independently by im0 ?not er portion is tilled in common and creates a s%rpl%s-prod%ct, @ ic ser8es partly to co8er comm%nity expenses, partly as a reser8e in cases o! crop !ail%re, etc0 5 ese last t@o parts o! t e s%rpl%s-prod%ct, and %ltimately t e entire s%rpl%s-prod%ct incl%ding t e land %pon @ ic it as been gro@n, are more and more %s%rped by state o!!icials and pri8ate indi8id%als, and t %s t e originally !ree peasant proprietors, @ ose obligation to till t is land in common is maintained, are trans!ormed into 8assals s%bHect eit er to cor8Fe-labo%r or rent in kind# @ ile t e %s%rpers o! common land are trans!ormed into o@ners, not only o! t e %s%rped common lands, b%t e8en t e 8ery lands o! t e peasants t emsel8es0 We need not !%rt er in8estigate sla8e economy proper B@ ic like@ise passes t ro%g a metamorp osis !rom t e patriarc al system mainly !or ome %se to t e plantation system !or t e @orld-marketC nor t e management o! estates %nder @ ic t e landlords t emsel8es are independent c%lti8ators, possessing all instr%ments o! prod%ction, and exploiting t e labo%r o! !ree or %n!ree bondsmen, @ o are paid eit er in kind or money0 'andlord and o@ner o! t e instr%ments o! prod%ction, and t %s t e direct exploiter o! labo%rers incl%ded among t ese elements o! prod%ction, are in t is case one and t e same person0 )ent and pro!it like@ise coincide t en, t ere occ%rring no separation o! t e di!!erent !orms o! s%rpl%s-8al%e0 5 e entire s%rpl%s-labo%r o! t e labo%rers, @ ic is mani!ested ere in t e s%rpl%s-prod%ct, is extracted !rom t em directly by t e o@ner o! all instr%ments o! prod%ction, to @ ic belong t e land and, %nder t e original !orm o! sla8ery, t e immediate prod%cers t emsel8es0 W ere t e capitalist o%tlook pre8ails, as on ?merican plantations, t is entire s%rpl%s-8al%e is regarded as pro!it# @ ere neit er t e capitalist mode o! prod%ction itsel! exists, nor t e corresponding o%tlook as been trans!erred !rom capitalist co%ntries, it appears as rent0 ?t any rate, t is !orm presents no di!!ic%lties0 5 e income o! t e landlord, @ ate8er it may be called, t e a8ailable s%rpl%s-prod%ct appropriated by im, is ere t e normal and pre8ailing !orm, @ ereby t e entire %npaid s%rpl%s-labo%r is directly appropriated, and landed property !orms t e basis o! s%c appropriation0 F%rt er, proprietorship of land parcels. 5 e peasant ere is sim%ltaneo%sly t e !ree o@ner o! is land, @ ic appears as is principal instr%ment o! prod%ction, t e indispensable !ield o! employment !or is labo%r and is capital0 -o lease money is paid %nder t is !orm0 )ent, t ere!ore, does not appear as a separate !orm o! s%rpl%s-8al%e, alt o%g in co%ntries in @ ic ot er@ise t e capitalist mode o! prod%ction is de8eloped, it appears as a s%rpl%s-pro!it compared @it ot er lines o! prod%ction# b%t as s%rpl%s-pro!it @ ic , like all proceeds o! is labo%r in general, accr%es to t e peasant0 5 is !orm o! landed property pres%pposes, as in t e earlier older !orms, t at t e r%ral pop%lation greatly predominates n%merically o8er t e to@n pop%lation, so t at, e8en i! t e capitalist mode o! prod%ction ot er@ise pre8ails, it is b%t relati8ely little de8eloped, and t %s also in t e ot er lines o! prod%ction t e concentration o! capital is restricted to narro@ limits and a !ragmentation o! capital predominates0 &n t e nat%re o! t ings, t e greater portion o! agric%lt%ral prod%ce m%st be cons%med as direct means o! s%bsistence by t e prod%cers t emsel8es, t e peasants, and only t e excess abo8e t at @ill !ind its @ay as commodities into %rban commerce0 -o matter o@ t e a8erage market-price o! agric%lt%ral prod%cts may ere be reg%lated, di!!erential rent, an excess portion o! commodity-prices !rom s%perior or more !a8o%rably located land, m%st e8idently exist ere m%c as %nder t e capitalist mode o! prod%ction0 5 is di!!erential rent exists, e8en @ ere

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t is !orm appears %nder social conditions, %nder @ ic no general market-price as as yet been de8eloped# it appears t en in t e excess s%rpl%s-prod%ct0 3nly t en it !lo@s into t e pockets o! t e peasant @ ose labo%r is realised %nder more !a8o%rable nat%ral conditions0 5 e ass%mption ere is generally to be made t at no absol%te rent exists, i0e0, t at t e @orst soil does not pay any rent I precisely %nder t is !orm @ ere t e price o! land enters as a !actor in t e peasantGs act%al cost o! prod%ction @ et er beca%se in t e co%rse o! t is !ormGs !%rt er de8elopment eit er t e price o! land as been comp%ted at a certain money-8al%e, in di8iding %p an in eritance, or, d%ring t e constant c ange in o@ners ip o! an entire estate, or o! its component parts, t e land as been bo%g t by t e c%lti8ator imsel!, largely by raising money on mortgage# and, t ere!ore, @ ere t e price o! land, representing not ing more t an capitalised rent, is a !actor ass%med in ad8ance, and @ ere rent t %s seems to exist independently o! any di!!erentiation in !ertility and location o! t e land0 For, absol%te rent pres%pposes eit er realised excess in prod%ct 8al%e abo8e its price o! prod%ction, or a monopoly price exceeding t e 8al%e o! t e prod%ct0 A%t since agric%lt%re ere is carried on largely as c%lti8ation !or direct s%bsistence, and t e land exists as an indispensable !ield o! employment !or t e labo%r and capital o! t e maHority o! t e pop%lation, t e reg%lating market-price o! t e prod%ct @ill reac its 8al%e only %nder extraordinary circ%mstances0 A%t t is 8al%e @ill, generally, be ig er t an its price o! prod%ction o@ing to t e preponderant element o! li8ing labo%r, alt o%g t is excess o! 8al%e o8er price o! prod%ction @ill in t%rn be limited by t e lo@ composition e8en o! non-agric%lt%ral capital in co%ntries @it an economy composed predominantly o! land parcels0 For t e peasant o@ning a parcel, t e limit o! exploitation is not set by t e a8erage pro!it o! capital, in so !ar as e is a small capitalist# nor, on t e ot er and, by t e necessity o! rent, in so !ar as e is a lando@ner0 5 e absol%te limit !or im as a small capitalist is no more t an t e @ages e pays to imsel!, a!ter ded%cting is act%al costs0 $o long as t e price o! t e prod%ct co8ers t ese @ages, e @ill c%lti8ate is land, and o!ten at @ages do@n to a p ysical minim%m0 ?s !or is capacity as land proprietor, t e barrier o! o@ners ip is eliminated !or im, since it can make itsel! !elt only vis1.1vis a capital Bincl%ding labo%rC separated !rom land-o@ners ip, by erecting an obstacle to t e in8estment o! capital0 &t is tr%e, to be s%re, t at interest on t e price o! land I @ ic generally as to be paid to still anot er indi8id%al, t e mortgage creditor I is a barrier0 A%t t is interest can be paid precisely o%t o! t at portion o! s%rpl%s-labo%r @ ic @o%ld constit%te pro!it %nder capitalist conditions0 5 e rent anticipated in t e price o! land and in t e interest paid !or it can t ere!ore be not ing b%t a portion o! t e peasantGs capitalised s%rpl%s-labo%r o8er and abo8e t e labo%r indispensable !or is s%bsistence, @it o%t t is s%rpl%s-labo%r being realised in a part o! t e commodity-8al%e eD%al to t e entire a8erage pro!it, and still less in an excess abo8e t e s%rpl%s-labo%r realised in t e a8erage pro!it, i0e0, in a s%rpl%s-pro!it0 5 e rent may be a ded%ction !rom t e a8erage pro!it, or e8en t e only portion o! it @ ic is realised0 For t e peasant parcel older to c%lti8ate is land, or to b%y land !or c%lti8ation, it is t ere!ore not necessary, as %nder t e normal capitalist mode o! prod%ction, t at t e market-price o! t e agric%lt%ral prod%cts rise ig eno%g to a!!ord im t e a8erage pro!it, and still less a !ixed excess abo8e t is a8erage pro!it in t e !orm o! rent0 &t is not necessary, t ere!ore, t at t e market-price rise, eit er %p to t e 8al%e or t e price o! prod%ction o! is prod%ct0 5 is is one o! t e reasons @ y grain prices are lo@er in co%ntries @it predominant small peasant land proprietors ip t an in co%ntries @it a capitalist mode o! prod%ction0 3ne portion o! t e s%rpl%s-labo%r o! t e peasants, @ o @ork %nder t e least !a8o%rable conditions, is besto@ed gratis %pon society and does not at all enter into t e reg%lation o! price o! prod%ction or into t e creation o! 8al%e in general0 5 is lo@er price is conseD%ently a res%lt o! t e prod%cersG po8erty and by no means o! t eir labo%r prod%cti8ity0 5 is !orm o! !ree sel!-managing peasant proprietors ip o! land parcels as t e pre8ailing, normal !orm constit%tes, on t e one and, t e economic !o%ndation o! society d%ring t e best periods o! classical antiD%ity, and on t e ot er and, it is !o%nd among modern nations as one o! t e !orms arising !rom t e dissol%tion o! !e%dal land o@ners ip0 5 %s, t e yeomanry in England, t e

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peasantry in $@eden, t e Frenc and West :erman peasants0 We do not incl%de colonies ere, since t e independent peasant t ere de8elops %nder di!!erent conditions0 5 e !ree o@ners ip o! t e sel!-managing peasant is e8idently t e most normal !orm o! landed property !or small-scale operation, i0e0, !or a mode o! prod%ction, in @ ic possession o! t e land is a prereD%isite !or t e labo%rerGs o@ners ip o! t e prod%ct o! is o@n labo%r, and in @ ic t e c%lti8ator, be e !ree o@ner or 8assal, al@ays m%st prod%ce is o@n means o! s%bsistence independently, as an isolated labo%rer @it is !amily0 3@ners ip o! t e land is as necessary !or !%ll de8elopment o! t is mode o! prod%ction as o@ners ip o! tools is !or !ree de8elopment o! andicra!t prod%ction0 6ere is t e basis !or t e de8elopment o! personal independence0 &t is a necessary transitional stage !or t e de8elopment o! agric%lt%re itsel!0 5 e ca%ses @ ic bring abo%t its do@n!all s o@ its limitations0 5 ese are: 7estr%ction o! r%ral domestic ind%stry, @ ic !orms its normal s%pplement as a res%lt o! t e de8elopment o! large-scale ind%stry# a grad%al impo8eris ment and ex a%stion o! t e soil s%bHected to t is c%lti8ation# %s%rpation by big lando@ners o! t e common lands, @ ic constit%te t e second s%pplement o! t e management o! land parcels e8ery@ ere and @ ic alone enable it to raise cattle# competition, eit er o! t e plantation system or large-scale capitalist agric%lt%re0 &mpro8ements in agric%lt%re, @ ic on t e one and ca%se a !all in agric%lt%ral prices and, on t e ot er, reD%ire greater o%tlays and more extensi8e material conditions o! prod%ction, also contrib%te to@ards t is, as in England d%ring t e !irst al! o! t e 18t cent%ry0 ,roprietors ip o! land parcels by its 8ery nat%re excl%des t e de8elopment o! social prod%cti8e !orces o! labo%r, social !orms o! labo%r, social concentration o! capital, large-scale cattle-raising, and t e progressi8e application o! science0 (s%ry and a taxation system m%st impo8eris it e8ery@ ere0 5 e expendit%re o! capital in t e price o! t e land @it dra@s t is capital !rom c%lti8ation0 ?n in!inite !ragmentation o! means o! prod%ction, and isolation o! t e prod%cers t emsel8es0 Monstro%s @aste o! %man energy0 ,rogressi8e deterioration o! conditions o! prod%ction and increased prices o! means o! prod%ction I an ine8itable la@ o! proprietors ip o! parcels0 ;alamity o! seasonal ab%ndance !or t is mode o! prod%ction0l8ii 3ne o! t e speci!ic e8ils o! small-scale agric%lt%re @ ere it is combined @it !ree land-o@ners ip arises !rom t e c%lti8atorGs in8esting capital in t e p%rc ase o! land0 B5 e same applies also to t e transitory !orm, in @ ic t e big lando@ner in8ests capital, !irst, to b%y land, and second, to manage it as is o@n tenant !armer0C 3@ing to t e c angeable nat%re @ ic t e land ere ass%mes as a mere commodity, t e c anges o! o@ners ip increase, l8iii so t at t e land, !rom t e peasantGs 8ie@point, enters ane@ as an in8estment o! capital @it eac s%ccessi8e generation and di8ision o! estates, i0e0, it becomes land p%rc ased by im0 5 e price o! land ere !orms a @eig ty element o! t e indi8id%al %nprod%cti8e costs o! prod%ction or cost-price o! t e prod%ct !or t e indi8id%al prod%cer0 5 e price o! land is not ing b%t capitalised and t ere!ore anticipated rent0 &! capitalist met ods are employed by agric%lt%re, so t at t e landlord recei8es only rent, and t e !armer pays not ing !or land except t is ann%al rent, t en it is e8ident t at t e capital in8ested by t e lando@ner imsel! in p%rc asing t e land constit%tes indeed an interest-bearing in8estment o! capital !or im, b%t as absol%tely not ing to do @it capital in8ested in agric%lt%re itsel!0 &t !orms neit er a part o! t e !ixed, nor o! t e circ%lating, capital employed ere# lix it merely sec%res !or t e b%yer a claim to recei8e ann%al rent, b%t as absol%tely not ing to do @it t e prod%ction o! t e rent itsel!0 5 e b%yer o! land H%st pays is capital o%t to t e one @ o sells t e land, and t e seller in ret%rn relinD%is es is o@ners ip o! t e land0 5 %s t is capital no longer exists as t e capital o! t e p%rc aser# e no longer as it# t ere!ore it does not belong to t e capital @ ic e can in8est in any @ay in t e land itsel!0 W et er e bo%g t t e land dear or c eap, or @ et er e recei8ed it !or not ing, alters not ing in t e capital in8ested by t e !armer in is establis ment, and c anges

+6+

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not ing in t e rent, b%t merely alters t e D%estion @ et er it appears to im as interest or not, or as ig er or lo@er interest respecti8ely0 5ake, !or instance, t e sla8e economy0 5 e price paid !or a sla8e is not ing b%t t e anticipated and capitalised s%rpl%s-8al%e or pro!it to be @r%ng o%t o! t e sla8e0 A%t t e capital paid !or t e p%rc ase o! a sla8e does not belong to t e capital by means o! @ ic pro!it, s%rpl%s-labo%r, is extracted !rom im0 3n t e contrary0 &t is capital @ ic t e sla8e- older as parted @it , it is a ded%ction !rom t e capital @ ic be as a8ailable !or act%al prod%ction0 &t as ceased to exist !or im, H%st as capital in8ested in p%rc asing land as ceased to exist !or agric%lt%re0 5 e best proo! o! t is is t at it does not reappear !or t e sla8e- older or t e lando@ner except @ en e, in t%rn, sells is sla8es or land0 A%t t en t e same sit%ation pre8ails !or t e b%yer0 5 e !act t at e as bo%g t t e sla8e does not enable im to exploit t e sla8e @it o%t !%rt er ado0 6e is only able to do so @ en e in8ests some additional capital in t e sla8e economy itsel!0 5 e same capital does not exist t@ice, once in t e ands o! t e seller, and a second time in t e ands o! t e b%yer o! t e land0 &t passes !rom t e ands o! t e b%yer to t ose o! t e seller, and t ere t e matter ends0 5 e b%yer no@ no longer as capital, b%t in its stead a piece o! land0 5 e circ%mstance t at t e rent prod%ced by a real in8estment o! capital in t is land is calc%lated by t e ne@ lando@ner as interest on capital @ ic e as not in8ested in t e land, b%t gi8en a@ay to acD%ire t e land, does not in t e least alter t e economic nat%re o! t e land !actor, any more t an t e circ%mstance t at someone as paid V1,=== !or 3T consols as anyt ing to do @it t e capital o%t o! @ ose re8en%e t e interest on t e national debt is paid0 &n !act, t e money expended in p%rc asing land, like t at in p%rc asing go8ernment bonds, is merely capital in itself, H%st as any 8al%e s%m is capital in itsel!, potential capital, on t e basis o! t e capitalist mode o! prod%ction0 W at is paid !or land, like t at !or go8ernment bonds or any ot er p%rc ased commodity, is a s%m o! money0 5 is is capital in itsel!, beca%se it can be con8erted into capital0 &t depends %pon t e %se p%t to it by t e seller @ et er t e money obtained by im is really trans!ormed into capital or not0 For t e b%yer, it can ne8er again !%nction as s%c , no more t an any ot er money @ ic e as de!initely paid o%t0 &t !ig%res in is acco%nts as interest-bearing capital, beca%se e considers t e income, recei8ed as rent !rom t e land or as interest on state indebtedness, as interest on t e money @ ic t e p%rc ase o! t e claim to t is re8en%e as cost im0 6e can only realise it as capital t ro%g resale0 A%t t en anot er, t e ne@ b%yer, enters t e same relations ip maintained by t e !ormer, and t e money t %s expended cannot be trans!ormed into act%al capital !or t e expender t ro%g any c ange o! ands0 &n t e case o! small landed property t e ill%sion is !ostered still more t at land itsel! possesses 8al%e and t %s enters as capital into t e price o! prod%ction o! t e prod%ct, m%c as mac ines or ra@ materials0 A%t @e a8e seen t at rent, and t ere!ore capitalised rent, t e price o! land, can enter as a determining !actor into t e price o! agric%lt%ral prod%cts in only t@o cases0 First, @ en as a conseD%ence o! t e composition o! agric%lt%ral capital I a capital @ ic as not ing to do @it t e capital in8ested in p%rc asing land I t e 8al%e o! t e prod%cts o! t e soil is ig er t an t eir price o! prod%ction, and market conditions enable t e landlord to realise t is di!!erence0 $econd, @ en t ere is a monopoly price0 ?nd bot are least o! all t e case %nder t e management o! land parcels and small land-o@ners ip beca%se precisely ere prod%ction to a large extent satis!ies t e prod%cersG o@n @ants and is carried on independently o! reg%lation by t e a8erage rate o! pro!it0 E8en @ ere c%lti8ation o! land parcels is cond%cted %pon leased land, t e lease money comprises, !ar more so t an %nder any ot er conditions, a portion o! t e pro!it and e8en a ded%ction !rom @ages# t is money is t en only a nominal rent, not rent as an independent category as opposed to @ages and pro!it0 5 e expendit%re o! money-capital !or t e p%rc ase o! land, t en, is not an in8estment o! agric%lt%ral capital0 &t is a decrease pro tanto in t e capital @ ic small peasants can employ in t eir o@n sp ere o! prod%ction0 &t red%ces pro tanto t e siEe o! t eir means o! prod%ction and t ereby narro@s t e economic basis o! reprod%ction0 &t s%bHects t e small peasant to t e money-

+66

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lender, since credit proper occ%rs b%t rarely in t is sp ere in general0 &t is a indrance to agric%lt%re, e8en @ ere s%c p%rc ase takes place in t e case o! large estates0 &t contradicts in !act t e capitalist mode o! prod%ction, @ ic is on t e @ ole indi!!erent to @ et er t e lando@ner is in debt, no matter @ et er e as in erited or p%rc ased is estate0 5 e nat%re o! management o! t e leased estate itsel! is not altered @ et er t e lando@ner pockets t e rent imsel! or @ et er e m%st pay it o%t to t e older o! is mortgage0 We a8e seen t at, in t e case o! a gi8en gro%nd-rent, t e price o! land is reg%lated by t e interest rate0 &! t e rate is lo@, t en t e price o! land is ig , and 8ice 8ersa0 -ormally, t en, a ig price o! land and a lo@ interest rate s o%ld go and in and, so t at i! t e peasant paid a ig price !or t e land in conseD%ence o! a lo@ interest rate, t e same lo@ rate o! interest s o%ld also sec%re is @orking capital !or im on easy credit terms0 A%t in reality, t ings t%rn o%t di!!erently @ en peasant proprietors ip o! land parcels is t e pre8ailing !orm0 &n t e !irst place, t e general la@s o! credit are not adapted to t e !armer, since t ese la@s pres%ppose a capitalist as t e prod%cer0 $econdly, @ ere proprietors ip o! land parcels predominates I @e are not re!erring to colonies ere I and t e small peasant constit%tes t e backbone o! t e nation, t e !ormation o! capital, i0e0, social reprod%ction, is relati8ely @eak, and still @eaker is t e !ormation o! loanable moneycapital, in t e sense pre8io%sly elaborated0 5 is pres%pposes t e concentration and existence o! a class o! idle ric capitalists BMassieC0 / /Massie1 +n 0ssay on the Governing Causes of the $atural 9ate of Dnterest, 'ondon, 1>+=, pp <3-<20 I 0d1 5 irdly, ere @ ere t e o@ners ip o! t e land is a necessary condition !or t e existence o! most prod%cers, and an indispensable !ield o! in8estment !or t eir capital, t e price o! land is raised independently o! t e interest rate, and o!ten in in8erse ratio to it, t ro%g t e preponderance o! t e demand !or landed property o8er its s%pply0 'and sold in parcels brings a !ar ig er price in s%c a case t an @ en sold in large tracts, beca%se ere t e n%mber o! small b%yers is large and t at o! large b%yers is small BAandes -oires, /?ssociations o! pro!iteers0 I 0d01 )%bic on# -e@man /-e@man, ,ectures on &olitical 0conomy, 'ondon, 18+1, pp0 18=-810 I 0d.1C0 For all t ese reasons, t e price o! land rises ere @it a relati8ely ig rate o! interest0 5 e relati8ely lo@ interest, @ ic t e peasant deri8es ere !rom t e o%tlay o! capital !or t e p%rc ase o! land BMo%nierC, corresponds ere, on t e ot er side, to t e ig %s%rio%s interest rate @ ic e imsel! as to pay to is mortgage creditors0 5 e &ris system bears o%t t e same t ing, only in anot er !orm0 5 e price o! land, t is element !oreign to prod%ction in itsel!, may t ere!ore rise ere to s%c a point t at it makes prod%ction impossible B7ombasleC0 5 e !act t at t e price o! land plays s%c a role, t at p%rc ase and sale, t e circ%lation o! land as a commodity, de8elops to t is degree, is practically a res%lt o! t e de8elopment o! t e capitalist mode o! prod%ction in so !ar as a commodity is ere t e general !orm o! all prod%cts and all instr%ments o! prod%ction0 3n t e ot er and, t is de8elopment takes place only @ ere t e capitalist mode o! prod%ction as a limited de8elopment and does not %n!old all o! its pec%liarities, beca%se t is rests precisely %pon t e !act t at agric%lt%re is no longer, or not yet, s%bHect to t e capitalist mode o! prod%ction, b%t rat er to one anded do@n !rom extinct !orms o! society0 5 e disad8antages o! t e capitalist mode o! prod%ction, @it its dependence o! t e prod%cer %pon t e money-price o! is prod%ct, coincide ere t ere!ore @it t e disad8antages occasioned by t e imper!ect de8elopment o! t e capitalist mode o! prod%ction0 5 e peasant t%rns merc ant and ind%strialist @it o%t t e conditions enabling im to prod%ce is prod%cts as commodities0 5 e con!lict bet@een t e price o! land as an element in t e prod%cersG cost-price and no element in t e price o! prod%ction Be8en t o%g t e rent enters as a determining !actor into t e price o! t e agric%lt%ral prod%ct, t e capitalised rent, @ ic is ad8anced !or <= years or more, by no means enters as a determinantC is b%t one o! t e !orms mani!esting t e general contradiction bet@een pri8ate land-o@ners ip and a rational agric%lt%re, t e normal social %tilisation o! t e soil0 A%t on t e ot er and, pri8ate land o@ners ip, and t ereby expropriation o! t e direct prod%cers !rom t e

+6>

; apter J'4&&

land I pri8ate land-o@ners ip by t e one, @ ic implies lack o! o@ners ip by ot ers I is t e basis o! t e capitalist mode o! prod%ction0 6ere, in small-scale agric%lt%re, t e price o! land, a !orm and res%lt o! pri8ate land-o@ners ip, appears as a barrier to prod%ction itsel!0 &n large-scale agric%lt%re, and large estates operating on a capitalist basis, o@ners ip like@ise acts as a barrier, beca%se it limits t e tenant !armer in is prod%cti8e in8estment o! capital, @ ic in t e !inal analysis bene!its not im, b%t t e landlord0 &n bot !orms, exploitation and sD%andering o! t e 8itality o! t e soil Bapart !rom making exploitation dependent %pon t e accidental and %neD%al circ%mstances o! indi8id%al prod%cers rat er t an t e attained le8el o! social de8elopmentC takes t e place o! conscio%s rational c%lti8ation o! t e soil as eternal comm%nal property, an inalienable condition !or t e existence and reprod%ction o! a c ain o! s%ccessi8e generations o! t e %man race0 &n t e case o! small property, t is res%lts !rom t e lack o! means and kno@ledge o! applying t e social labo%r prod%cti8ity0 &n t e case o! large property, it res%lts !rom t e exploitation o! s%c means !or t e most rapid enric ment o! !armer and proprietor0 &n t e case o! bot t ro%g dependence on t e market-price0 ?ll critiD%e o! small landed property resol8es itsel! in t e !inal analysis into a criticism o! pri8ate o@ners ip as a barrier and indrance to agric%lt%re0 ?nd similarly all co%nter-criticism o! large landed property0 &n eit er case, o! co%rse, @e lea8e aside all secondary political considerations0 5 is barrier and indrance, @ ic are erected by all pri8ate landed property 8is-O-8is agric%lt%ral prod%ction and t e rational c%lti8ation, maintenance and impro8ement o! t e soil itsel!, de8elop on bot sides merely in di!!erent !orms, and in @rangling o8er t e speci!ic !orms o! t is e8il its %ltimate ca%se is !orgotten0 $mall landed property pres%pposes t at t e o8er@ elming maHority o! t e pop%lation is r%ral, and t at not social, b%t isolated labo%r predominates# and t at, t ere!ore, %nder s%c conditions @ealt and de8elopment o! reprod%ction, bot o! its material and spirit%al prereD%isites, are o%t o! t e D%estion, and t ereby also t e prereD%isites !or rational c%lti8ation0 3n t e ot er and, large landed property red%ces t e agric%lt%ral pop%lation to a constantly !alling minim%m, and con!ronts it @it a constantly gro@ing ind%strial pop%lation cro@ded toget er in large cities0 &t t ereby creates conditions @ ic ca%se an irreparable break in t e co erence o! social interc ange prescribed by t e nat%ral la@s o! li!e0 ?s a res%lt, t e 8itality o! t e soil is sD%andered, and t is prodigality is carried by commerce !ar beyond t e borders o! a partic%lar state B'iebigC0 / 'iebig, Die Chemie in ihrer +nwendung auf +gricultur und &hysiologie, Ara%nsc @eig, 186<0 I 0d01 W ile small landed property creates a class o! barbarians standing al!@ay o%tside o! society, a class combining all t e cr%deness o! primiti8e !orms o! society @it t e ang%is and misery o! ci8ilised co%ntries, large landed property %ndermines labo%r-po@er in t e last region, @ ere its prime energy seeks re!%ge and stores %p its strengt as a reser8e !%nd !or t e regeneration o! t e 8ital !orce o! nations I on t e land itsel!0 'arge-scale ind%stry and large-scale mec anised agric%lt%re @ork toget er0 &! originally disting%is ed by t e !act t at t e !ormer lays @aste and destroys principally labo%r-po@er, ence t e nat%ral !orce o! %man beings, @ ereas t e latter more directly ex a%sts t e nat%ral 8itality o! t e soil, t ey Hoin ands in t e !%rt er co%rse o! de8elopment in t at t e ind%strial system in t e co%ntryside also ener8ates t e labo%rers, and ind%stry and commerce on t eir part s%pply agric%lt%re @it t e means !or ex a%sting t e soil0

Part !II. #evenues an" their Sources

Chapter 4&. The Trinit! #or ula
I lx
;apital I pro!it Bpro!it o! enterprise pl%s interestC, land I gro%nd-rent, labo%r I @ages, t is is t e trinity !orm%la @ ic comprises all t e secrets o! t e social prod%ction process0 F%rt ermore, since as pre8io%sly /,resent edition: ; 0 JJ&&&0 I 0d.1 demonstrated interest appears as t e speci!ic c aracteristic prod%ct o! capital and pro!it o! enterprise on t e contrary appears as @ages independent o! capital, t e abo8e trinity !orm%la red%ces itsel! more speci!ically to t e !ollo@ing: ;apital I interest, land I gro%nd-rent, labo%r I @ages, @ ere pro!it, t e speci!ic c aracteristic !orm o! s%rpl%s-8al%e belonging to t e capitalist mode o! prod%ction, is !ort%nately eliminated0 3n closer examination o! t is economic trinity, @e !ind t e !ollo@ing: First, t e alleged so%rces o! t e ann%ally a8ailable @ealt belong to @idely dissimilar sp eres and are not at all analogo%s @it one anot er0 5 ey a8e abo%t t e same relation to eac ot er as la@yerGs !ees, red beets and m%sic0 ;apital, land, labo%rS 6o@e8er, capital is not a t ing, b%t rat er a de!inite social prod%ction relation, belonging to a de!inite istorical !ormation o! society, @ ic is mani!ested in a t ing and lends t is t ing a speci!ic social c aracter0 ;apital is not t e s%m o! t e material and prod%ced means o! prod%ction0 ;apital is rat er t e means o! prod%ction trans!ormed into capital, @ ic in t emsel8es are no more capital t an gold or sil8er in itsel! is money0 &t is t e means o! prod%ction monopolised by a certain section o! society, con!ronting li8ing labo%r-po@er as prod%cts and @orking conditions rendered independent o! t is 8ery labo%r-po@er, @ ic are personi!ied t ro%g t is antit esis in capital0 &t is not merely t e prod%cts o! labo%rers t%rned into independent po@ers, prod%cts as r%lers and b%yers o! t eir prod%cers, b%t rat er also t e social !orces and t e !%t%re /Q illegible1 /? later collation @it t e man%script s o@ed t at t e text reads as !ollo@s: Kdie :esellsc a!tlic en Krn!te %nd 9%sammen nngende Form dieser ?rbeitL Bt e social !orces o! t eir labo%r and socialised !orm o! t is labo%rC0 I 0d.1 !orm o! t is labo%r, @ ic con!ront t e labo%rers as properties o! t eir prod%cts0 6ere, t en, @e a8e a de!inite and, at !irst glance, 8ery mystical, social !orm, o! one o! t e !actors in a istorically prod%ced social prod%ction process0 ?nd no@ alongside o! t is @e a8e t e land, inorganic nat%re as s%c , rudis indigesta3ue moles, /K? r%de and %ndigested massL, 38id, Metamorphoses, Aook &, >0 I 0d1 in all its prime8al @ildness0 4al%e is labo%r0 5 ere!ore s%rpl%s-8al%e cannot be eart 0 ?bsol%te !ertility o! t e soil e!!ects not ing more t an t e !ollo@ing: a certain D%antity o! labo%r prod%ces a certain prod%ct I in accordance @it t e nat%ral !ertility o! t e soil0 5 e di!!erence in soil !ertility ca%ses t e same D%antities o! labo%r and capital, ence t e same 8al%e, to be mani!ested in di!!erent D%antities o! agric%lt%ral prod%cts# t at is, ca%ses t ese prod%cts to a8e di!!erent indi8id%al 8al%es0 5 e eD%alisation o! t ese indi8id%al 8al%es into market-8al%es is responsible !or t e !act t at t e Kad8antages o! !ertile o8er in!erior soil 000 are trans!erred !rom t e c%lti8ator or cons%mer to t e landlordL0 B)icardo, &rinciples, 'ondon, 18<1, p06<0C ?nd !inally, as t ird party in t is %nion, a mere g ost I Kt eL 'abo%r, @ ic is no more t an an abstraction and taken by itsel! does not exist at all, or, i! @e take000 /illegible1 /?s as been establis ed by later reading o! t e man%script, it reads ere: K@enn @ir das :emeinte ne menL Bi!

+6*

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@e take t at @ ic is be ind itC0 I 0d01, t e prod%cti8e acti8ity o! %man beings in general, by @ ic t ey promote t e interc ange @it -at%re, di8ested not only o! e8ery social !orm and @ellde!ined c aracter, b%t e8en in its bare nat%ral existence, independent o! society, remo8ed !rom all societies, and as an expression and con!irmation o! li!e @ ic t e still non-social man in general as in common @it t e one @ o is in any @ay social0

II
;apital I interest# landed property, pri8ate o@ners ip o! t e Eart , and, to be s%re, modern and corresponding to t e capitalist mode o! prod%ction I rent# @age-labo%r I @ages0 5 e connection bet@een t e so%rces o! re8en%e is s%pposed to be represented in t is !orm0 Wage-labo%r and landed property, like capital, are istorically determined social !orms# one o! labo%r, t e ot er o! monopolised terrestrial globe, and indeed bot !orms corresponding to capital and belonging to t e same economic !ormation o! society0 5 e !irst striking t ing abo%t t is !orm%la is t at side by side @it capital, @it t is !orm o! an element o! prod%ction belonging to a de!inite mode o! prod%ction, to a de!inite istorical !orm o! social process o! prod%ction, side by side @it an element o! prod%ction amalgamated @it and represented by a de!inite social !orm are indiscriminately placed: t e land on t e one and and labo%r on t e ot er, t@o elements o! t e real labo%r process, @ ic in t is material !orm are common to all modes o! prod%ction, @ ic are t e material elements o! e8ery process o! prod%ction and a8e not ing to do @it its social !orm0 $econdly0 &n t e !orm%la: capital I interest, land I gro%nd-rent, labo%r I @ages, capital, land and labo%r appear respecti8ely as so%rces o! interest Binstead o! pro!itC, gro%nd-rent and @ages, as t eir prod%cts, or !r%its# t e !ormer are t e basis, t e latter t e conseD%ence, t e !ormer are t e ca%se, t e latter t e e!!ect# and indeed, in s%c a manner t at eac indi8id%al so%rce is related to its prod%ct as to t at @ ic is eHected and prod%ced by it0 ?ll t e proceeds, interest Binstead o! pro!itC, rent, and @ages, are t ree components o! t e 8al%e o! t e prod%cts, i0e0, generally speaking, components o! 8al%e or expressed in money, certain money components, price components0 5 e !orm%la: capital I interest is no@ indeed t e most meaningless !orm%la o! capital, b%t still one o! its !orm%las0 A%t o@ s o%ld land create 8al%e, i0e0, a socially de!ined D%antity o! labo%r, and moreo8er t at partic%lar portion o! t e 8al%e o! its o@n prod%cts @ ic !orms t e rentQ 'and, e0g0, takes part as an agent o! prod%ction in creating a %se-8al%e, a material prod%ct, @ eat0 A%t it as not ing to do @it t e prod%ction o! t e value of wheat. &n so !ar as 8al%e is represented by @ eat, t e latter is merely considered as a de!inite D%antity o! materialised social labo%r, regardless o! t e partic%lar s%bstance in @ ic t is labo%r is mani!ested or o! t e partic%lar %se-8al%e o! t is s%bstance0 5 is no@ise contradicts t at 1C ot er circ%mstances being eD%al, t e c eapness or dearness o! @ eat depends %pon t e prod%cti8ity o! t e soil0 5 e prod%cti8ity o! agric%lt%ral labo%r is dependent on nat%ral conditions, and t e same D%antity o! labo%r is represented by more or !e@er prod%cts, %se-8al%es, in accordance @it s%c prod%cti8ity0 6o@ large t e D%antity o! labo%r represented in one b%s el o! @ eat depends %pon t e n%mber o! b%s els yielded by t e same D%antity o! labo%r0 &t depends, in t is case, %pon t e soil prod%cti8ity in @ at D%antities o! prod%ct t e 8al%e s all be mani!ested0 A%t t is 8al%e is gi8en, independent o! t is distrib%tion0 4al%e is represented in %se-8al%e# and %se-8al%e is a prereD%isite !or t e creation o! 8al%e# b%t it is !olly to create an antit esis by placing a %se-8al%e, like land, on one side and on t e ot er side 8al%e, and a partic%lar portion o! 8al%e at t at0 <C000 / ere t e man%script breaks o!!10

III
4%lgar economy act%ally does no more t an interpret, systematise and de!end in doctrinaire !as ion t e conceptions o! t e agents o! bo%rgeois prod%ction @ o are entrapped in bo%rgeois

+>=

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prod%ction relations0 &t s o%ld not astonis %s, t en, t at 8%lgar economy !eels partic%larly at ome in t e estranged o%t@ard appearances o! economic relations in @ ic t ese prima facie abs%rd and per!ect contradictions appear and t at t ese relations seem t e more sel!-e8ident t e more t eir internal relations ips are concealed !rom it, alt o%g t ey are %nderstandable to t e pop%lar mind0 A%t all science @o%ld be s%per!l%o%s i! t e o%t@ard appearance and t e essence o! t ings directly coincided0 5 %s, 8%lgar economy as not t e slig test s%spicion t at t e trinity @ ic it takes as its point o! depart%re, namely, land I rent, capital I interest, labo%r I @ages or t e price o! labo%r, are prima facie t ree impossible combinations0 First @e a8e t e %se-8al%e land, @ ic as no 8al%e, and t e exc ange-8al%e rentI so t at a social relation concei8ed as a t ing is made proportional to -at%re, i0e0, t@o incommens%rable magnit%des are s%pposed to stand in a gi8en ratio to one anot er0 5 en capital J interest. &! capital is concei8ed as a certain s%m o! 8al%es represented independently by money, t en it is prima facie nonsense to say t at a certain 8al%e s o%ld be @ort more t an it is @ort 0 &t is precisely in t e !orm: capital I interest t at all intermediate links are eliminated, and capital is red%ced to its most general !orm%la, @ ic t ere!ore in itsel! is also inexplicable and abs%rd0 5 e 8%lgar economist pre!ers t e !orm%la capital I interest, @it its occ%lt D%ality o! making a 8al%e %neD%al to itsel!, to t e !orm%la capital I pro!it, precisely !or t e reason t at t is already more nearly approac es act%al capitalist relations0 5 en again, dri8en by t e dist%rbing t o%g t t at 2 is not + and t at 1== taler cannot possibly be 11= taler, e !lees !rom capital as 8al%e to t e material s%bstance o! capital# to its %se8al%e as a condition o! prod%ction o! labo%r, to mac inery, ra@ materials, etc0 5 %s, e is able once more to s%bstit%te in place o! t e !irst incompre ensible relation, @ ereby 2 R +, a @ olly incommens%rable one bet@een a %se-8al%e, a t ing on one side, and a de!inite social prod%ction relation, s%rpl%s-8al%e, on t e ot er, as in t e case o! landed property0 ?s soon as t e 8%lgar economist arri8es at t is incommens%rable relation, e8eryt ing becomes clear to im, and e no longer !eels t e need !or !%rt er t o%g t0 For e as arri8ed precisely at t e KrationalL in bo%rgeois conception0 Finally, labour J wages, or price o! labo%r, is an expression, as s o@n in Aook &, @ ic prima facie contradicts t e conception o! 8al%e as @ell as o! price I t e latter generally being b%t a de!inite expression o! 8al%e0 ?nd Kprice o! labo%rL is H%st as irrational as a yello@ logarit m0 A%t ere t e 8%lgar economist is all t e more satis!ied, beca%se e as gained t e pro!o%nd insig t o! t e bo%rgeois, namely, t at e pays money !or labo%r, and since precisely t e contradiction bet@een t e !orm%la and t e conception o! 8al%e relie8es im !rom all obligation to %nderstand t e latter0 We lxi a8e seen t at t e capitalist process o! prod%ction is a istorically determined !orm o! t e social process o! prod%ction in general0 5 e latter is as m%c a prod%ction process o! material conditions o! %man li!e as a process taking place %nder speci!ic istorical and economic prod%ction relations, prod%cing and reprod%cing t ese prod%ction relations t emsel8es, and t ereby also t e bearers o! t is process, t eir material conditions o! existence and t eir m%t%al relations, i0e0, t eir partic%lar socio-economic !orm0 For t e aggregate o! t ese relations, in @ ic t e agents o! t is prod%ction stand @it respect to -at%re and to one anot er, and in @ ic t ey prod%ce, is precisely society, considered !rom t e standpoint o! its economic str%ct%re0 'ike all its predecessors, t e capitalist process o! prod%ction proceeds %nder de!inite material conditions, @ ic are, o@e8er, sim%ltaneo%sly t e bearers o! de!inite social relations entered into by indi8id%als in t e process o! reprod%cing t eir li!e0 5 ose conditions, like t ese relations, are on t e one and prereD%isites, on t e ot er and res%lts and creations o! t e capitalist process o! prod%ction# t ey are prod%ced and reprod%ced by it0 We sa@ also t at capital I and t e capitalist is merely capital personi!ied and !%nctions in t e process o! prod%ction solely as t e agent o! capital I in its corresponding social process o! prod%ction, p%mps a de!inite D%antity o! s%rpl%slabo%r o%t o! t e direct prod%cers, or labo%rers# capital obtains t is s%rpl%s-labo%r @it o%t an eD%i8alent, and in essence it al@ays remains !orced labo%r I no matter o@ m%c it may seem to res%lt !rom !ree contract%al agreement0 5 is s%rpl%s-labo%r appears as s%rpl%s-8al%e, and t is

+>1

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s%rpl%s-8al%e exists as a s%rpl%s-prod%ct0 $%rpl%s-labo%r in general, as labo%r per!ormed o8er and abo8e t e gi8en reD%irements, m%st al@ays remain0 &n t e capitalist as @ell as in t e sla8e system, etc0, it merely ass%mes an antagonistic !orm and is s%pplemented by complete idleness o! a strat%m o! society0 ? de!inite D%antity o! s%rpl%s-labo%r is reD%ired as ins%rance against accidents, and by t e necessary and progressi8e expansion o! t e process o! reprod%ction in keeping @it t e de8elopment o! t e needs and t e gro@t o! pop%lation, @ ic is called acc%m%lation !rom t e 8ie@point o! t e capitalist0 &t is one o! t e ci8ilising aspects o! capital t at it en!orces t is s%rpl%s-labo%r in a manner and %nder conditions @ ic are more ad8antageo%s to t e de8elopment o! t e prod%cti8e !orces, social relations, and t e creation o! t e elements !or a ne@ and ig er !orm t an %nder t e preceding !orms o! sla8ery, ser!dom, etc0 5 %s it gi8es rise to a stage, on t e one and, in @ ic coercion and monopolisation o! social de8elopment Bincl%ding its material and intellect%al ad8antagesC by one portion o! society at t e expense o! t e ot er are eliminated# on t e ot er and, it creates t e material means and embryonic conditions, making it possible in a ig er !orm o! society to combine t is s%rpl%s-labo%r @it a greater red%ction o! time de8oted to material labo%r in general0 For, depending on t e de8elopment o! labo%r prod%cti8ity, s%rpl%s-labo%r may be large in a small total @orking-day, and relati8ely small in a large total @orking-day0 &! t e necessary labo%r-time R 3 and t e s%rpl%s-labo%r R 3, t en t e total @orking-day R 6 and t e rate o! s%rpl%s-labo%r R 1==T0 &! t e necessary labo%r R * and t e s%rpl%s-labo%r R 3, t en t e total @orking-day R 1< and t e rate o! s%rpl%s-labo%r only R 33XT0 &n t at case, it depends %pon t e labo%r prod%cti8ity o@ m%c %se-8al%e s all be prod%ced in a de!inite time, ence also in a de!inite s%rpl%s labo%r-time0 5 e act%al @ealt o! society, and t e possibility o! constantly expanding its reprod%ction process, t ere!ore, do not depend %pon t e d%ration o! s%rpl%s-labo%r, b%t %pon its prod%cti8ity and t e more or less copio%s conditions o! prod%ction %nder @ ic it is per!ormed0 &n !act, t e realm o! !reedom act%ally begins only @ ere labo%r @ ic is determined by necessity and m%ndane considerations ceases# t %s in t e 8ery nat%re o! t ings it lies beyond t e sp ere o! act%al material prod%ction0 P%st as t e sa8age m%st @restle @it -at%re to satis!y is @ants, to maintain and reprod%ce li!e, so m%st ci8ilised man, and e m%st do so in all social !ormations and %nder all possible modes o! prod%ction0 Wit is de8elopment t is realm o! p ysical necessity expands as a res%lt o! is @ants# b%t, at t e same time, t e !orces o! prod%ction @ ic satis!y t ese @ants also increase0 Freedom in t is !ield can only consist in socialised man, t e associated prod%cers, rationally reg%lating t eir interc ange @it -at%re, bringing it %nder t eir common control, instead o! being r%led by it as by t e blind !orces o! -at%re# and ac ie8ing t is @it t e least expendit%re o! energy and %nder conditions most !a8o%rable to, and @ort y o!, t eir %man nat%re0 A%t it nonet eless still remains a realm o! necessity0 Aeyond it begins t at de8elopment o! %man energy @ ic is an end in itsel!, t e tr%e realm o! !reedom, @ ic , o@e8er, can blossom !ort only @it t is realm o! necessity as its basis0 5 e s ortening o! t e @orking-day is its basic prereD%isite0 &n a capitalist society, t is s%rpl%s-8al%e, or t is s%rpl%s-prod%ct Blea8ing aside c ance !l%ct%ations in its distrib%tion and considering only its reg%lating la@, its standardising limitsC, is di8ided among capitalists as di8idends proportionate to t e s are o! t e social capital eac olds0 &n t is !orm s%rpl%s-8al%e appears as a8erage pro!it @ ic !alls to t e s are o! capital, an a8erage pro!it @ ic in t%rn di8ides into pro!it o! enterprise and interest, and @ ic %nder t ese t@o categories may !all into t e laps o! di!!erent kinds o! capitalists0 5 is appropriation and distrib%tion o! s%rpl%s-8al%e, or s%rpl%s-prod%ct, on t e part o! capital, o@e8er, as its barrier in landed property0 P%st as t e operating capitalist p%mps s%rpl%s-labo%r, and t ereby s%rpl%s 8al%e and s%rpl%s-prod%ct in t e !orm o! pro!it, o%t o! t e labo%rer, so t e landlord in t%rn p%mps a portion o! t is s%rpl%s-8al%e, or s%rpl%s-prod%ct, o%t o! t e capitalist in t e !orm o! rent in accordance @it t e la@s already elaborated0 6ence, @ en speaking ere o! pro!it as t at portion o! s%rpl%s-8al%e !alling to t e s are o! capital, @e mean a8erage pro!it BeD%al to pro!it o! enterprise pl%s interestC @ ic is already limited by t e

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ded%ction o! rent !rom t e aggregate pro!it Bidentical in mass @it aggregate s%rpl%s-8al%eC# t e ded%ction o! rent is ass%med0 ,ro!it o! capital Bpro!it o! enterprise pl%s interestC and gro%nd-rent are t %s no more t an partic%lar components o! s%rpl%s-8al%e, categories by @ ic s%rpl%s-8al%e is di!!erentiated depending on @ et er it !alls to t e s are o! capital or landed property, eadings @ ic in no @ it o@e8er alter its nat%re0 ?dded toget er, t ese !orm t e s%m o! social s%rpl%s8al%e0 ;apital p%mps t e s%rpl%s-labo%r, @ ic is represented by s%rpl%s-8al%e and s%rpl%sprod%ct, directly o%t o! t e labo%rers0 5 %s, in t is sense, it may be regarded as t e prod%cer o! s%rpl%s-8al%e0 'anded property as not ing to do @it t e act%al process o! prod%ction0 &ts role is con!ined to trans!erring a portion o! t e prod%ced s%rpl%s-8al%e !rom t e pockets o! capital to its o@n0 6o@e8er, t e landlord plays a role in t e capitalist process o! prod%ction not merely t ro%g t e press%re e exerts %pon capital, nor merely beca%se large landed property is a prereD%isite and condition o! capitalist prod%ction since it is a prereD%isite and condition o! t e expropriation o! t e labo%rer !rom t e means o! prod%ction, b%t partic%larly beca%se e appears as t e personi!ication o! one o! t e most essential conditions o! prod%ction0 Finally, t e labo%rer in t e capacity o! o@ner and seller o! is indi8id%al labo%r-po@er recei8es a portion o! t e prod%ct %nder t e label o! @ages, in @ ic t at portion o! is labo%r appears @ ic @e call necessary labo%r, i0e0, t at reD%ired !or t e maintenance and reprod%ction o! t is labo%rpo@er, be t e conditions o! t is maintenance and reprod%ction scanty or bo%nti!%l, !a8o%rable or %n!a8o%rable0 W ate8er may be t e disparity o! t ese relations in ot er respects, t ey all a8e t is in common: ;apital yields a pro!it year a!ter year to t e capitalist, land a gro%nd-rent to t e landlord, and labo%r-po@er, %nder normal conditions and so long as it remains %se!%l labo%r-po@er, a @age to t e labo%rer0 5 ese t ree portions o! total 8al%e ann%ally prod%ced, and t e corresponding portions o! t e ann%ally created total prod%ct Blea8ing aside !or t e present any consideration o! acc%m%lationC, may be ann%ally cons%med by t eir respecti8e o@ners, @it o%t ex a%sting t e so%rce o! t eir reprod%ction0 5 ey are like t e ann%ally cons%mable !r%its o! a perennial tree, or rat er t ree trees# t ey !orm t e ann%al incomes o! t ree classes, capitalist, lando@ner and labo%rer, re8en%es distrib%ted by t e !%nctioning capitalist in is capacity as direct extorter o! s%rpl%s-labo%r and employer o! labo%r in general0 5 %s, capital appears to t e capitalist, land to t e landlord, and labo%r-po@er, or rat er labo%r itsel!, to t e labo%rer Bsince e act%ally sells labo%r-po@er only as it is mani!ested, and since t e price o! labo%r-po@er, as pre8io%sly s o@n, ine8itably appears as t e price o! labo%r %nder t e capitalist mode o! prod%ctionC, as t ree di!!erent so%rces o! t eir speci!ic re8en%es, namely, pro!it, gro%nd-rent and @ages0 5 ey are really so in t e sense t at capital is a perennial p%mping-mac ine o! s%rpl%s-labo%r !or t e capitalist, land a perennial magnet !or t e landlord, attracting a portion o! t e s%rpl%s-8al%e p%mped o%t by capital, and !inally, labo%r t e constantly sel!-rene@ing condition and e8er sel!rene@ing means o! acD%iring %nder t e title o! @ages a portion o! t e 8al%e created by t e labo%rer and t %s a part o! t e social prod%ct meas%red by t is portion o! 8al%e, i0e0, t e necessities o! li!e0 5 ey are so, !%rt ermore, in t e sense t at capital !ixes a portion o! t e 8al%e and t ereby o! t e prod%ct o! t e ann%al labo%r in t e !orm o! pro!it# landed property !ixes anot er portion in t e !orm o! rent# and @age-labo%r !ixes a t ird portion in t e !orm o! @ages, and precisely by t is trans!ormation con8erts t em into re8en%es o! t e capitalist, lando@ner, and labo%rer, @it o%t, o@e8er, creating t e s%bstance itsel! @ ic is trans!ormed into t ese 8ario%s categories0 5 e distrib%tion rat er pres%pposes t e existence o! t is s%bstance, namely, t e total 8al%e o! t e ann%al prod%ct, @ ic is not ing b%t materialised social labo%r0 -e8ert eless, it is not in t is !orm t at t e matter appears to t e agents o! prod%ction, t e bearers o! t e 8ario%s !%nctions in t e prod%ction process, b%t rat er in a distorted !orm0 W y t is takes place @ill be de8eloped in t e !%rt er co%rse o! o%r analysis0 ;apital landed property and labo%r appear to t ose agents o! prod%ction as t ree di!!erent, independent so%rces, !rom @ ic as s%c t ere arise t ree di!!erent components o! t e ann%ally prod%ced 8al%e I and t ereby t e prod%ct in @ ic it

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exists# t %s, !rom @ ic t ere arise not merely t e di!!erent !orms o! t is 8al%e as re8en%es !alling to t e s are o! partic%lar !actors in t e social process o! prod%ction, b%t !rom @ ic t is 8al%e itsel! arises, and t ereby t e s%bstance o! t ese !orms o! re8en%e0 /6ere one !olio s eet o! t e man%script is missing01 000 7i!!erential rent is bo%nd %p @it t e relati8e soil !ertility, in ot er @ords, @it properties arising !rom t e soil as s%c 0 A%t, in t e !irst place, in so !ar as it is based %pon t e di!!erent indi8id%al 8al%es o! t e prod%cts o! di!!erent soil types, it is b%t t e determination H%st mentioned# secondly, in so !ar as it is based %pon t e reg%lating general market-8al%e, @ ic di!!ers !rom t ese indi8id%al 8al%es, it is a social la@ carried t ro%g by means o! competition, @ ic as to do neit er @it t e soil nor t e di!!erent degrees o! its !ertility0 &t mig t seem as i! a rational relation @ere expressed at least in Klabo%r I @ages0L A%t t is is no more t e case t an @it Kland I gro%nd-rent0L &n so !ar as labo%r is 8al%e-creating, and is mani!ested in t e 8al%e o! commodities, it as not ing to do @it t e distrib%tion o! t is 8al%e among 8ario%s categories0 &n so !ar as it as t e speci!ically social c aracter o! @age-labo%r, it is not 8al%e-creating0 &t as already been s o@n in general t at @ages o! labo%r, or price o! labo%r, is b%t an irrational expression !or t e 8al%e, or price o! labo%r-po@er# and t e speci!ic social conditions, %nder @ ic t is labo%r-po@er is sold, a8e not ing to do @it labo%r as a general agent in prod%ction0 'abo%r is also materialised in t at 8al%e component o! a commodity @ ic as @ages !orms t e price o! labo%r-po@er# it creates t is portion H%st as m%c as t e ot er portions o! t e prod%ct# b%t it is materialised in t is portion no more and no di!!erently t an in t e portions !orming rent or pro!it0 ?nd, in general, @ en @e establis labo%r as 8al%e-creating, @e do not consider it in its concrete !orm as a condition o! prod%ction, b%t in its social delimitation @ ic di!!ers !rom t at o! @age-labo%r0 E8en t e expression Kcapital I pro!itL is incorrect ere0 &! capital is 8ie@ed in t e only relation in @ ic it prod%ces s%rpl%s-8al%e, namely, its relation to t e labo%rer @ ereby it extorts s%rpl%slabo%r by comp%lsion exerted %pon labo%r-po@er, i0e0, t e @age-labo%rer, t en t is s%rpl%s-8al%e comprises, o%tside o! pro!it Bpro!it o! enterprise pl%s interestC, also rent, in s ort t e entire %ndi8ided s%rpl%s-8al%e0 6ere, on t e ot er and, as a so%rce o! re8en%e, it is placed only in relation to t at portion !alling to t e s are o! t e capitalist0 5 is is not t e s%rpl%s-8al%e @ ic it extracts generally b%t only t at portion @ ic it extracts !or t e capitalist0 $till more does all connection 8anis no sooner t e !orm%la is trans!ormed into Kcapital I interest0L &! @e at !irst considered t e disparity o! t e abo8e t ree so%rces, @e no@ note t at t eir prod%cts, t eir o!!s oots, or re8en%es, on t e ot er band, all belong to t e same sp ere, t at o! 8al%e0 6o@e8er, t is is compensated !or Bt is relation not only bet@een incommens%rable magnit%des, b%t also bet@een @ olly %nlike, m%t%ally %nrelated, and non-comparable t ingsC in t at capital, like land and labo%r, is simply considered as a material s%bstance, t at is, simply as a prod%ced means o! prod%ction, and t %s is abstracted bot as a relation to t e labo%rer and as 8al%e0 5 irdly, i! %nderstood in t is @ay, t e !orm%la, capital I interest Bpro!itC, land I rent, labo%r I @ages, presents a %ni!orm and symmetrical incongr%ity0 &n !act, since @age-labo%r does not appear as a socially determined !orm o! labo%r, b%t rat er all labo%r appears by its nat%re as @age-labo%r Bt %s appearing to t ose in t e grip o! capitalist prod%ction relationsC, t e de!inite speci!ic social !orms ass%med by t e material conditions o! labo%r I t e prod%ced means o! prod%ction and t e land I @it respect to @age-labo%r BH%st as t ey, in t%rn, con8ersely pres%ppose @age-labo%rC, directly coincide @it t e material existence o! t ese conditions o! labo%r or @it t e !orm possessed by t em generally in t e act%al labo%r-process, independent o! its concrete istorically determined social !orm, or indeed independent o! any social !orm0 5 e c anged !orm o! t e conditions o! labo%r, i0 e0, alienated !rom labo%r and con!ronting it independently, @ ereby t e prod%ced means o! prod%ction are t %s trans!ormed into capital, and t e land into monopolised land, or landed property I t is !orm belonging to a de!inite istorical

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period t ereby coincides @it t e existence and !%nction o! t e prod%ced means o! prod%ction and o! t e land in t e process o! prod%ction in general0 5 ese means o! prod%ction are in t emsel8es capital by nat%re# capital is merely an Keconomic appellationL !or t ese means o! prod%ction# and so, in itsel! land is by nat%re t e eart monopolised by a certain n%mber o! lando@ners0 P%st as prod%cts con!ront t e prod%cer as an independent !orce in capital and capitalists I @ o act%ally are b%t t e personi!ication o! capital I so land becomes personi!ied in t e landlord and like@ise gets on its ind legs to demand, as an independent !orce, its s are o! t e prod%ct created @it its elp0 5 %s, not t e land recei8es its d%e portion o! t e prod%ct !or t e restoration and impro8ement o! its prod%cti8ity, b%t instead t e landlord takes a s are o! t is prod%ct to c a!!er a@ay or sD%ander0 &t is clear t at capital pres%pposes labo%r as @age-labo%r0 A%t it is H%st as clear t at i! labo%r as @age-labo%r is taken as t e point o! depart%re, so t at t e identity o! labo%r in general @it @age-labo%r appears to be sel!-e8ident, t en capital and monopolised land m%st also appear as t e nat%ral !orm o! t e conditions o! labo%r in relation to labo%r in general0 5o be capital, t en, appears as t e nat%ral !orm o! t e means o! labo%r and t ereby as t e p%rely real c aracter arising !rom t eir !%nction in t e labo%r-process in general0 ;apital and prod%ced means o! prod%ction t %s become identical terms0 $imilarly, land and land monopolised t ro%g pri8ate o@ners ip become identical0 5 e means o! labo%r as s%c , @ ic are by nat%re capital, t %s become t e so%rce o! pro!it, m%c as t e land as s%c becomes t e so%rce o! rent0 'abo%r as s%c , in its simple capacity as p%rposi8e prod%cti8e acti8ity, relates to t e means o! prod%ction, not in t eir social determinate !orm, b%t rat er in t eir concrete s%bstance, as material and means o! labo%r# t e latter like@ise are disting%is ed !rom one anot er merely materially, as %se-8al%es, i0e0, t e land as %nprod%ced, t e ot ers as prod%ced, means o! labo%r0 &!, t en, labo%r coincides @it @age-labo%r, so does t e partic%lar social !orm in @ ic t e conditions o! labo%r con!ront labo%r coincide @it t eir material existence0 5 e means o! labo%r as s%c are t en capital, and t e land as s%c is landed property0 5 e !ormal independence o! t ese conditions o! labo%r in relation to labo%r, t e %niD%e !orm o! t is independence @it respect to @age-labo%r, is t en a property inseparable !rom t em as t ings, as material conditions o! prod%ction, an in erent, immanent, intrinsic c aracter o! t em as elements o! prod%ction0 5 eir de!inite social c aracter in t e process o! capitalist prod%ction bearing t e stamp o! a de!inite istorical epoc is a nat%ral, and intrinsic s%bstanti8e c aracter belonging to t em, as it @ere, !rom time immemorial, as elements o! t e prod%ction process0 5 ere!ore, t e respecti8e part played by t e eart as t e original !ield o! acti8ity o! labo%r, as t e realm o! !orces o! -at%re, as t e pre-existing arsenal o! all obHects o! labo%r, and t e ot er respecti8e part played by t e prod%ced means o! prod%ction Binstr%ments, ra@ materials, etc0C in t e general process o! prod%ction, m%st seem to be expressed in t e respecti8e s ares claimed by t em as capital and landed property, i0e0, @ ic !all to t e s are o! t eir social representati8es in t e !orm o! pro!it BinterestC and rent, like to t e labo%rer I t e part is labo%r plays in t e process o! prod%ction is expressed in @ages0 )ent, pro!it and @ages t %s seem to gro@ o%t o! t e role played by t e land, prod%ced means o! prod%ction, and labo%r in t e simple labo%r-process, e8en @ en @e consider t is labo%r-process as one carried on merely bet@een man and -at%re, lea8ing aside any istorical determination0 &t is merely t e same t ing again, in anot er !orm, @ en it is arg%ed: t e prod%ct in @ ic a @age-labo%rerGs labo%r !or imsel! is mani!ested, is proceeds or re8en%e, is simply @ages, t e portion o! 8al%e Band t ereby t e social prod%ct meas%red by t is 8al%eC @ ic is @ages represent0 5 %s, i! @age-labo%r coincides @it labo%r generally, t en so do @ages @it t e prod%ce o! labo%r, and t e 8al%e portion representing @ages @it t e 8al%e created by labo%r generally0 A%t in t is @ay t e ot er portions o! 8al%e, pro!it and rent also appear independent @it respect to @ages, and m%st arise !rom so%rces o! t eir o@n, @ ic are speci!ically di!!erent and independent o! labo%r# t ey m%st arise !rom t e participating elements o! prod%ction, to t e s are o! @ ose o@ners t ey !all# i0e0, pro!it arises !rom t e means o! prod%ction, t e material elements o! capital, and rent arises !rom

+>+

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t e land, or -at%re, as represented by t e landlord B)osc erC0 /)osc er, System der Lol-swirtschaft, Aand &, Die Grundlagen der $ationalK-onomie, $t%ttgart %nd ?%gsb%rg, 18+8. J 0d.1 'anded property, capital and @age-labo%r are t %s trans!ormed !rom so%rces o! re8en%e I in t e sense t at capital attracts to t e capitalist, in t e !orm o! pro!it, a portion o! t e s%rpl%s-8al%e extracted by im !rom labo%r, t at monopoly in land attracts !or t e landlord anot er portion in t e !orm o! rent# and t at labo%r grants t e labo%rer t e remaining portion o! 8al%e in t e !orm o! @ages I !rom so%rces by means o! @ ic one portion o! 8al%e is trans!ormed into t e !orm o! pro!it, anot er into t e !orm o! rent, and a t ird into t e !orm o! @ages I into act%al so%rces !rom @ ic t ese 8al%e portions and respecti8e portions o! t e prod%ct in @ ic t ey exist, or !or @ ic t ey are exc angeable, arise t emsel8es, and !rom @ ic , t ere!ore, in t e !inal analysis, t e 8al%e o! t e prod%ct itsel! arises0lxii &n t e case o! t e simplest categories o! t e capitalist mode o! prod%ction, and e8en o! commodity-prod%ction, in t e case o! commodities and money, @e a8e already pointed o%t t e mysti!ying c aracter t at trans!orms t e social relations, !or @ ic t e material elements o! @ealt ser8e as bearers in prod%ction, into properties o! t ese t ings t emsel8es BcommoditiesC and still more prono%ncedly trans!orms t e prod%ction relation itsel! into a t ing BmoneyC0 ?ll !orms o! society, in so !ar as t ey reac t e stage o! commodity-prod%ction and money circ%lation, take part in t is per8ersion0 A%t %nder t e capitalist mode o! prod%ction and in t e case o! capital, @ ic !orms its dominant category, its determining prod%ction relation, t is enc anted and per8erted @orld de8elops still more0 &! one considers capital, to begin @it , in t e act%al process o! prod%ction as a means o! extracting s%rpl%s-labo%r, t en t is relations ip is still 8ery simple, and t e act%al connection impresses itsel! %pon t e bearers o! t is process, t e capitalists t emsel8es, and remains in t eir conscio%sness0 5 e 8iolent str%ggle o8er t e limits o! t e @orking-day demonstrates t is strikingly0 A%t e8en @it in t is non-mediated sp ere, t e sp ere o! direct action bet@een labo%r and capital, matters do not rest in t is simplicity0 Wit t e de8elopment o! relati8e s%rpl%s-8al%e in t e act%al speci!ically capitalist mode o! prod%ction, @ ereby t e prod%cti8e po@ers o! social labo%r are de8eloped, t ese prod%cti8e po@ers and t e social interrelations o! labo%r in t e direct labo%r-process seem trans!erred !rom labo%r to capital0 ;apital t %s becomes a 8ery mystic being since all o! labo%rGs social prod%cti8e !orces appear to be d%e to capital, rat er t an labo%r as s%c , and seem to iss%e !rom t e @omb o! capital itsel!0 5 en t e process o! circ%lation inter8enes, @it its c anges o! s%bstance and !orm, on @ ic all parts o! capital, e8en agric%lt%ral capital, de8ol8e to t e same degree t at t e speci!ically capitalist mode o! prod%ction de8elops0 5 is is a sp ere @ ere t e relations %nder @ ic 8al%e is originally prod%ced are p%s ed completely into t e backgro%nd0 &n t e direct process o! prod%ction t e capitalist already acts sim%ltaneo%sly as prod%cer o! commodities and manager o! commodity-prod%ction0 6ence t is process o! prod%ction appears to im by no means simply as a process o! prod%cing s%rpl%s-8al%e0 A%t @ ate8er may be t e s%rpl%s-8al%e extorted by capital in t e act%al prod%ction process and appearing in commodities, t e 8al%e and s%rpl%s-8al%e contained in t e commodities m%st !irst be realised in t e circ%lation process0 ?nd bot t e restit%tion o! t e 8al%es ad8anced in prod%ction and, partic%larly, t e s%rpl%s-8al%e contained in t e commodities seem not merely to be realised in t e circ%lation, b%t act%ally to arise !rom it# an appearance @ ic is especially rein!orced by t@o circ%mstances: !irst, t e pro!it made in selling depends on c eating, deceit, inside kno@ledge, skill and a t o%sand !a8o%rable market opport%nities# and t en by t e circ%mstance t at added ere to labo%r-time is a second determining element I time o! circ%lation0 5 is acts, in !act, only as a negati8e barrier against t e !ormation o! 8al%e and s%rpl%s-8al%e, b%t it as t e appearance o! being as de!inite a basis as labo%r itsel! and o! introd%cing a determining element t at is independent o! labo%r and res%lting !rom t e nat%re o! capital0 &n Aook && @e nat%rally ad to present t is sp ere o! circ%lation merely @it re!erence to t e !orm determinations @ ic it created and to demonstrate t e !%rt er

+>6

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de8elopment o! t e str%ct%re o! capital taking place in t is sp ere0 A%t in reality t is sp ere is t e sp ere o! competition, @ ic , considered in eac indi8id%al case, is dominated by c ance# @ ere, t en, t e inner la@, @ ic pre8ails in t ese accidents and reg%lates t em, is only 8isible @ en t ese accidents are gro%ped toget er in large n%mbers, @ ere it remains, t ere!ore, in8isible and %nintelligible to t e indi8id%al agents in prod%ction0 A%t !%rt ermore: t e act%al process o! prod%ction, as a %nity o! t e direct prod%ction process and t e circ%lation process, gi8es rise to ne@ !ormations, in @ ic t e 8ein o! internal connections is increasingly lost, t e prod%ction relations are rendered independent o! one anot er, and t e component 8al%es become ossi!ied into !orms independent o! one anot er0 5 e con8ersion o! s%rpl%s-8al%e into pro!it, as @e a8e seen, is determined as m%c by t e process o! circ%lation as by t e process o! prod%ction0 $%rpl%s-8al%e, in t e !orm o! pro!it, is no longer related back to t at portion o! capital in8ested in labo%r !rom @ ic it arises, b%t to t e total capital0 5 e rate o! pro!it is reg%lated by la@s o! its o@n, @ ic permit, or e8en reD%ire, it to c ange @ ile t e rate o! s%rpl%s-8al%e remains %naltered0 ?ll t is obsc%res more and more t e tr%e nat%re o! s%rpl%s-8al%e and t %s t e act%al mec anism o! capital0 $till more is t is ac ie8ed t ro%g t e trans!ormation o! pro!it into a8erage pro!it and o! 8al%es into prices o! prod%ction, into t e reg%lating a8erages o! market-prices0 ? complicated social process inter8enes ere, t e eD%alisation process o! capitals, @ ic di8orces t e relati8e a8erage prices o! t e commodities !rom t eir 8al%es, as @ell as t e a8erage pro!its in t e 8ario%s sp eres o! prod%ction BD%ite aside !rom t e indi8id%al in8estments o! capital in eac partic%lar sp ere o! prod%ctionC !rom t e act%al exploitation o! labo%r by t e partic%lar capitals0 -ot only does it appear so, b%t it is tr%e in !act t at t e a8erage price o! commodities di!!ers !rom t eir 8al%e, t %s !rom t e labo%r realised in t em, and t e a8erage pro!it o! a partic%lar capital di!!ers !rom t e s%rpl%s-8al%e @ ic t is capital as extracted !rom t e labo%rers employed by it0 5 e 8al%e o! commodities appears, directly, solely in t e in!l%ence o! !l%ct%ating prod%cti8ity o! labo%r %pon t e rise and !all o! t e prices o! prod%ction, %pon t eir mo8ement and not %pon t eir %ltimate limits0 ,ro!it seems to be determined only secondarily by direct exploitation o! labo%r, in so !ar as t e latter permits t e capitalist to realise a pro!it de8iating !rom t e a8erage pro!it at t e reg%lating market-prices, @ ic apparently pre8ail independent o! s%c exploitation0 -ormal a8erage pro!its t emsel8es seem immanent in capital and independent o! exploitation# abnormal exploitation, or e8en a8erage exploitation %nder !a8o%rable, exceptional conditions, seems to determine only t e de8iations !rom a8erage pro!it, not t is pro!it itsel!0 5 e di8ision o! pro!it into pro!it o! enterprise and interest Bnot to mention t e inter8ention o! commercial pro!it and pro!it !rom money-dealing, @ ic are !o%nded %pon circ%lation and appear to arise completely !rom it, and not !rom t e process o! prod%ction itsel!C cons%mmates t e indi8id%alisation o! t e !orm o! s%rpl%s-8al%e, t e ossi!ication o! its !orm as opposed to its s%bstance, its essence0 3ne portion o! pro!it, as opposed to t e ot er, separates itsel! entirely !rom t e relations ip o! capital as s%c and appears as arising not o%t o! t e !%nction o! exploiting @age-labo%r, b%t o%t o! t e @age-labo%r o! t e capitalist imsel!0 &n contrast t ereto, interest t en seems to be independent bot o! t e labo%rerGs @agelabo%r and t e capitalistGs o@n labo%r, and to arise !rom capital as its o@n independent so%rce0 &! capital originally appeared on t e s%r!ace o! circ%lation as a !etis ism o! capital, as a 8al%ecreating 8al%e, so it no@ appears again in t e !orm o! interest-bearing capital, as in its most estranged and c aracteristic !orm0 W ere!ore also t e !orm%la capital I interest, as t e t ird to land I rent and labo%r I @ages, is m%c more consistent t an capital I pro!it, since in pro!it t ere still remains a recollection o! its origin, @ ic is not only exting%is ed in interest, b%t is also placed in a !orm t oro%g ly antit etical to t is origin0 Finally, capital as an independent so%rce o! s%rpl%s-8al%e is Hoined by landed property, @ ic acts as a barrier to a8erage pro!it and trans!ers a portion o! s%rpl%s-8al%e to a class t at neit er @orks itsel!, nor directly exploits labo%r, nor can !ind morally edi!ying rationalisations, as in t e case o! interest-bearing capital, e0g0, risk and sacri!ice o! lending capital to ot ers0 $ince ere a part o! t e

+>>

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s%rpl%s-8al%e seems to be bo%nd %p directly @it a nat%ral element, t e land, rat er t an @it social relations, t e !orm o! m%t%al estrangement and ossi!ication o! t e 8ario%s parts o! s%rpl%s8al%e is completed, t e inner connection completely disr%pted, and its so%rce entirely b%ried, precisely beca%se t e relations o! prod%ction, @ ic are bo%nd to t e 8ario%s material elements o! t e prod%ction process, a8e been rendered m%t%ally independent0 &n capital I pro!it, or still better capital I interest, land I rent, labo%r I @ages, in t is economic trinity represented as t e connection bet@een t e component parts o! 8al%e and @ealt in general and its so%rces, @e a8e t e complete mysti!ication o! t e capitalist mode o! prod%ction, t e con8ersion o! social relations into t ings, t e direct coalescence o! t e material prod%ction relations @it t eir istorical and social determination0 &t is an enc anted, per8erted, topsy-t%r8y @orld, in @ ic Monsie%r le ;apital and Madame la 5erre do t eir g ost-@alking as social c aracters and at t e same time directly as mere t ings0 &t is t e great merit o! classical economy to a8e destroyed t is !alse appearance and ill%sion, t is m%t%al independence and ossi!ication o! t e 8ario%s social elements o! @ealt , t is personi!ication o! t ings and con8ersion o! prod%ction relations into entities, t is religion o! e8eryday li!e0 &t did so by red%cing interest to a portion o! pro!it, and rent to t e s%rpl%s abo8e a8erage pro!it, so t at bot o! t em con8erge in s%rpl%s8al%e# and by representing t e process o! circ%lation as a mere metamorp osis o! !orms, and !inally red%cing 8al%e and s%rpl%s-8al%e o! commodities to labo%r in t e direct prod%ction process0 -e8ert eless e8en t e best spokesmen o! classical economy remain more or less in t e grip o! t e @orld o! ill%sion @ ic t eir criticism ad dissol8ed, as cannot be ot er@ise !rom a bo%rgeois standpoint, and t %s t ey all !all more or less into inconsistencies, al!-tr%t s and %nsol8ed contradictions0 3n t e ot er and, it is H%st as nat%ral !or t e act%al agents o! prod%ction to !eel completely at ome in t ese estranged and irrational !orms o! capital I interest, land I rent, labo%r I @ages, since t ese are precisely t e !orms o! ill%sion in @ ic t ey mo8e abo%t and !ind t eir daily occ%pation0 &t is t ere!ore H%st as nat%ral t at 8%lgar economy, @ ic is no more t an a didactic, more or less dogmatic, translation o! e8eryday conceptions o! t e act%al agents o! prod%ction, and @ ic arranges t em in a certain rational order, s o%ld see precisely in t is trinity, @ ic is de8oid o! all inner connection, t e nat%ral and ind%bitable lo!ty basis !or its s allo@ pompo%sness0 5 is !orm%la sim%ltaneo%sly corresponds to t e interests o! t e r%ling classes by proclaiming t e p ysical necessity and eternal H%sti!ication o! t eir so%rces o! re8en%e and ele8ating t em to a dogma0 &n o%r description o! o@ prod%ction relations are con8erted into entities and rendered independent in relation to t e agents o! prod%ction, @e lea8e aside t e manner in @ ic t e interrelations, d%e to t e @orld-market, its conH%nct%res, mo8ements o! market-prices, periods o! credit, ind%strial and commercial cycles, alternations o! prosperity and crisis, appear to t em as o8er@ elming nat%ral la@s t at irresistibly en!orce t eir @ill o8er t em, and con!ront t em as blind necessity0 We lea8e t is aside beca%se t e act%al mo8ement o! competition belongs beyond o%r scope, and @e need present only t e inner organisation o! t e capitalist mode o! prod%ction, in its ideal a8erage, as it @ere0 &n preceding !orms o! society t is economic mysti!ication arose principally @it respect to money and interest-bearing capital0 &n t e nat%re o! t ings it is excl%ded, in t e !irst place, @ ere prod%ction !or t e %se-8al%e, !or immediate personal reD%irements, predominates# and, secondly, @ ere sla8ery or ser!dom !orm t e broad !o%ndation o! social prod%ction, as in antiD%ity and d%ring t e Middle ?ges0 6ere, t e domination o! t e prod%cers by t e conditions o! prod%ction is concealed by t e relations o! dominion and ser8it%de, @ ic appear and are e8ident as t e direct moti8e po@er o! t e process o! prod%ction0 &n early comm%nal societies in @ ic primiti8e comm%nism pre8ailed, and e8en in t e ancient comm%nal to@ns, it @as t is comm%nal society itsel! @it its conditions @ ic appeared as t e basis o! prod%ction, and its reprod%ction appeared as its %ltimate p%rpose0 E8en in t e medie8al g%ild system neit er capital nor labo%r appear %ntrammelled, b%t t eir relations are rat er de!ined by t e corporate r%les, and by t e same

+>8

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associated relations, and corresponding conceptions o! pro!essional d%ty, cra!tsmans ip, etc0 3nly @ en t e capitalist mode o! prod%ction I /5 e man%script breaks o!! ere I 0d.1

Chapter 4*. Concernin) the -nal!sis of the Process of Production

For t e p%rposes o! t e !ollo@ing analysis @e may lea8e o%t o! consideration t e distinction bet@een price o! prod%ction and 8al%e, since t is distinction disappears altoget er @ en, as ere, t e 8al%e o! t e total ann%al prod%ct o! labo%r is considered, i0e0, t e prod%ct o! t e total social capital0 ,ro!it Bpro!it o! enterprise pl%s interestC and rent are not ing b%t pec%liar !orms ass%med by partic%lar parts o! t e s%rpl%s-8al%e o! commodities0 5 e magnit%de o! s%rpl%s-8al%e is t e limit o! t e total siEe o! t e parts into @ ic it may be di8ided0 ?8erage pro!it pl%s rent are, t ere!ore, eD%al to t e s%rpl%s-8al%e0 &t is possible !or part o! t e s%rpl%s-labo%r, and t %s s%rpl%s-8al%e, contained in t e commodities, not to take part directly in t e eD%alisation o! an a8erage pro!it, so t at part o! t e commodity-8al%e is not expressed at all in its price0 A%t !irst, t is is balanced eit er by t e !act t at t e rate o! pro!it increases, @ en t e commodities sold belo@ t eir 8al%e !orm an element o! t e constant capital, or by pro!it and rent being represented by a larger prod%ct, @ en commodities sold belo@ t eir 8al%e enter into t e portion o! 8al%e cons%med as re8en%e in t e !orm o! articles !or indi8id%al cons%mption0 $econdly, t is is eliminated in t e a8erage mo8ement0 ?t any rate, e8en i! a portion o! s%rpl%s-8al%e not expressed in t e price o! t e commodity is lost !or t e price !ormation, t e s%m o! a8erage pro!it pl%s rent in its normal !orm can ne8er be larger t an t e total s%rpl%s-8al%e, alt o%g it may be smaller0 &ts normal !orm pres%pposes @ages corresponding to t e 8al%e o! labo%r-po@er0 E8en monopoly rent, in so !ar as it is not a ded%ction !rom @ages, i0e0, does not constit%te a special category, m%st al@ays indirectly be a part o! t e s%rpl%s-8al%e0 &! it is not part o! t e price excess abo8e t e price o! prod%ction o! t e commodity itsel!, o! @ ic it is a constit%ent part Bas in di!!erential rentC, or an excess portion o! t e s%rpl%s-8al%e o! t e commodity itsel!, o! @ ic it is a constit%ent part, abo8e t at portion o! its o@n s%rpl%s-8al%e meas%red by t e a8erage pro!it Bas in absol%te rentC, it is at least part o! t e s%rpl%s-8al%e o! ot er commodities, i0e0, o! commodities @ ic are exc anged !or t is commodity a8ing a monopoly price0 5 e s%m o! a8erage pro!it pl%s gro%ndrent can ne8er be greater t an t e magnit%de o! @ ic t ey are components and @ ic exists be!ore t is di8ision0 &t is t ere!ore immaterial !or o%r disc%ssion @ et er t e entire s%rpl%s-8al%e o! t e commodities, i0e0, all t e s%rpl%s-labo%r contained in t e commodities, is realised in t eir price or not0 5 e s%rpl%s-labo%r is not entirely realised i! only !or t e reason t at d%e to a contin%al c ange in t e amo%nt o! labo%r socially necessary to prod%ce a certain commodity, res%lting !rom t e constant c ange in t e prod%cti8eness o! labo%r, some commodities are al@ays prod%ced %nder abnormal conditions and m%st, t ere!ore, be sold belo@ t eir indi8id%al 8al%e0 ?t any rate, pro!it pl%s rent eD%al t e total realised s%rpl%s-8al%e Bs%rpl%s-labo%rC, and !or p%rposes o! t is disc%ssion t e realised s%rpl%s-8al%e may be eD%ated to all s%rpl%s-8al%e# !or pro!it and rent are realised s%rpl%s-8al%e, or, generally speaking, t e s%rpl%s-8al%e @ ic passes into t e prices o! commodities, t %s in practice all t e s%rpl%s-8al%e !orming a constit%ent part o! t is price0 3n t e ot er and, @ages, @ ic !orm t e t ird speci!ic !orm o! re8en%e, are al@ays eD%al to t e 8ariable component part o! capital, i0e0, t e component part @ ic is laid o%t in p%rc asing li8ing labo%r-po@er, paying labo%rers rat er t an in means o! labo%r0 B5 e labo%r @ ic is paid in t e expendit%re o! re8en%e is itsel! paid in @ages, pro!it, or rent, and t ere!ore does not !orm any 8al%e portion o! commodities by @ ic it is paid0 6ence it is not considered in t e analysis o! commodity-8al%e and o! t e component parts into @ ic it is di8ided0C &t is t e materialisation o!

+8=

; apter J'&J

t at portion o! t e total @orking-day o! t e labo%rer in @ ic t e 8al%e o! 8ariable capital and t %s t e price o! labo%r is reprod%ced# t at portion o! commodity-8al%e in @ ic t e labo%rer reprod%ces t e 8al%e o! is o@n labo%r-po@er, or t e price o! is labo%r0 5 e total @orking-day o! t e labo%rer is di8ided into t@o parts0 3ne portion in @ ic e per!orms t e amo%nt o! labo%r necessary to reprod%ce t e 8al%e o! is o@n means o! s%bsistence# t e paid portion o! is total labo%r, t e portion necessary !or is o@n maintenance and reprod%ction0 5 e entire remaining portion o! t e @orking-day, t e entire excess D%antity o! labo%r per!ormed abo8e t e 8al%e o! t e labo%r realised in is @ages, is s%rpl%s-labo%r, %npaid labo%r, represented in t e s%rpl%s-8al%e o! is total commodity-prod%ction Band t %s in an excess D%antity o! commoditiesC, s%rpl%s-8al%e @ ic in t%rn is di8ided into di!!erently named parts, into pro!it Bpro!it o! enterprise pl%s interestC and rent0 5 e entire 8al%e portion o! commodities, t en, in @ ic t e total labo%r o! t e labo%rers added d%ring one day, or one year, is realised, t e total 8al%e o! t e ann%al prod%ct, created by t is labo%r, is di8ided into t e 8al%e o! @ages, into pro!it and into rent0 For t is total labo%r is di8ided into necessary labo%r, by @ ic t e labo%rer creates t at 8al%e portion o! t e prod%ct @it @ ic e is imsel! paid, t at is, is @ages, and into %npaid s%rpl%s-labo%r, by @ ic e creates t at 8al%e portion o! t e prod%ct @ ic represents s%rpl%s-8al%e and @ ic is later di8ided into pro!it and rent0 ?side !rom t is labo%r, t e labo%rer per!orms no labo%r, and aside !rom t e total 8al%e o! t e prod%ct, @ ic ass%mes t e !orms o! @ages, pro!it and rent, e creates no 8al%e0 5 e 8al%e o! t e ann%al prod%ct, in @ ic t e ne@ labo%r added by t e labo%rer d%ring t e year is incorporated, is eD%al to t e @age, or t e 8al%e o! t e 8ariable capital pl%s t e s%rpl%s-8al%e, @ ic in t%rn is di8ided into pro!it and rent0 5 e entire 8al%e portion o! t e ann%al prod%ct, t en, @ ic t e labo%rer creates in t e co%rse o! t e year, is expressed in t e ann%al 8al%e s%m o! t e t ree re8en%es, t e 8al%e o! @ages, pro!it, and rent0 E8idently, t ere!ore, t e 8al%e o! t e constant portion o! capital is not reprod%ced in t e ann%ally created 8al%e o! prod%ct, !or t e @ages are only eD%al to t e 8al%e o! t e 8ariable portion o! capital ad8anced in prod%ction, and rent and pro!it are only eD%al to t e s%rpl%s-8al%e, t e excess o! 8al%e prod%ced abo8e t e total 8al%e o! ad8anced capital, @ ic eD%als t e 8al%e o! t e constant capital pl%s t e 8al%e o! t e 8ariable capital0 &t is completely irrele8ant to t e problem to be sol8ed ere t at a portion o! t e s%rpl%s-8al%e con8erted into t e !orm o! pro!it and rent is not cons%med as re8en%e, b%t is acc%m%lated0 5 at portion @ ic is sa8ed %p as an acc%m%lation !%nd ser8es to create ne@, additional capital, b%t not to replace t e old capital, be it t e component part o! old capital laid o%t !or labo%r-po@er or !or means o! labo%r0 We may t ere!ore ass%me ere, !or t e sake o! simplicity, t at t e re8en%e passes @ olly into indi8id%al cons%mption0 5 e di!!ic%lty is t@o-!old0 3n t e one and t e 8al%e o! t e ann%al prod%ct, in @ ic t e re8en%es, @ages, pro!it and rent, are cons%med, contains a portion o! 8al%e eD%al to t e portion o! 8al%e o! constant capital %sed %p in it0 &t contains t is portion o! 8al%e in addition to t at portion @ ic resol8es itsel! into @ages and t at @ ic resol8es itsel! into pro!it and rent0 &ts 8al%e is t ere!ore R @ages U pro!it U rent U ; Bits constant portion o! 8al%eC0 6o@ can an ann%ally prod%ced 8al%e, @ ic only R @ages U pro!it U rent, b%y a prod%ct t e 8al%e o! @ ic R B@ages U pro!it U rentC U ;Q 6o@ can t e ann%ally prod%ced 8al%e b%y a prod%ct @ ic as a ig er 8al%e t an its o@nQ 3n t e ot er and, i! @e lea8e aside t at portion o! constant capital @ ic did not pass o8er into t e prod%ct, and @ ic t ere!ore contin%es to exist, alt o%g @it red%ced 8al%e, as be!ore t e ann%al prod%ction o! commodities# in ot er @ords, temporarily lea8ing o%t o! consideration t e employed, b%t not cons%med, !ixed capital, t en t e constant portion o! ad8anced capital is seen to a8e been @ olly trans!erred to t e ne@ prod%ct in t e !orm o! ra@ and a%xiliary materials, @ ereas a part o! t e means o! labo%r as been @ olly cons%med and anot er part only partially, and t %s only a part o! its 8al%e as been cons%med in prod%ction0 5 is entire portion o! constant capital cons%med in prod%ction m%st be replaced in kind0 ?ss%ming all ot er circ%mstances,

+81

; apter J'&J

partic%larly t e prod%cti8e po@er o! labo%r, to remain %nc anged, t is portion reD%ires t e same amo%nt o! labo%r !or its replacement as be!ore, i0e0, it m%st be replaced by an eD%i8alent 8al%e0 &! not, t en reprod%ction itsel! cannot take place on t e !ormer scale0 A%t @ o is obliged to per!orm t is labo%r, and @ o does per!orm itQ ?s to t e !irst di!!ic%lty: W o is obliged to pay !or t e constant portion o! 8al%e contained in t e prod%ct, and @it @ atQ I &t is ass%med t at t e 8al%e o! constant capital cons%med in prod%ction reappears as a part o! t e 8al%e o! t e prod%ct0 5 is does not contradict t e ass%mptions o! t e second di!!ic%lty0 For it as already been demonstrated in Aook & BKap0 4C /Englis edition: ; 0 4&&0I0d01 BK5 e 'abo%r ,rocess and t e ,rocess o! ,rod%cing $%rpl%s-4al%eLC o@ t e old 8al%e remains sim%ltaneo%sly preser8ed in t e prod%ct t ro%g t e mere addition o! ne@ labo%r, alt o%g t is does not reprod%ce t e old 8al%e and does no more t an add to it, creates merely additional 8al%e# b%t t at t is res%lts !rom labo%r, not in so !ar as it is 8al%e-creating, i0e0, labo%r in general, b%t in its !%nction as de!inite prod%cti8e labo%r0 5 ere!ore, no additional labo%r @as necessary to preser8e t e 8al%e o! t e constant portion in t e prod%ct in @ ic t e re8en%e, i0e0, t e entire 8al%e created d%ring t e year, is expended0 A%t to be s%re, ne@ additional labo%r is reD%ired to replace t e 8al%e and %se-8al%e o! constant capital cons%med d%ring t e preceding year, @it o%t t e replacement o! @ ic no reprod%ction at all is possible0 ?ll ne@ly added labo%r is represented in t e 8al%e ne@ly created d%ring t e year, and t is in t%rn is di8ided into t e t ree re8en%es: @ages, pro!it and rent0 I 5 %s, on t e one and, no excess social labo%r remains !or t e replacement o! t e cons%med constant capital, @ ic m%st be replaced partially in kind and according to its 8al%e, and partially merely according to its 8al%e B!or p%re @ear and tear on !ixed capitalC0 3n t e ot er and, t e 8al%e ann%ally created by labo%r, di8ided into @ages, pro!it and rent, and to be expended in t is !orm, appears not to s%!!ice to pay !or, or b%y, t e constant portion o! capital, @ ic m%st be contained, o%tside t eir o@n 8al%e, in t e ann%al prod%ct0 &t is seen t at t e problem presented ere as already been sol8ed in t e consideration o! reprod%ction o! t e total social capital I Aook &&, ,art &&&0 We ret%rn to it ere, in t e !irst place, beca%se s%rpl%s-8al%e ad not been de8eloped t ere in its re8en%e !orms: pro!it Bpro!it o! enterprise pl%s interestC and rent, and co%ld not, t ere!ore, be treated in t ese !orms# and t en, also beca%se precisely in t e !orm o! @ages, pro!it and rent t ere is contained an incredible bl%nder in analysis, @ ic per8ades all political economy since ?dam $mit 0 We di8ided all capital t ere into t@o big classes: ;lass &, prod%cing means o! prod%ction, and ;lass &&, prod%cing articles o! indi8id%al cons%mption0 5 e !act t at certain prod%cts may ser8e eD%ally @ell bot !or personal cons%mption and as means o! prod%ction Ba orse, grain, etc0C does not in8alidate t e absol%te correctness o! t is di8ision in any @ay0 &t is act%ally no ypot esis, b%t merely an expression o! !act0 5ake t e ann%al prod%ct o! a co%ntry0 3ne portion o! t e prod%ct, @ ate8er its ability to ser8e as means o! prod%ction, passes o8er into indi8id%al cons%mption0 &t is t e prod%ct !or @ ic @ages, pro!it and rent are expended0 5 is prod%ct is t e prod%ct o! a de!inite department o! t e social capital0 &t is possible t at t is same capital may also prod%ce prod%cts belonging to ;lass &0 &n so !ar as it does so, it is not t e portion o! t is capital cons%med in t e prod%cts o! ;lass &&, prod%cts belonging act%ally to indi8id%al cons%mption, @ ic s%pplies t e prod%cti8ely cons%med prod%cts belonging to ;lass &0 5 is entire prod%ct &&, @ ic passes into indi8id%al cons%mption, and !or @ ic t ere!ore t e re8en%e is spent, is t e existent !orm o! t e capital cons%med in it pl%s t e prod%ced s%rpl%s0 &t is t %s t e prod%ct o! a capital in8ested solely in t e prod%ction o! articles o! cons%mption0 ?nd in t e same @ay 7epartment & o! t e ann%al prod%ct, @ ic ser8es as means o! reprod%ction I ra@ materials and instr%ments o! labo%r I @ ate8er capacity t is prod%ct may ot er@ise possess naturaliter to ser8e as means o! cons%mption, is t e prod%ct o! a capital in8ested solely in t e prod%ction o! means o! prod%ction0 Ay !ar t e greater part o! prod%cts !orming constant capital exists also materially in a !orm in @ ic it cannot pass into indi8id%al cons%mption0 &n so !ar as t is co%ld be done, e0g0, in so !ar as

+8<

; apter J'&J

a !armer co%ld eat is seed-corn, b%tc er is dra%g t animals, etc0, t e economic barrier @orks t e same !or im as i! t is portion did not exist in cons%mable !orm0 ?s already indicated, @e lea8e o%t o! consideration in bot classes t e !ixed portion o! constant capital, @ ic contin%es to exist in kind and, so !ar as its 8al%e is concerned, independently o! t e ann%al prod%ct o! bot classes0 &n ;lass &&, !or t e prod%cts o! @ ic @ages, pro!it and rent are expended, in s ort, t e re8en%es cons%med, t e prod%ct itsel! consists o! t ree components so !ar as its 8al%e is concerned0 3ne component is eD%al to t e 8al%e o! t e constant portion o! capital cons%med in prod%ction# a second component is eD%al to t e 8al%e o! t e 8ariable ad8anced capital laid o%t in @ages# !inally, a t ird component is eD%al to t e prod%ced s%rpl%s-8al%e, t %s R pro!it U rent0 5 e !irst component o! t e prod%ct o! ;lass &&, t e 8al%e o! t e constant portion o! capital, can be cons%med neit er by t e capitalists o! ;lass &&, nor by t e labo%rers o! t is class, nor by t e lando@ners0 &t !orms no part o! t eir re8en%es, b%t m%st be replaced in kind and m%st be sold !or t is to occ%r0 3n t e ot er and, t e ot er t@o components o! t is prod%ct are eD%al to t e 8al%e o! t e re8en%es created in t is class, R @ages U pro!it U rent0 &n ;lass & t e prod%ct consists o! t e same constit%ents, as regards !orm0 A%t t at part @ ic ere !orms re8en%e, @ages U pro!it U rent, in s ort, t e 8ariable portion o! capital U s%rpl%s-8al%e, is not cons%med ere in t e nat%ral !orm o! prod%cts o! t is ;lass &, b%t in prod%cts o! ;lass &&0 5 e 8al%e o! t e re8en%es o! ;lass & m%st, t ere!ore, be cons%med in t at portion o! prod%cts o! ;lass && @ ic !orms t e constant capital o! && to be replaced0 5 e portion o! t e prod%ct o! ;lass && @ ic m%st replace its constant capital is cons%med in its nat%ral !orm by t e labo%rers, capitalists and landlords o! ;lass &0 5 ey spend t eir re8en%e !or t is prod%ct o! &&0 3n t e ot er and, t e prod%ct o! &, to t e extent t at it represents a re8en%e o! ;lass &, is prod%cti8ely cons%med in its nat%ral !orm by ;lass &&, @ ose constant capital it replaces in kind0 Finally, t e %sed-%p constant portion o! capital o! ;lass & is replaced o%t o! t e 8ery prod%cts o! t is class, @ ic consist precisely o! means o! labo%r, ra@ and a%xiliary materials, etc0, partly t ro%g exc ange by capitalists o! & among t emsel8es, partly so t at some o! t ese capitalists can directly %se t eir o@n prod%ct once more as means o! prod%ction0 'et %s take t e pre8io%s sc eme BAook &&, ; apter JJ, &&C !or simple reprod%ction: &0 2,===c U 1,===8 U 1,===s R 6,=== &&0 <,===c U +==8 U +==s R 3,===

o R *,===

?ccording to t is, t e prod%cers and landlords o! && cons%me +== 8 U +==s R 1,=== as re8en%e# <,===c remains to be replaced0 5 is is cons%med by t e labo%rers, capitalists and t ose @ o dra@ rent !rom &, @ ose income R 1,===8 U 1,===s R <,===0 5 e cons%med prod%ct o! && is cons%med as re8en%e by &, and t e portion o! t e re8en%e o! & representing an %ncons%mable prod%ct is cons%med as constant capital by &&0 &t remains t en to acco%nt !or t e 2,=== c o! &0 5 is is replaced o%t o! t e prod%ct o! & itsel!, @ ic R 6,===, or rat er R 6,=== - <,===# !or t ese <,=== a8e already been con8erted into constant capital !or &&0 &t s o%ld be noted, o! co%rse, t at t ese n%mbers a8e been c osen arbitrarily, and so t e relation bet@een t e 8al%e o! t e re8en%es o! & and t e 8al%e o! t e constant capital o! && appears arbitrary0 &t is e8ident, o@e8er, t at so !ar as t e process o! reprod%ction is normal and takes place %nder ot er@ise eD%al circ%mstances, i0e0, lea8ing aside t e acc%m%lation, t e s%m o! t e 8al%es o! @ages, pro!it and rent in ;lass & m%st eD%al t e 8al%e o! t e constant portion o! capital o! ;lass &&0 3t er@ise eit er ;lass && @ill not be able to replace its constant capital, or ;lass & @ill not be able to con8ert its re8en%e !rom %ncons%mable into cons%mable !orm0 5 %s, t e 8al%e o! t e ann%al commodity-prod%ct, H%st like t e 8al%e o! t e commodity-prod%ct prod%ced by some partic%lar in8estment o! capital, and like t e 8al%e o! any indi8id%al

+83

; apter J'&J

commodity, resol8es itsel! into t@o component parts: ?, @ ic replaces t e 8al%e o! t e ad8anced constant capital, and A, @ ic is represented in t e !orm o! re8en%e I @ages, pro!it and rent0 5 e latter component part o! 8al%e, A, is co%nterposed to t e !ormer ?, in so !ar as ?, %nder ot er@ise eD%al circ%mstances: 1C ne8er ass%mes t e !orm o! re8en%e and <C al@ays !lo@s back in t e !orm o! capital, and indeed constant capital0 5 e ot er component, A, o@e8er, carries @it in itsel!, in t%rn, an antit esis0 ,ro!it and rent a8e t is in common @it @ages: all t ree are !orms o! re8en%e0 -e8ert eless t ey di!!er essentially in t at pro!it and rent represent s%rpl%s-8al%e, i0e0, %npaid labo%r, @ ereas @ages represent paid labo%r0 5 e portion o! t e 8al%e o! t e prod%ct @ ic represents @ages expended t %s replaces @ages, and, %nder t e conditions ass%med by %s, @ ere reprod%ction takes place on t e same scale and %nder t e same conditions, is again recon8erted into @ages, !lo@s back !irst as 8ariable capital, as a component o! t e capital t at m%st be ad8anced ane@ !or reprod%ction0 5 is portion as a t@o-!old !%nction0 &t exists !irst in t e !orm o! capital and is exc anged as s%c !or labo%r-po@er0 &n t e ands o! t e labo%rer, it is trans!ormed into re8en%e @ ic e dra@s o%t o! t e sale o! is labo%r-po@er, is con8erted as re8en%e into means o! s%bsistence and cons%med0 5 is do%ble process is re8ealed t ro%g t e mediation o! money circ%lation0 5 e 8ariable capital is ad8anced in money, paid o%t as @ages0 5 is is its !irst !%nction as capital0 &t is exc anged !or labo%r-po@er and trans!ormed into t e mani!estation o! t is labo%r-po@er, into labo%r0 5 is is t e process as regards t e capitalist0 $econdly, o@e8er: @it t is money t e labo%rers b%y a part o! t e commodities prod%ced by t em, @ ic is meas%red by t is money, and is cons%med by t em as re8en%e0 &! @e imagine t e circ%lation o! money to be eliminated, t en a part o! t e labo%rerGs prod%ct is in t e ands o! t e capitalist in t e !orm o! a8ailable capital0 6e ad8ances t is part as capital, gi8es it to t e labo%rer !or ne@ labo%r-po@er, @ ile t e labo%rer cons%mes it as re8en%e directly or indirectly t ro%g exc ange !or ot er commodities0 5 at portion o! t e 8al%e o! t e prod%ct, t en, @ ic is destined in t e co%rse o! reprod%ction to be con8erted into @ages, into re8en%e !or t e labo%rers, !irst !lo@s back into t e ands o! t e capitalist in t e !orm o! capital, or more acc%rately 8ariable capital0 &t is an essential reD%irement t at it s o%ld !lo@ back in t is !orm in order !or labo%r as @age-labo%r, t e means o! prod%ction as capital, and t e process o! prod%ction itsel! as a capitalist process, to be contin%ally reprod%ced ane@0 &n order to a8oid %nnecessary di!!ic%lty, one s o%ld disting%is gross o%tp%t and net o%tp%t !rom gross income and net income0 5 e gross o%tp%t, or gross prod%ct, is t e total reprod%ced prod%ct0 Wit t e exception o! t e employed b%t not cons%med portion o! !ixed capital, t e 8al%e o! t e gross o%tp%t, or gross prod%ct, eD%als t e 8al%e o! capital ad8anced and cons%med in prod%ction, t at is, constant and 8ariable capital pl%s s%rpl%s-8al%e, @ ic resol8es itsel! into pro!it and rent0 3r, i! @e consider t e prod%ct o! t e total social capital instead o! t at o! an indi8id%al capital, t e gross o%tp%t eD%als t e material elements !orming t e constant and 8ariable capital, pl%s t e material elements o! t e s%rpl%s-prod%ct in @ ic pro!it and rent are represented0 5 e gross income is t at portion o! 8al%e and t at portion o! t e gross prod%ct meas%red by it @ ic remains a!ter ded%cting t at portion o! 8al%e and t at portion o! t e prod%ct o! total prod%ction meas%red by it @ ic replaces t e constant capital ad8anced and cons%med in prod%ction0 5 e gross income, t en, is eD%al to @ages Bor t e portion o! t e prod%ct destined to again become t e income o! t e labo%rerC U pro!it U rent0 5 e net income, on t e ot er and, is t e s%rpl%s-8al%e, and t %s t e s%rpl%s-prod%ct, @ ic remains a!ter ded%cting @ages, and @ ic , in !act, t %s represents t e s%rpl%s-8al%e realised by capital and to be di8ided @it t e landlord, and t e s%rpl%s-prod%ct meas%red by it0 5 %s, @e sa@ t at t e 8al%e o! eac indi8id%al commodity and t e 8al%e o! t e total commodityprod%ct o! eac indi8id%al capital is di8ided into t@o parts: one replaces only constant capital, and t e ot er, alt o%g a !raction o! it !lo@s back as 8ariable capital I t %s also !lo@s back in t e form o! capital I ne8ert eless is destined to be @ olly trans!ormed into gross income, and to

+82

; apter J'&J

ass%me t e !orm o! @ages, pro!it and rent, t e s%m o! @ ic makes %p t e gross income0 F%rt ermore, @e sa@ t at t e same is tr%e o! t e 8al%e o! t e ann%al total prod%ct o! a society0 ? di!!erence bet@een t e prod%ct o! t e indi8id%al capitalist and t at o! society exists only in so !ar as: !rom t e standpoint o! t e indi8id%al capitalist t e net income di!!ers !rom t e gross income, !or t e latter incl%des t e @ages, @ ereas t e !ormer excl%des t em0 4ie@ing t e income o! t e @ ole society, national income consists o! @ages pl%s pro!it pl%s rent, t %s, o! t e gross income0 A%t e8en t is is an abstraction to t e extent t at t e entire society, on t e basis o! capitalist prod%ction, bases itsel! on t e capitalist standpoint and t ereby considers only t e income resol8ed into pro!it and rent as net income0 3n t e ot er and, t e !antasy o! men like $ay, to t e e!!ect t at t e entire yield, t e entire gross o%tp%t, resol8es itsel! into t e net income o! t e nation or cannot be disting%is ed !rom it, t at t is distinction t ere!ore disappears !rom t e national 8ie@point, is b%t t e ine8itable and %ltimate expression o! t e abs%rd dogma per8ading political economy since ?dam $mit , t at in t e !inal analysis t e 8al%e o! commodities resol8es itsel! completely into income, into @ages, pro!it and rent0lxiii 5o compre end, in t e case o! eac indi8id%al capitalist, t at a portion o! is prod%ct m%st be trans!ormed again into capital Be8en aside !rom t e expansion o! reprod%ction, or acc%m%lationC, indeed not only into 8ariable capital, @ ic is destined to again become in its t%rn income !or t e labo%rers, t %s a !orm o! re8en%e, b%t also into constant capital, @ ic can ne8er be trans!ormed into re8en%e I s%c discernment is nat%rally extraordinarily easy0 5 e simplest obser8ation o! t e process o! prod%ction s o@s t is clearly0 5 e di!!ic%lty !irst begins as soon as t e process o! prod%ction is 8ie@ed as a @ ole0 5 e 8al%e o! t e entire portion o! t e prod%ct @ ic is cons%med as re8en%e in t e !orm o! @ages, pro!it and rent Bit is entirely immaterial @ et er t e cons%mption is indi8id%al or prod%cti8eC, indeed, completely resol8es itsel! %nder analysis into t e s%m o! 8al%es consisting o! @ages pl%s pro!it pl%s rent, t at is, into t e total 8al%e o! t e t ree re8en%es, alt o%g t e 8al%e o! t is portion o! t e prod%ct, H%st like t at @ ic does not enter into re8en%e, contains a 8al%e portion R ;, eD%al to t e 8al%e o! t e constant capital contained in t ese portions, and t %s prima facie cannot be limited by t e 8al%e o! t e re8en%e0 5 is circ%mstance @ ic , on t e one and, is a practically irre!%table !act, on t e ot er and, an eD%ally %ndeniable t eoretical contradiction presents a di!!ic%lty @ ic is most easily circ%m8ented by t e assertion t at commodity-8al%e contains anot er portion o! 8al%e, merely appearing to di!!er, !rom t e standpoint o! t e indi8id%al capitalist, !rom t e portion existing in t e !orm o! re8en%e0 5 e p rase: t at @ ic appears as re8en%e !or one constit%tes capital !or anot er, relie8es one o! t e necessity !or any !%rt er re!lection0 A%t o@, t en, t e old capital can be replaced @ en t e 8al%e o! t e entire prod%ct is cons%mable in t e !orm o! re8en%e# and o@ t e 8al%e o! t e prod%ct o! eac indi8id%al capital can be eD%al to t e 8al%e s%m o! t e t ree re8en%es pl%s ;, constant capital, @ ereas t e s%m o! t e 8al%es o! t e prod%cts o! all capitals is eD%al to t e 8al%e s%m o! t e t ree re8en%es pl%s = I t is appears, o! co%rse, as an insol%ble riddle and m%st be sol8ed by declaring t at t e analysis is completely incapable o! %nra8elling t e simple elements o! price, and m%st be content to go aro%nd in a 8icio%s circle making a sp%rio%s ad8ance ad infinitum. 5 %s, t at @ ic appears as constant capital may be resol8ed into @ages, pro!it and rent, b%t t e commodity-8al%es in @ ic @ages, pro!it and rent appear, are determined in t eir t%rn by @ages, pro!it and rent, and so !ort ad infinitum0lxi8 5 e !%ndamentally erroneo%s dogma to t e e!!ect t at t e 8al%e o! commodities in t e last analysis may be resol8ed into @ages U pro!it U rent also expresses itsel! in t e proposition t at t e cons%mer m%st %ltimately pay !or t e total 8al%e o! t e total prod%ct# or also t at t e money circ%lation bet@een prod%cers and cons%mers m%st %ltimately be eD%al to t e money circ%lation bet@een t e prod%cers t emsel8es B5ookeC# all t ese propositions are as !alse as t e axiom %pon @ ic t ey are based0 5 e di!!ic%lties, @ ic lead to t is erroneo%s and prima facie abs%rd analysis, are brie!ly t ese:

+8+

; apter J'&J

1C 5 e !%ndamental relations ip o! constant and 8ariable capital, ence also t e nat%re o! s%rpl%s8al%e, and t ereby t e entire basis o! t e capitalist mode o! prod%ction, are not %nderstood0 5 e 8al%e o! eac partial prod%ct o! capital, eac indi8id%al commodity, contains a portion o! 8al%e R constant capital, a portion o! 8al%e R 8ariable capital Btrans!ormed into @ages !or labo%rersC, and a portion o! 8al%e R s%rpl%s-8al%e Blater split into pro!it and rentC0 5 %s, o@ is it possible !or t e labo%rer @it is @ages, t e capitalist @it is pro!it, t e landlord @it is rent, to be able to b%y commodities, eac o! @ ic contains not only one o! t ese constit%ent elements, b%t all t ree o! t em# and o@ is it possible !or t e s%m o! t e 8al%es o! @ages, pro!it and rent, t at is, t e t ree so%rces o! re8en%e toget er, to be able to b%y t e commodities @ ic go to make %p t e total cons%mption o! t e recipients o! t ese incomes I commodities containing an additional component o! 8al%e, namely constant capital, o%tside t ese t ree components o! 8al%eQ 6o@ s o%ld t ey b%y a 8al%e o! !o%r @it a 8al%e o! t reeQ lx8 We presented o%r analysis in Aook &&, ,art &&&0 <C 5 e met od is not grasped @ ereby labo%r, in adding a ne@ 8al%e, preser8es t e old 8al%e in a ne@ !orm @it o%t prod%cing t is old 8al%e ane@0 3C 5 e pattern o! t e process o! reprod%ction is not %nderstood I o@ it appears not !rom t e standpoint o! indi8id%al capital, b%t rat er !rom t at o! t e total capital# t e di!!ic%lty is not %nderstood o@ it is t at t e prod%ct in @ ic @ages and s%rpl%s-8al%e, in s ort, t e entire 8al%e prod%ced by all t e labo%r ne@ly added d%ring t e year, is realised, replaces t e constant part o! its 8al%e and yet at t e same time resol8es itsel! into 8al%e limited solely by t e re8en%es# and !%rt ermore o@ it is t at t e constant capital cons%med in prod%ction can be replaced in s%bstance and 8al%e by ne@ capital, alt o%g t e total s%m o! ne@ly added labo%r is realised only in @ages and s%rpl%s-8al%e, and is !%lly represented in t e s%m o! t e 8al%es o! bot 0 &t is precisely ere t at t e main di!!ic%lty lies, in t e analysis o! reprod%ction and t e relations o! its 8ario%s component parts, bot as concerns t eir material c aracter and t eir 8al%e relations ips0 2C 5o t ese di!!ic%lties is added still anot er, @ ic increases e8en more as soon as t e 8ario%s component parts o! s%rpl%s-8al%e appear in t e !orm o! m%t%ally independent re8en%es0 5 is di!!ic%lty consists in t e de!inite designations o! re8en%e and capital interc anging, and altering t eir position, so t at t ey seem to be merely relati8e determinations !rom t e point o! 8ie@ o! t e indi8id%al capitalist and to disappear @ en t e total process o! prod%ction is 8ie@ed as a @ ole0 For instance, t e re8en%e o! t e labo%rers and capitalists o! ;lass &, @ ic prod%ces constant capital, replaces in 8al%e and s%bstance t e constant capital o! t e capitalists o! ;lass &&, @ ic prod%ces articles o! cons%mption0 3ne may, t ere!ore, sD%eeEe o%t o! t e dilemma by remonstrating t at @ at is re8en%e !or one is capital !or anot er and t at t ese designations t %s a8e not ing to do @it t e act%al pec%liarities o! t e 8al%e components o! commodities0 F%rt ermore: commodities @ ic are %ltimately destined to !orm t e s%bstanti8e elements o! re8en%e expendit%re, t at is, articles o! cons%mption, pass t ro%g 8ario%s stages d%ring t e year, e0g0, @oollen yarn, clot 0 &n one stage t ey !orm a portion o! constant capital, in t e ot er t ey are cons%med indi8id%ally, and t %s pass @ olly into t e re8en%e0 3ne may t ere!ore imagine along @it ?dam $mit t at constant capital is b%t an apparent element o! commodity-8al%e, @ ic disappears in t e total pattern0 5 %s, a !%rt er exc ange takes place o! 8ariable capital !or re8en%e0 5 e labo%rer b%ys @it is @ages t at portion o! commodities @ ic !orm is re8en%e0 &n t is @ay e sim%ltaneo%sly replaces !or t e capitalist t e money-!orm o! 8ariable capital0 Finally: one portion o! prod%cts @ ic !orm constant capital is replaced in kind or t ro%g exc ange by t e prod%cers o! constant capital t emsel8es# a process @it @ ic t e cons%mers a8e not ing to do0 W en t is is o8erlooked t e impression is created t at t e re8en%e o! cons%mers replaces t e entire prod%ct, i0e0, incl%ding t e constant portion o! 8al%e0 +C ?side !rom t e con!%sion @ ic t e trans!ormation o! 8al%es into prices o! prod%ction brings abo%t, anot er arises d%e to t e trans!ormation o! s%rpl%s-8al%e into di!!erent, special, m%t%ally independent !orms o! re8en%e applying to t e 8ario%s elements o! prod%ction, i0e0, into pro!it and

+86

; apter J'&J

rent0 &t is !orgotten t at t e !act t at t e 8al%es o! commodities are t e basis, and t at t e di8ision o! t ese commodity-8al%es into distinct constit%ent parts, and t e !%rt er de8elopment o! t ese constit%ents o! 8al%e into !orms o! re8en%e, t eir transm%tation into relations o! 8ario%s o@ners o! di!!erent !actors o! prod%ction to t ese indi8id%al components o! 8al%e, t eir distrib%tion among t ese o@ners according to de!inite categories and titles, itsel! alters not ing in 8al%e determination and its la@0 P%st as little is t e la@ o! 8al%e c anged by t e circ%mstance t at t e eD%alisation o! pro!it, i0e0, t e distrib%tion o! t e total s%rpl%s-8al%e among t e 8ario%s capitals, and t e obstacles @ ic landed property partially Bin absol%te rentC p%ts in t e @ay o! t is eD%alisation, bring abo%t a di8ergence bet@een t e reg%lating a8erage prices and t e indi8id%al 8al%es o! commodities0 5 is again a!!ects merely t e addition o! s%rpl%s-8al%e to t e 8ario%s commodity-prices, b%t does not abolis s%rpl%s-8al%e itsel!, nor t e total 8al%e o! commodities as t e so%rce o! t ese 8ario%s component parts o! price0 5 is is t e 3uid pro 3uo @ ic @e s all consider in t e next c apter, and @ ic is ine8itably linked @it t e ill%sion t at 8al%e arises o%t o! its o@n component parts0 ?nd namely, t e 8ario%s component 8al%es o! t e commodity acD%ire independent !orms as re8en%es, and as s%c re8en%es t ey are related back to t e partic%lar material elements o! prod%ction as t eir so%rces o! origin instead o! to t e 8al%e o! t e commodity as t eir so%rce0 5 ey are act%ally related back to t ose so%rces I o@e8er, not as components o! 8al%e, b%t rat er as re8en%es, as components o! 8al%e !alling to t e s are o! t ese partic%lar categories o! agents in prod%ction: t e labo%rer, t e capitalist and t e landlord0 A%t t en one mig t !ancy t at t ese constit%ents o! 8al%e, rat er t an arising o%t o! t e di8ision o! commodity-8al%e, con8ersely !orm it instead only t ro%g t eir combination, @ ic leads to t e pretty and 8icio%s circle, @ ereby t e 8al%e o! commodities arises o%t o! t e s%m o! t e 8al%es o! @ages, pro!it and rent, and t e 8al%e o! @ages, pro!it and rent, in its t%rn, is determined by t e 8al%e o! commodities, etc0 lx8i ;onsidering reprod%ction in its normal state, only a part o! ne@ly added labo%r is employed !or prod%ction, and t %s !or replacement o! constant capital# precisely t at part @ ic replaces t e constant capital %sed %p in t e prod%ction o! articles o! cons%mption, o! material elements o! re8en%e0 5 is is balanced by t e !act t at t is constant portion o! ;lass && costs no additional labo%r0 A%t, no@, t is constant capital Blooking %pon t e total process o! reprod%ction, in @ ic t en t e abo8e-mentioned eD%alisation o! ;lasses & and && is incl%dedC, not representing a prod%ct o! ne@ly added labo%r, alt o%g t is prod%ct co%ld not be created @it o%t it I t is constant capital, in t e process o! reprod%ction, considered !rom t e standpoint o! s%bstance, is exposed to certain accidents and dangers @ ic co%ld decimate it0 BF%rt ermore, o@e8er, considered !rom t e point o! 8ie@ o! 8al%e as @ell, it may be depreciated t ro%g a c ange in t e prod%cti8eness o! labo%r# b%t t is re!ers only to t e indi8id%al capitalist0C ?ccordingly, a portion o! t e pro!it, t ere!ore o! s%rpl%s-8al%e and t ereby also s%rpl%s-prod%ct, in @ ic Bas concerns 8al%eC only ne@ly added labo%r is represented, ser8es as an ins%rance !%nd0 ?nd it matters not @ et er t is ins%rance !%nd is managed by ins%rance companies as a separate b%siness or not0 5 is is t e sole portion o! re8en%e @ ic is neit er cons%med as s%c nor ser8es necessarily as a !%nd !or acc%m%lation0 W et er it act%ally ser8es as s%c , or co8ers merely a loss in reprod%ction, depends %pon c ance0 5 is is also t e only portion o! s%rpl%s-8al%e and s%rpl%s-prod%ct, and t %s o! s%rpl%s-labo%r, @ ic @o%ld contin%e to exist, o%tside o! t at portion ser8ing !or acc%m%lation, and ence expansion o! t e process o! reprod%ction, e8en a!ter t e abolition o! t e capitalist mode o! prod%ction0 5 is, o! co%rse, pres%pposes t at t e portion reg%larly cons%med by direct prod%cers does not remain limited to its present minim%m0 ?part !rom s%rpl%s-labo%r !or t ose @ o on acco%nt o! age are not yet, or no longer, able to take part in prod%ction, all labo%r to s%pport t ose @ o do not @ork @o%ld cease0 &! @e t ink back to t e beginnings o! society, @e !ind no prod%ced means o! prod%ction, ence no constant capital, t e 8al%e o! @ ic co%ld pass into t e prod%ct, and @ ic , in reprod%ction on t e same scale, @o%ld a8e to be replaced in kind o%t o! t e prod%ct and to a degree meas%red by its 8al%e0 A%t -at%re t ere

+8>

; apter J'&J

directly pro8ides t e means o! s%bsistence, @ ic need not !irst be prod%ced0 -at%re t ereby also gi8es to t e sa8age @ o as b%t !e@ @ants to satis!y t e time, not to %se t e as yet non-existent means o! prod%ction in ne@ prod%ction, b%t to trans!orm, alongside t e labo%r reD%ired to appropriate nat%rally existing means o! prod%ction, ot er prod%cts o! -at%re into means o! prod%ction: bo@s, stone kni8es, boats, etc0 5 is process among sa8ages, considered merely !rom t e s%bstanti8e side, corresponds to t e recon8ersion o! s%rpl%s-labo%r into ne@ capital0 &n t e process o! acc%m%lation, t e con8ersion o! s%c prod%cts o! excess labo%r into capital obtains contin%ally# and t e circ%mstance t at all ne@ capital arises o%t o! pro!it, rent, or ot er !orms o! re8en%e, i0e0, o%t o! s%rpl%s-labo%r, leads to t e mistaken idea t at all 8al%e o! commodities arises !rom some re8en%e0 5 is recon8ersion o! pro!it into capital s o@s rat er %pon closer analysis t at, con8ersely, t e additional labo%r I @ ic is al@ays represented in t e !orm o! re8en%e I does not ser8e !or t e maintenance, or reprod%ction respecti8ely, o! t e old capital 8al%e, b%t !or t e creation o! ne@ excess capital so !ar as it is not cons%med as re8en%e0 5 e @ ole di!!ic%lty arises !rom t e !act t at all ne@ly added labo%r, in so !ar as t e 8al%e created by it is not resol8ed into @ages, appears as pro!it I interpreted ere as a !orm o! s%rpl%s-8al%e in general I i0e0, as a 8al%e @ ic costs t e capitalist not ing and @ ic , o! co%rse, t ere!ore does not a8e to replace !or im anyt ing ad8anced, any capital @ ate8er0 5 is 8al%e t %s exists in t e !orm o! a8ailable additional @ealt , in s ort, !rom t e 8ie@point o! t e indi8id%al capitalist, in t e !orm o! is re8en%e0 A%t t is ne@ly created 8al%e can H%st as @ell be cons%med prod%cti8ely as indi8id%ally, eD%ally @ell as capital or re8en%e0 ?s a conseD%ence o! its nat%ral !orm, some o! it m%st be prod%cti8ely cons%med0 &t is, t ere!ore, e8ident t at t e ann%ally added labo%r creates capital as @ell as re8en%e# as becomes e8ident in t e process o! acc%m%lation0 6o@e8er, t e portion o! labo%r-po@er employed in t e creation o! ne@ capital Bt %s analogo%s to t at portion o! t e @orking-day employed by a sa8age, not !or acD%iring s%bsistence, b%t to !as ion tools @it @ ic to acD%ire is s%bsistenceC becomes in8isible in t at t e entire prod%ct o! s%rpl%s-labo%r !irst appears in t e !orm o! pro!it# a designation @ ic indeed as not ing to do @it t is s%rpl%sprod%ct itsel!, b%t re!ers merely to t e indi8id%al relation o! t e capitalist to t e s%rpl%s-8al%e pocketed by im0 &n !act, t e s%rpl%s-8al%e created by t e labo%rer is di8ided into re8en%e and capital# i0e0, into articles o! cons%mption and additional means o! prod%ction0 A%t !ormer constant capital taken o8er !rom t e pre8io%s year Blea8ing aside t e portion impaired and t %s pro tanto destroyed, t %s so !ar as it does not a8e to be reprod%ced I and s%c dist%rbances in t e process o! reprod%ction !all %nder ins%ranceC is not reprod%ced as concerns 8al%e by t e ne@ly added labo%r0 We see, !%rt ermore, t at a portion o! t e ne@ly added labo%r is contin%ally absorbed in t e reprod%ction and replacement o! cons%med constant capital, alt o%g t is ne@ly added labo%r resol8es itsel! solely into re8en%e, into @ages, pro!it and rent0 A%t it is t ereby o8erlooked 1C t at one 8al%e portion o! t e prod%ct o! t is labo%r is no prod%ct o! t is ne@ additional labo%r, b%t rat er pre-existing and cons%med constant capital# t at t e portion o! t e prod%ct in @ ic t is part o! 8al%e appears is t %s also not trans!ormed into re8en%e, b%t replaces t e means o! prod%ction o! t is constant capital in kind# <C t at t e portion o! 8al%e in @ ic t is ne@ly added labo%r act%ally appears is not cons%med as re8en%e in kind, b%t replaces t e constant capital in anot er sp ere, @ ere it is trans!ormed into a nat%ral !orm, in @ ic it may be cons%med as re8en%e, b%t @ ic in its t%rn is again not entirely a prod%ct o! ne@ly added labo%r0 &n so !ar as reprod%ction obtains on t e same scale, e8ery cons%med element o! constant capital m%st be replaced in kind by a ne@ specimen o! t e same kind, i! not in D%antity and !orm, t en at least in e!!ecti8eness0 &! t e prod%cti8eness o! labo%r remains t e same, t en t is replacement in kind implies replacing t e same 8al%e @ ic t e constant capital ad in its old !orm0 A%t s o%ld t e prod%cti8eness o! labo%r increase, so t at t e same material elements may be reprod%ced @it less labo%r, t en a smaller portion o! t e 8al%e o! t e prod%ct can completely replace t e constant part in kind0 5 e excess may t en be employed to !orm ne@ additional capital or a larger portion

+88

; apter J'&J

o! t e prod%ct may be gi8en t e !orm o! articles o! cons%mption, or t e s%rpl%s-labo%r may be red%ced0 3n t e ot er and, s o%ld t e prod%cti8eness o! labo%r decrease, t en a larger portion o! t e prod%ct m%st be %sed !or t e replacement o! t e !ormer capital, and t e s%rpl%s-prod%ct decreases0 5 e recon8ersion o! pro!it, or generally o! any !orm o! s%rpl%s-8al%e, into capital s o@s I lea8ing aside t e istorically de!ined economic !orm and considering it merely as t e simple !ormation o! ne@ means o! prod%ction I t at t e sit%ation still pre8ails @ ereby t e labo%rer per!orms labo%r to prod%ce means o! prod%ction beyond t e labo%r !or acD%iring is immediate means o! s%bsistence0 5rans!ormation o! pro!it into capital is no more t an employing a portion o! excess labo%r to !orm ne@, additional means o! prod%ction0 5 at t is takes place in t e s ape o! a trans!ormation o! pro!it into capital signi!ies merely t at it is t e capitalist rat er t an t e labo%rer @ o disposes o! excess labo%r0 5 at t is excess labo%r m%st !irst pass t ro%g a stage in @ ic it appears as re8en%e B@ ereas, e0g0, in t e case o! a sa8age it appears as excess labo%r directly destined !or t e prod%ction o! means o! prod%ctionC means simply t at t is labo%r, or its prod%ct, is appropriated by t e non-@orker0 6o@e8er, @ at is act%ally trans!ormed into capital is not pro!it as s%c 0 5rans!ormation o! s%rpl%s-8al%e into capital signi!ies merely t at t e s%rpl%s-8al%e and s%rpl%s-prod%ct are not cons%med indi8id%ally as re8en%e by t e capitalist0 A%t, @ at is act%ally so trans!ormed is 8al%e, materialised labo%r, or t e prod%ct in @ ic t is 8al%e is directly mani!ested, or !or @ ic it is exc anged a!ter a8ing been pre8io%sly trans!ormed into money0 ?nd @ en t e pro!it is trans!ormed back into capital, t is de!inite !orm o! s%rpl%s-8al%e, or pro!it, does not !orm t e so%rce o! t e ne@ capital0 5 e s%rpl%s-8al%e is t ereby merely c anged !rom one !orm into anot er0 A%t it is not t is c ange o! !orm @ ic t%rns it into capital0 &t is t e commodity and its 8al%e @ ic no@ !%nction as capital0 6o@e8er, t at t e 8al%e o! t e commodity is not paid !or I and only by t is means does it become s%rpl%s-8al%e I is D%ite irrele8ant !or t e materialisation o! labo%r, t e 8al%e itsel!0 5 e mis%nderstanding is expressed in 8ario%s !orms0 For instance, t at t e commodities @ ic compose t e constant capital also contain elements o! @ages, pro!it and rent0 3r, on t e ot er and, t at @ at is re8en%e !or t e one is capital !or anot er, and t at t ere!ore t ese are b%t s%bHecti8e relations0 5 %s t e yarn o! t e spinner contains a portion o! 8al%e representing pro!it !or im, $ o%ld t e @ea8er b%y t e yarn, e realises t e pro!it o! t e spinner, b%t !or imsel! t is yarn is merely a part o! is constant capital0 ?side !rom t e pre8io%s remarks made concerning t e relations bet@een re8en%e and capital, t e !ollo@ing is to be noted: 5 at @ ic , as regards 8al%e, passes along @it t e yarn as a constit%ent element into t e capital o! t e @ea8er, is t e 8al%e o! t e yarn0 &n @ at manner t e parts o! t is 8al%e a8e been resol8ed !or t e spinner imsel! into capital and re8en%e, or, in ot er @ords, into paid and %npaid labo%r, is completely irrele8ant !or t e 8al%e determination o! t e commodity itsel! Baside !rom modi!ications t ro%g t e a8erage pro!itC0 Aack o! t is still l%rks t e idea t at t e pro!it, or s%rpl%s-8al%e in general, is an excess abo8e t e 8al%e o! t e commodity, @ ic can only be made by an extra c arge, m%t%al c eating, or gain t ro%g selling0 W en t e price o! prod%ction is paid, or e8en t e 8al%e o! t e commodity, t e component 8al%es o! t e commodity @ ic appear to t e seller in t e !orm o! re8en%e are nat%rally also paid0 Monopoly prices, o! co%rse, are not re!erred to ere0 $econdly, it is D%ite correct to say t at t e component parts o! commodities @ ic make %p t e constant capital, like any ot er commodity-8al%e, may be red%ced to portions o! 8al%e @ ic resol8e t emsel8es !or t e prod%cers and t e o@ners o! t e means o! prod%ction into @ages, pro!it and rent0 5 is is merely a capitalist !orm o! expression !or t e !act t at all commodity-8al%e is b%t t e meas%re o! t e socially necessary labo%r contained in a commodity0 A%t it as already been s o@n in Aook & t at t is no@ise pre8ents t e commodity-prod%ct o! any capital !rom being split into separate parts, o! @ ic one represents excl%si8ely t e constant portion o! capital, anot er t e 8ariable portion o! capital, and a t ird solely s%rpl%s-8al%e0

+8*

; apter J'&J

$torc expresses t e opinion o! many ot ers @ en e says: K5 e saleable prod%cts @ ic make %p t e national re8en%e m%st be considered in political economy in t@o di!!erent @ays: relati8e to indi8id%als as 8al%es, and relati8e to t e nation as goods# !or t e re8en%e o! a nation is not appraised, like t at o! an indi8id%al, by its 8al%e, b%t by its %tility or by t e @ants @ ic it can satis!y0L BConsid7rations sur le revenu national, p0 1*0C &n t e !irst place, it is a !alse abstraction to regard a nation @ ose mode o! prod%ction is based %pon 8al%e, and !%rt ermore is capitalistically organised, as an aggregate body @orking merely !or t e satis!action o! t e national @ants0 $econdly, a!ter t e abolition o! t e capitalist mode o! prod%ction, b%t still retaining social prod%ction, t e determination o! 8al%e contin%es to pre8ail in t e sense t at t e reg%lation o! labo%r-time and t e distrib%tion o! social labo%r among t e 8ario%s prod%ction gro%ps, %ltimately t e book-keeping encompassing all t is, become more essential t an e8er0

Chapter 5/. 5llusions Created (! Co petition

&t as been s o@n t at t e 8al%e o! commodities, or t e price o! prod%ction reg%lated by t eir total 8al%e, resol8es itsel! into: 1C ? portion o! 8al%e replacing constant capital, or representing past labo%r, @ ic @as %sed %p in t e !orm o! means o! prod%ction in making t e commodity# in a @ord, t e 8al%e, or price, @ ic t ese means o! prod%ction carried into t e prod%ction process o! t e commodities0 We are not re!erring at all ere to indi8id%al commodities, b%t to commodity-capital, t at is, t e !orm in @ ic t e prod%ct o! t e capital d%ring a de!inite period o! time, say a year, mani!ests itsel!# t e indi8id%al commodity !orms one element o! commodity-capital, @ ic , moreo8er, so !ar as its 8al%e is concerned, resol8es itsel! into t e same analogo%s constit%ents0 <C 5 e portion o! 8al%e representing 8ariable capital, @ ic meas%res t e income o! t e labo%rer and is trans!ormed into @ages !or im# i0e0, t e labo%rer as reprod%ced t ese @ages in t is 8ariable portion o! 8al%e# in s ort, t e portion o! 8al%e @ ic represents t e paid portion o! ne@ labo%r added to t e abo8e constant portion in t e prod%ction o! t e commodities0 3C $%rpl%s-8al%e, i0e0, t e portion o! 8al%e o! t e prod%ced commodities in @ ic t e %npaid labo%r, or s%rpl%s-labo%r, is incorporated0 5 is last portion o! 8al%e, in its t%rn, ass%mes t e independent !orms @ ic are at t e same time !orms o! re8en%e: t e !orms o! pro!it on capital Binterest on capital as s%c and pro!it o! enterprise on capital as !%nctioning capitalC and gro%ndrent, @ ic is claimed by t e o@ner o! t e land participating in t e prod%ction process0 5 e components <C and 3C, t at is, t e portion o! 8al%e @ ic al@ays ass%mes t e re8en%e !orms o! @ages Bo! co%rse only a!ter t e latter a8e !irst gone t ro%g t e !orm o! 8ariable capitalC, pro!it and rent, is disting%is ed !rom t e constant component 1C by t e !act t at in it is embodied t at entire 8al%e in @ ic t e ne@ additional labo%r added to t e constant part, to t e means o! prod%ction o! t e commodities, is materialised0 -o@, apart !rom t e constant portion, it is correct to say t at t e 8al%e o! a commodity, i0e0, to t e extent t at it represents ne@ly added labo%r, contin%ally resol8es itsel! into t ree parts, @ ic constit%te t ree !orms o! re8en%e, namely, @ages, pro!it and rent, lx8ii t e respecti8e magnit%des o! @ ose 8al%e, t at is, t e aliD%ot portions @ ic t ey constit%te in t e total 8al%e, are determined by 8ario%s speci!ic la@s de8eloped abo8e0 A%t, it @o%ld be a mistake to state t e con8erse, namely, t at t e 8al%e o! @ages, rate o! pro!it and rate o! rent !orm independent constit%ent elements o! 8al%e, @ ose synt esis gi8es rise to t e 8al%e o! commodities, apart !rom t e constant component# in ot er @ords, it @o%ld be a mistake to say t at t ey are constit%ent elements o! t e 8al%e o! commodities, or o! t e price o! prod%ction0lx8iii 5 e di!!erence is easily seen0 'et %s ass%me t at t e 8al%e o! t e prod%ct o! a capital o! +== is eD%al to 2== c U 1==8 U 1+=s R 6+=# let t e 1+=s in t%rn, be di8ided into >+ pro!it U >+ rent0 We @ill also ass%me, in order to !orestall %seless di!!ic%lties, t at t is is a capital o! a8erage composition, so t at its price o! prod%ction and its 8al%e coincide# t is coincidence al@ays takes place @ ene8er t e prod%ct o! s%c an indi8id%al capital may be considered as t e prod%ct o! some portion I corresponding to its magnit%de I o! t e total capital0 6ere @ages, meas%red by 8ariable capital, !orm <=T o! t e ad8anced capital# s%rpl%s-8al%e, calc%lated on t e total capital, !orms 3=T, namely 1+T pro!it and 1+T rent0 5 e entire 8al%e component o! t e commodity representing t e ne@ly added labo%r is eD%al to 1== 8 U 1+=s R <+=0 &ts magnit%de does not depend %pon its di8ision into @ages, pro!it and rent0 We see !rom t e

+*1

; apter '

relation o! t ese parts to eac ot er t at labo%r-po@er, @ ic is paid @it 1== in money, say V1==, as s%pplied a D%antity o! labo%r represented by money to t e amo%nt o! V<+=0 We see !rom t is t at t e labo%rer per!ormed 1Z times as m%c s%rpl%s-labo%r as e did labo%r !or imsel!0 &! t e @orking-day R 1= o%rs, t en e @orked 2 o%rs !or imsel! and 6 o%rs !or t e capitalist0 5 ere!ore, t e labo%r o! t e labo%rers paid @it V1== is expressed in a money-8al%e o! V<+=0 ?part !rom t is 8al%e o! V<+=, t ere is not ing to di8ide bet@een labo%rer and capitalist, bet@een capitalist and landlord0 &t is t e total 8al%e ne@ly added to t e 8al%e o! t e means o! prod%ction, i0e0, 2==0 5 e speci!ic commodity-8al%e o! <+= t %s prod%ced and determined by t e D%antity o! labo%r materialised in it constit%tes t e limit, t ere!ore, !or t e di8idends @ ic t e labo%rer, capitalist and landlord @ill be able to dra@ !rom t is 8al%e in t e !orm o! re8en%e I @ages, pro!it and rent0 'et %s ass%me t at a capital o! t e same organic composition, t at is, t e same proportion bet@een employed li8ing labo%r-po@er and constant capital set in motion, is compelled to pay V1+= instead o! V1== !or t e same labo%r-po@er @ ic sets in motion t e constant capital o! 2==0 ?nd let %s !%rt er ass%me t at pro!it and rent s are in t e s%rpl%s-8al%e in di!!erent proportions0 $ince @e a8e ass%med t at t e 8ariable capital o! V1+= sets t e same D%antity o! labo%r in motion as did t e 8ariable capital o! V1==, t e ne@ly prod%ced 8al%e @o%ld R <+=, as be!ore, and t e 8al%e o! t e total prod%ct @o%ld be 6+=, also as be!ore, b%t @e @o%ld t en a8e 2== c U 1+=8 U 1==s and t ese 1==s @o%ld di8ide, say, into 2+ pro!it and ++ rent0 5 e proportion in @ ic t e ne@ly prod%ced total 8al%e @o%ld be distrib%ted as @ages, pro!it and rent @o%ld no@ be 8ery di!!erent# similarly, t e magnit%de o! t e ad8anced total capital @o%ld be di!!erent, alt o%g it only sets t e same total D%antity o! labo%r in motion0 Wages @o%ld amo%nt to <> 3N11T, pro!it I 8 <N11T, and rent I 1=T o! t e ad8anced capital# t %s, t e total s%rpl%s-8al%e @o%ld be some@ at o8er 18T0 ?s a res%lt o! t e increase in @ages, t e %npaid portion o! total labo%r @o%ld be di!!erent and t ereby t e s%rpl%s-8al%e too0 &! t e @orking-day contained 1= o%rs, t e labo%rer @o%ld a8e @orked 6 o%rs !or imsel! and only 2 o%rs !or t e capitalist0 5 e proportions o! pro!it and rent @o%ld also be di!!erent# t e red%ced s%rpl%s-8al%e @o%ld be di8ided in a di!!erent proportion bet@een t e capitalist and t e landlord0 Finally, since t e 8al%e o! t e constant capital @o%ld a8e remained t e same and t e 8al%e o! t e ad8anced 8ariable capital @o%ld a8e risen, t e red%ced s%rpl%s-8al%e @o%ld express itsel! in a still more red%ced rate o! gross pro!it, by @ ic @e mean in t is case t e ratio o! t e total s%rpl%s-8al%e to t e total ad8anced capital0 5 e c ange in t e 8al%e o! @ages, in t e rate o! pro!it, and in t e rate o! rent, @ ate8er t e e!!ect o! t e la@s reg%lating t e proportions o! t ese parts to eac ot er, co%ld only mo8e @it in t e limits set by t e ne@ly prod%ced commodity-8al%e o! <+=0 ?n exception co%ld only take place i! rent s o%ld be based on a monopoly price0 5 is @o%ld no@ise alter t e la@, b%t merely complicate t e analysis0 For i! @e consider only t e prod%ct itsel! in t is case, t en only t e di8ision o! s%rpl%s-8al%e @o%ld be di!!erent0 A%t i! @e consider its relati8e 8al%e as compared @it ot er commodities, t en @e s o%ld !ind solely t is di!!erence I t at a portion o! t e s%rpl%s8al%e ad been trans!erred !rom t em to t is partic%lar commodity0 5o recapit%late: 4al%e o! t e ,rod%ct -e@ )ate o! )ate 4al%e $%rpl%s :ross 4al%e ,ro!it 1+=T 66WT 3=T 18 <N11T o!

First ;ase: 2==c U 1==8 U <+= 1+=+ R 6+= $econd 2==c U 1+=8 U <+=

+*<

; apter '

;ase:

1==s R 6+=

&n t e !irst place, t e s%rpl%s-8al%e !alls one-t ird o! @ at it @as, i0e0, !rom 1+= to 1==0 5 e rate o! pro!it !alls by a little more t an one-t ird, i0e0, !rom 3=T to 18T, beca%se t e red%ced s%rpl%s8al%e m%st be calc%lated on an increased total ad8anced capital0 A%t it by no means !alls in t e same proportion as t e rate o! s%rpl%s-8al%e0 5 e latter !alls !rom 1+=N1== to 1==N1+=, t at is, !rom 1+=T to 66WT, @ ereas t e rate o! pro!it only !alls !rom 1+=N+== to 1==N++=, or !rom 3=T to 18 <N11T0 5 e rate o! pro!it, t en, !alls proportionately more t an t e mass o! s%rpl%s-8al%e, b%t less t an t e rate o! s%rpl%s-8al%e0 We !ind, !%rt ermore, t at 8al%e, as @ell as mass o! prod%cts, remains t e same, so long as t e same D%antity o! labo%r is employed, alt o%g t e ad8anced capital as increased d%e to t e a%gmentation o! its 8ariable component0 5 is increase in ad8anced capital @o%ld indeed be 8ery m%c !elt by a capitalist %ndertaking a ne@ enterprise0 A%t considering reprod%ction as a @ ole, a%gmentation o! t e 8ariable capital merely means t at a larger portion o! t e 8al%e ne@ly created by ne@ly added labo%r is con8erted into @ages, and t %s, in t e !irst place, into 8ariable capital instead o! into s%rpl%s-8al%e and s%rpl%s-prod%ct0 5 e 8al%e o! t e prod%ct t %s remains t e same, beca%se it is limited on t e one and by t e 8al%e o! t e constant capital R 2==, and on t e ot er by t e n%mber <+=, in @ ic t e ne@ly added labo%r is represented0 Aot , o@e8er, remain %naltered0 5 is prod%ct @o%ld, as be!ore, represent t e same amo%nt o! %se-8al%e in t e same magnit%de o! 8al%e, to t e extent t at it @o%ld itsel! again enter into t e constant capital# t %s, t e same mass o! elements o! constant capital @o%ld retain t e same 8al%e0 5 e matter @o%ld be di!!erent i! @ages @ere to rise not beca%se t e labo%rer recei8ed a larger s are o! is o@n labo%r, b%t i! e recei8ed a larger portion o! is o@n labo%r beca%se t e labo%r prod%cti8ity ad decreased0 &n t is case, t e total 8al%e in @ ic t e same labo%r, paid and %npaid, @o%ld be incorporated, @o%ld remain t e same0 A%t t e mass o! prod%cts in @ ic t is D%antity o! labo%r @o%ld be incorporated @o%ld a8e decreased so t at t e price o! eac aliD%ot portion o! t is prod%ct @o%ld rise, beca%se eac portion @o%ld contain more labo%r0 5 e increased @ages o! 1+= @o%ld not represent any more prod%ct t an t e @ages o! 1== did be!ore# t e red%ced s%rpl%s-8al%e o! 1== @o%ld represent merely W t e !ormer prod%ct, i0e0, 66W T o! t e mass o! %se-8al%es !ormerly represented by 1==0 &n t is case, t e constant capital @o%ld also become dearer to t e extent t at t is prod%ct @o%ld enter into it0 6o@e8er, t is @o%ld not be t e res%lt o! t e increase in @ages, b%t rat er t e increase in @ages @o%ld be a res%lt o! t e increase in t e price o! commodities and a res%lt o! t e diminis ed prod%cti8ity o! t e same D%antity o! labo%r0 &t appears ere as t o%g t e increase in @ages ad made t e prod%ct dearer# o@e8er, t is increase is not t e ca%se, b%t rat er t e res%lt, o! a c ange in t e 8al%e o! t e commodities, d%e to t e decreased prod%cti8ity o! labo%r0 3n t e ot er and, all ot er circ%mstances remaining t e same, i0e0, i! t e same D%antity o! employed labo%r is still represented by <+=, t en, i! t e 8al%e o! t e means o! prod%ction employed s o%ld rise or !all, t e 8al%e o! t e same D%antity o! prod%cts @o%ld rise or !all by t e same magnit%de0 2+=c U 1==8 U 1+=s gi8es a prod%ct-8al%e R >==# b%t 3+=c U 1==8 U 1+=s gi8es a 8al%e !or t e same D%antity o! prod%cts o! only 6==, as against a !ormer 6+=0 6ence, i! t e ad8anced capital, set in motion by t e same D%antity o! labo%r, increases or decreases, t en t e 8al%e o! t e prod%ct rises or !alls, ot er circ%mstances remaining t e same, i! t e increase or decrease in ad8anced capital is d%e to a c ange in t e magnit%de o! t e 8al%e o! t e constant portion o! capital0 3n t e ot er and, t e 8al%e o! t e prod%ct remains %nc anged i! t e increase or decrease in ad8anced capital is ca%sed by a c ange in t e magnit%de o! t e 8al%e o! t e 8ariable portion o! capital, ass%ming t e labo%r prod%cti8ity remains t e same0 &n t e case o! t e constant capital, t e increase or decrease in its 8al%e is not compensated !or by any opposite mo8ement0 A%t in t e case o! t e 8ariable capital, ass%ming t e labo%r prod%cti8ity remains t e same, an increase or decrease in its 8al%e is compensated !or by t e opposite mo8ement on t e part o! t e s%rpl%s-8al%e, so t at t e 8al%e o! t e 8ariable capital pl%s t e s%rpl%s-8al%e, i0e0, t e

+*3

; apter '

8al%e ne@ly added by labo%r to t e means o! prod%ction and ne@ly incorporated in t e prod%ct, remains t e same0 A%t i! t e increase or decrease in t e 8al%e o! t e 8ariable capital or @ages is d%e to a rise or !all in t e price o! commodities, i0e0, a decrease or increase in t e prod%cti8eness o! t e labo%r employed by t is in8estment o! capital t en t e 8al%e o! t e prod%ct is a!!ected0 A%t t e rise or !all in @ages in t is case is not a ca%se, b%t merely an e!!ect0 3n t e ot er and, ass%ming t e constant capital in t e abo8e ill%stration to remain R 2== c, i! t e c ange !rom 1==8 U 1+=s to 1+=8 U 1==s, i0e0, t e increase in 8ariable capital, s o%ld be d%e to a decrease in t e prod%cti8eness o! labo%r, not in t is partic%lar branc o! ind%stry, say, cotton spinning, b%t per aps in agric%lt%re @ ic pro8ides t e labo%rerGs !oodst%!!s, i0e0, d%e to a rise in t e price o! t ese !oodst%!!s, t en t e 8al%e o! t e prod%ct @o%ld remain %nc anged0 5 e 8al%e o! 6+= @o%ld still be represented by t e same D%antity o! cotton yarn0 &t !ollo@s, !%rt ermore, !rom t e abo8e: &! t e decrease in t e expendit%re o! constant capital is d%e to economies, etc0, in lines o! prod%ction @ ose prod%cts enter into t e labo%rerGs cons%mption, t en t is, H%st like t e direct increase in t e prod%cti8ity o! t e employed labo%r itsel!, may lead to a decrease in @ages d%e to a c eapening o! t e means o! s%bsistence o! t e labo%rer, and may lead, t ere!ore, to an increase in t e s%rpl%s-8al%e# so t at t e rate o! pro!it in t is case @o%ld gro@ !or t@o reasons, namely, on t e one and, beca%se t e 8al%e o! t e constant capital decreases, and on t e ot er and, beca%se t e s%rpl%s-8al%e increases0 &n o%r consideration o! t e trans!ormation o! s%rpl%s-8al%e into pro!it, @e ass%med t at @ages do not !all, b%t remain constant, beca%se t ere @e ad to in8estigate t e !l%ct%ations in t e rate o! pro!it, independent o! t e c anges in t e rate o! s%rpl%s-8al%e0 Moreo8er, t e la@s de8eloped t ere are general ones, and also apply to in8estments o! capital @ ose prod%cts do not enter into t e labo%rerGs cons%mption, @ ereby c anges in t e 8al%e o! t e prod%ct, t ere!ore, are @it o%t in!l%ence %pon t e @ages0 5 %s, t e separation and resol%tion o! ne@ 8al%e ann%ally added by ne@ labo%r to t e means o! prod%ction, or to t e constant part o! capital, into t e 8ario%s !orms o! re8en%e, 8iE0, @ages, pro!it and rent, do not at all alter t e limits o! t e 8al%e itsel!, t e total 8al%e to be distrib%ted among t ese 8ario%s categories# any more t an a c ange in t e m%t%al relations o! t ese indi8id%al parts can c ange t eir total, t is gi8en magnit%de o! 8al%e0 5 e gi8en n%mber 1== al@ays remains t e same, @ et er it is di8ided into += U +=, or into <= U >= U 1=, or into 2= U 3= U 3=0 5 e portion o! t e 8al%e o! t e prod%ct @ ic is resol8ed into t ese re8en%es is determined, H%st like t e constant portion o! t e 8al%e o! capital, by t e 8al%e o! t e commodities, i0e0, by t e D%antity o! labo%r incorporated in t em in eac case0 :i8en !irst, t en, is t e D%antity o! 8al%e o! commodities to be di8ided among @ages, pro!it and rent# in ot er @ords, t e absol%te limit o! t e s%m o! t e portions o! 8al%e o! t ese commodities0 $econdly, as concerns t e indi8id%al categories t emsel8es, t eir a8erage and reg%lating limits are like@ise gi8en0 Wages !orm t e basis in t is limitation0 5 ey are reg%lated on t e one and by a nat%ral la@# t eir lo@er limit is determined by t e p ysical minim%m o! means o! s%bsistence reD%ired by t e labo%rer !or t e conser8ation o! is labo%rpo@er and !or its reprod%ction# i0e0, by a de!inite D%antity o! commodities0 5 e 8al%e o! t ese commodities is determined by t e labo%r-time reD%ired !or t eir reprod%ction# and t %s by t e portion o! ne@ labo%r added to t e means o! prod%ction, or by t e portion o! eac @orking-day reD%ired by t e labo%rer !or t e prod%ction and reprod%ction o! an eD%i8alent !or t e 8al%e o! t ese necessary means o! s%bsistence0 For instance, i! is a8erage daily means o! s%bsistence a8e a 8al%e R 6 o%rs o! a8erage labo%r, t en e m%st @ork on an a8erage six o%rs per day !or imsel!0 5 e act%al 8al%e o! is labo%r-po@er de8iates !rom t is p ysical minim%m# it di!!ers according to climate and le8el o! social de8elopment# it depends not merely %pon t e p ysical, b%t also %pon t e istorically de8eloped social needs, @ ic become second nat%re0 A%t in e8ery co%ntry, at a gi8en time, t is reg%lating a8erage @age is a gi8en magnit%de0 5 e 8al%e o! all ot er re8en%e t %s as its limit0 &t is al@ays eD%al to t e 8al%e in @ ic t e total @orking-day B@ ic

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coincides in t e present case @it t e a8erage @orking-day, since it comprises t e total D%antity o! labo%r set in motion by t e total social capitalC is incorporated min%s t e portion o! t e @orking-day incorporated in @ages0 &ts limit is t ere!ore determined by t e limit o! t e 8al%e in @ ic t e %npaid labo%r is expressed, t at is, by t e D%antity o! t is %npaid labo%r0 W ile t e portion o! t e @orking-day @ ic is reD%ired by t e labo%rer !or t e reprod%ction o! t e 8al%e o! is @ages !inds its %ltimate limit in t e p ysical minim%m o! @ages, t e ot er portion o! t e @orking-day, in @ ic s%rpl%s-labo%r is incorporated, and t %s t e portion o! 8al%e representing s%rpl%s-8al%e, !inds its limit in t e p ysical maxim%m o! t e @orking-day, i0e0, in t e total D%antity o! daily labo%r-time d%ring @ ic t e labo%rer can, in general, be acti8e and still preser8e and reprod%ce is labo%r-po@er0 $ince @e are ere concerned @it t e distrib%tion o! t e 8al%e @ ic represents t e total labo%r ne@ly added per year, t e @orking-day may be regarded ere as a constant magnit%de, and is ass%med as s%c , no matter o@ m%c or o@ little it may de8iate !rom its p ysical maxim%m0 5 e absol%te limit o! t e portion o! 8al%e @ ic !orms s%rpl%s-8al%e, and @ ic resol8es itsel! into pro!it and gro%nd-rent, is t %s gi8en0 &t is determined by t e excess o! t e %npaid portion o! t e @orking-day o8er its paid portion, i0e0, by t e portion o! t e 8al%e o! t e total prod%ct in @ ic t is s%rpl%s-labo%r exists0 &! @e call t e s%rpl%s-8al%e t %s limited and calc%lated on t e ad8anced total capital I t e pro!it, as & a8e done, t en t is pro!it, so !ar as its absol%te magnit%de is concerned, is eD%al to t e s%rpl%s-8al%e and, t ere!ore, its limits are H%st as m%c determined by la@ as t e latter0 3n t e ot er and, t e le8el o! t e rate o! pro!it is like@ise a magnit%de eld @it in certain speci!ic limits determined by t e 8al%e o! commodities0 &t is t e ratio o! t e total s%rpl%s-8al%e to t e total social capital ad8anced in prod%ction0 &! t is capital R +== Bsay millionsC and t e s%rpl%s-8al%e R 1==, t en <=T constit%tes t e absol%te limit o! t e rate o! pro!it0 5 e distrib%tion o! t e social pro!it according to t is rate among t e capitals in8ested in t e 8ario%s sp eres o! prod%ction creates prices o! prod%ction @ ic de8iate !rom t e 8al%es o! commodities and @ ic are t e real reg%lating a8erage marketprices0 A%t t is de8iation abolis es neit er t e determination o! prices by 8al%es nor t e reg%lar limits o! pro!it0 &nstead o! t e 8al%e o! a commodity being eD%al to t e capital cons%med in its prod%ction pl%s t e s%rpl%s-8al%e contained in it, its price o! prod%ction is no@ eD%al to t e capital, c, cons%med in its prod%ction pl%s t e s%rpl%s-8al%e !alling to its s are as a res%lt o! t e general rate o! pro!it, !or instance <=T on t e capital ad8anced in its prod%ction, co%nting bot t e cons%med and t e merely employed capital0 A%t t is additional amo%nt o! <=T is itsel! determined by t e s%rpl%s-8al%e created by t e total social capital and its relation to t e 8al%e o! t is capital# and !or t is reason it is <=T and not 1= or 1==0 5 e trans!ormation o! 8al%es into prices o! prod%ction, t en, does not remo8e t e limits on pro!it, b%t merely alters its distrib%tion among t e 8ario%s partic%lar capitals @ ic make %p t e social capital, i0e0, it distrib%tes it %ni!ormly among t em in t e proportion in @ ic t ey !orm parts o! t e 8al%e o! t is total capital0 5 e market-prices rise abo8e and !all belo@ t ese reg%lating prices o! prod%ction, b%t t ese !l%ct%ations m%t%ally balance eac ot er0 &! one examines price lists o8er a more or less long period o! time, and i! one disregards t ose cases in @ ic t e act%al 8al%e o! commodities is altered by a c ange in t e prod%cti8ity o! labo%r, and like@ise t ose cases in @ ic t e process o! prod%ction as been dist%rbed by nat%ral or social accidents, one @ill be s%rprised, in t e !irst place, by t e relati8ely narro@ limits o! t e de8iations, and, secondly, by t e reg%larity o! t eir m%t%al compensation0 5 e same domination o! t e reg%lating a8erages @ill be !o%nd ere t at M%etelet pointed o%t in t e case o! social p enomena0 &! t e eD%alisation o! t e 8al%es o! commodities into prices o! prod%ction does not meet any obstacles, t en t e rent resol8es itsel! into di!!erential rent, i0e0, it is limited to t e eD%alisation o! t e s%rpl%s-pro!its @ ic @o%ld e gi8en to some capitalists by t e reg%lating prices o! prod%ction and @ ic are no@ appropriated by t e landlord0 6ere, t en, rent as its de!inite limit o! 8al%e in t e de8iations o! t e indi8id%al rates o! pro!it, @ ic are ca%sed by t e reg%lation o! prices o! prod%ction by t e general rate o! pro!it0 &! landed property obstr%cts eD%alisation o! t e 8al%es o! commodities into prices o! prod%ction, and appropriates absol%te rent, t en t e latter is limited by t e excess o! t e 8al%e o!

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t e agric%lt%ral prod%cts o8er t eir price o! prod%ction, i0e0, by t e excess o! t e s%rpl%s-8al%e contained in t em o8er t e rate o! pro!it assigned to t e capitals by t e general rate o! pro!it0 5 is di!!erence, t en, !orms t e limit o! t e rent, @ ic , as be!ore, is b%t a de!inite portion o! t e gi8en s%rpl%s-8al%e contained in t e commodities0 Finally, i! eD%alisation o! s%rpl%s-8al%e into a8erage pro!it meets @it obstacles in t e 8ario%s sp eres o! prod%ction in t e !orm o! arti!icial or nat%ral monopolies, and partic%larly monopoly in landed property, so t at a monopoly price becomes possible, @ ic rises abo8e t e price o! prod%ction and abo8e t e 8al%e o! t e commodities a!!ected by s%c a monopoly, t en t e limits imposed by t e 8al%e o! t e commodities @o%ld not t ereby be remo8ed0 5 e monopoly price o! certain commodities @o%ld merely trans!er a portion o! t e pro!it o! t e ot er commodityprod%cers to t e commodities a8ing t e monopoly price0 ? local dist%rbance in t e distrib%tion o! t e s%rpl%s-8al%e among t e 8ario%s sp eres o! prod%ction @o%ld indirectly take place, b%t it @o%ld lea8e t e limit o! t is s%rpl%s-8al%e itsel! %naltered0 $ o%ld t e commodity a8ing t e monopoly price enter into t e necessary cons%mption o! t e labo%rer, it @o%ld increase t e @age and t ereby red%ce t e s%rpl%s-8al%e, ass%ming t e labo%rer recei8es t e 8al%e o! is labo%rpo@er as be!ore0 &t co%ld depress @ages belo@ t e 8al%e o! labo%r-po@er, b%t only to t e extent t at t e !ormer exceed t e limit o! t eir p ysical minim%m0 &n t is case t e monopoly price @o%ld be paid by a ded%ction !rom real @ages Bi0e00 t e D%antity o! %se-8al%es recei8ed by t e labo%rer !or t e same D%antity o! labo%rC and !rom t e pro!it o! t e ot er capitalists0 5 e limits @it in @ ic t e monopoly price @o%ld a!!ect t e normal reg%lation o! t e prices o! commodities @o%ld be !irmly !ixed and acc%rately calc%lable0 5 %s H%st as t e di8ision o! t e ne@ly added 8al%e o! commodities, and, in general, 8al%e resol8able into re8en%e, !inds its gi8en and reg%lating limits in t e relation bet@een necessary and s%rpl%s labo%r, @ages and s%rpl%s-8al%e, so does t e di8ision o! s%rpl%s-8al%e itsel! into pro!it and gro%nd-rent !ind its limits in t e la@s reg%lating t e eD%alisation o! t e rate o! pro!it0 ?s regards t e di8ision into interest and pro!it o! enterprise, t e a8erage pro!it itsel! !orms t e limit !or bot taken toget er0 &t !%rnis es t e gi8en magnit%de o! 8al%e @ ic t ey may split among t emsel8es and @ ic alone can be so di8ided0 5 e speci!ic ratio o! t is di8ision is ere !ort%ito%s, i0e0, it is determined excl%si8ely by conditions o! competition0 @ ereas in ot er cases t e balancing o! s%pply and demand is eD%i8alent to elimination o! t e de8iations in marketprices !rom t eir reg%lating a8erage prices, i0e0, elimination o! t e in!l%ence o! competition, it is ere t e only determinant0 A%t @ yQ Aeca%se t e same prod%ction !actor, capital, as to di8ide its s are o! t e s%rpl%s-8al%e bet@een t@o o@ners o! t e same prod%ction !actor0 A%t t e !act t at t ere is no de!inite, reg%lar limit ere !or t e di8ision o! t e a8erage pro!it does not remo8e its limit as part o! t e commodity-8al%e# H%st as t e !act t at t@o partners in a certain b%siness di8ide t eir pro!it %neD%ally d%e to di!!erent external circ%mstances does not a!!ect t e limits o! t is pro!it in any @ay0 6ence, alt o%g t e portion o! t e commodity-8al%e in @ ic t e ne@ labo%r added to t e 8al%e o! t e means o! prod%ction is incorporated is di8ided into 8ario%s parts, @ ic in t e !orm o! re8en%e ass%me m%t%ally independent !orms, t is is no reason !or no@ considering @ages, pro!it and gro%nd-rent as t e constit%ent elements @ ic , in combination or taken all toget er, are t e so%rce o! t e reg%lating price Bnat%ral price, pri necessaireC o! t e commodities t emsel8es# so t at it is not t e commodity-8al%e, a!ter ded%cting t e constant portion o! 8al%e, @ ic @o%ld be t e original %nit t at di8ides into t ese t ree parts, b%t rat er, con8ersely, t e price o! eac o! t ese t ree parts @o%ld be independently determined, and t e price o! t e commodities @o%ld t en be !ormed by adding t ese t ree independent magnit%des toget er0 &n reality, t e commodity-8al%e is t e magnit%de @ ic precedes t e s%m o! t e total 8al%es o! @ages, pro!it and rent, regardless o! t e relati8e magnit%des o! t e latter0 &n t e abo8e erroneo%s conception, @ages, pro!it and rent are t ree independent magnit%des o! 8al%e, @ ose total magnit%de prod%ces, limits and determines t e magnit%de o! t e commodity-8al%e0

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&n t e !irst place it is e8ident t at i! @ages, pro!it and rent @ere to !orm t e price o! commodities, t is @o%ld apply as m%c to t e constant portion o! t e commodity-8al%e as to t e ot er portion, in @ ic 8ariable capital and s%rpl%s-8al%e are incorporated0 5 %s, t is constant portion may ere be le!t entirely o%t o! consideration, since t e 8al%e o! t e commodities o! @ ic it is composed @o%ld like@ise resol8e itsel! into t e s%m o! t e 8al%es o! @ages, pro!it and rent0 ?s already noted, t is conception, t en, denies t e 8ery existence o! s%c a constant portion o! 8al%e0 &t is !%rt ermore e8ident t at 8al%e loses all meaning ere0 3nly t e conception o! price still remains, in t e sense t at a certain amo%nt o! money is paid to t e o@ner o! labo%r-po@er, capital and land0 A%t @ at is moneyQ Money is not a t ing, b%t a de!inite !orm o! 8al%e, ence, 8al%e is again pres%pposed0 'et %s say, t en, t at a de!inite amo%nt o! gold or sil8er is paid !or t ese elements o! prod%ction, or t at it is mentally eD%ated to t em0 A%t gold and sil8er Band t e enlig tened economist is pro%d o! t is disco8eryC are t emsel8es commodities like all ot er commodities0 5 e price o! gold and sil8er is t ere!ore like@ise determined by @ages, pro!it and rent0 6ence @e cannot determine @ages, pro!it and rent by eD%ating t em to a certain amo%nt o! gold and sil8er, !or t e 8al%e o! t is gold and sil8er, by means o! @ ic t ey s o%ld be e8al%ated as in t eir eD%i8alent, s o%ld be !irst determined precisely by t em, independently o! gold and sil8er, i0e0, independently o! t e 8al%e o! any commodity, @ ic 8al%e is precisely t e prod%ct o! t e abo8e t ree !actors0 5 %s, to say t at t e 8al%e o! @ages, pro!it and rent consists in t eir being eD%i8alent to a certain D%antity o! gold and sil8er, @o%ld merely be saying t at t ey are eD%al to a certain D%antity o! @ages, pro!it and rent0 5ake @ages !irst0 For it is necessary to make labo%r t e point o! depart%re, e8en in t is 8ie@ o! t e matter0 6o@, t en, is t e reg%lating price o! @ages determined, t e price abo%t @ ic its market-prices oscillateQ 'et %s say t at it is determined by t e s%pply and demand o! labo%r-po@er0 A%t @ at sort o! labo%r-po@er demand is t isQ &t is a demand made by capital0 5 e demand !or labo%r is t ere!ore tantamo%nt to t e s%pply o! capital0 &n order to speak o! a s%pply o! capital, @e s o%ld kno@ abo8e all @ at capital is0 3! @ at does capital consistQ &! @e take its simplest aspect, it consists o! money and commodities0 A%t money is merely a commodity-!orm0 ;apital, t en, consists o! commodities0 A%t t e 8al%e o! commodities, according to o%r ass%mption, is determined, in t e !irst instance, by t e price o! t e labo%r prod%cing t e commodities, by @ages0 Wages are ere pres%pposed and are treated as a constit%ent element o! t e price o! commodities0 5 is price t en s o%ld be determined by t e ratio o! a8ailable labo%r to capital0 5 e price o! t e capital itsel! is eD%al to t e price o! t e commodities o! @ ic it is composed0 5 e demand by capital !or labo%r is eD%al to t e s%pply o! capital0 ?nd t e s%pply o! capital is eD%al to t e s%pply o! a D%antity o! commodities o! gi8en price, and t is price is reg%lated in t e !irst place by t e price o! labo%r, and t e price o! labo%r in t%rn is eD%al to t at portion o! t e commodity-price constit%ting t e 8ariable capital, @ ic is granted to t e labo%rer in exc ange !or is labo%r# and t e price o! t e commodities constit%ting t is 8ariable capital is again determined, in t%rn, primarily by t e price o! labo%r# !or it is determined by t e prices o! @ages, pro!it and rent0 &n order to determine @ages, @e cannot, t ere!ore, pres%ppose capital, !or t e 8al%e o! t e capital is itsel! determined in part by @ages0 Moreo8er, dragging competition into t is problem does not elp at all0 ;ompetition makes t e market-prices o! labo%r rise or !all0 A%t s%ppose s%pply and demand o! labo%r are balanced0 6o@ are @ages t en determinedQ Ay competition0 A%t @e a8e H%st ass%med t at competition ceases to act as a determinant, t at its in!l%ence is cancelled d%e to eD%ilibri%m bet@een its t@o m%t%ally opposing !orces0 &ndeed, it is precisely t e nat%ral price o! @ages t at @e @is to !ind, i0e0, t e price o! labo%r t at is not reg%lated by competition, b%t @ ic , on t e contrary, reg%lates t e latter0 -ot ing remains b%t to determine t e necessary price o! labo%r by t e necessary means o! s%bsistence o! t e labo%rer0 A%t t ese means o! s%bsistence are commodities, @ ic a8e a price0

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5 e price o! labo%r is t ere!ore determined by t e price o! t e necessary means o! s%bsistence and t e price o! t e means o! s%bsistence, like t at o! all ot er commodities, is determined primarily by t e price o! labo%r0 5 ere!ore, t e price o! labo%r determined by t e price o! t e means o! s%bsistence is determined by t e price o! labo%r0 5 e price o! labo%r is determined by itsel!0 &n ot er @ords, @e do not kno@ o@ t e price o! labo%r is determined0 'abo%r in t is case as a price in general, beca%se it is considered as a commodity0 &n order, t ere!ore, to speak o! t e price o! labo%r, @e m%st kno@ @ at price in general is0 A%t @e do not learn at all in t is @ay @ at price in general is0 -e8ert eless, let %s ass%me t at t e necessary price o! labo%r is determined in t is agreeable manner0 5 en o@ is t e a8erage pro!it determined, t e pro!it o! e8ery capital %nder normal conditions, @ ic constit%tes t e second element in t e price o! commoditiesQ 5 e a8erage pro!it m%st be determined by an a8erage rate o! pro!it# o@ is t is rate determinedQ Ay competition among t e capitalistsQ A%t t e competition already pres%pposes t e existence o! pro!it0 &t pres%pposes 8ario%s rates o! pro!it, and t %s 8ario%s pro!its I eit er in t e same or in di!!erent sp eres o! prod%ction0 ;ompetition can in!l%ence t e rate o! pro!it only to t e extent t at it a!!ects t e prices o! commodities0 ;ompetition can only make t e prod%cers @it in t e same sp ere o! prod%ction sell t eir commodities at t e same prices, and make t em sell t eir commodities in di!!erent sp eres o! prod%ction at prices @ ic @ill gi8e t em t e same pro!it, t e same proportional addition to t e price o! commodities @ ic as already been partially determined by @ages0 6ence competition can only eD%alise ineD%alities in t e rate o! pro!it0 &n order to eD%alise %neD%al rates o! pro!it, pro!it m%st exist as an element in t e price o! commodities0 ;ompetition does not create it0 &t lo@ers or raises its le8el, b%t does not create t e le8el @ ic is establis ed @ en eD%alisation as been ac ie8ed0 ?nd @ en @e speak o! a necessary rate o! pro!it, @ at @e @is to kno@ is precisely t e rate o! pro!it independent o! t e mo8ements o! competition, @ ic in t%rn reg%lates competition itsel!0 5 e a8erage rate o! pro!it sets in @ en t ere is an eD%ilibri%m o! !orces among t e competing capitalists0 ;ompetition may establis t is eD%ilibri%m b%t not t e rate o! pro!it @ ic makes its appearance @it t is eD%ilibri%m0 W en t is eD%ilibri%m is establis ed, @ y is t e general rate o! pro!it no@ 1=, or <=, or 1==TQ Aeca%se o! competitionQ -o, on t e contrary, competition as eliminated t e ca%ses prod%cing de8iations !rom 1=, <=, or 1==T0 &t as bro%g t abo%t a commodity-price @ ereby e8ery capital yields t e same pro!it in proportion to its magnit%de0 5 e magnit%de o! t is pro!it itsel!, o@e8er, is independent o! competition0 5 e latter merely red%ces, again and again, all de8iations to t is magnit%de0 3ne person competes @it anot er, and competition compels im to sell is commodities at t e same price as t e ot er0 A%t @ y is t is price 1= or <= or 1==Q 5 %s, not ing remains b%t to declare rate o! pro!it, and t ere!ore pro!it, to be in some %nacco%ntable manner a de!inite extra c arge added to t e price o! commodities, @ ic %p to t is point @as determined by @ages0 5 e only t ing t at competition tells %s is t at t is rate o! pro!it m%st be a gi8en magnit%de0 A%t @e kne@ t is be!ore I @ en @e dealt @it general rate o! pro!it and Knecessary priceL o! pro!it0 &t is D%ite %nnecessary to @ade t ro%g t is abs%rd process ane@ in t e case o! gro%nd-rent0 3ne can see @it o%t doing t is t at, @ en carried o%t more or less consistently, it makes pro!it and rent merely appear as de!inite extra c arges added by %nacco%ntable la@s to t e price o! commodities, a price primarily determined by @ages0 &n s ort, competition as to s o%lder t e responsibility o! explaining all t e meaningless ideas o! t e economists, @ ereas it s o%ld rat er be t e economists @ o explain competition0 -o@, disregarding ere t e ill%sion o! a pro!it and rent being created by circ%lation, i0e0, price components arising t ro%g sale I and circ%lation can ne8er gi8e @ at it did not !irst recei8e I t e matter simply amo%nts to t is: 'et t e price o! a commodity determined by @ages R 1==# let t e rate o! pro!it be 1=T o! @ages, and t e rent 1+T o! @ages0 5 en t e price o! t e commodity determined by t e s%m o! @ages,

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pro!it and rent R 1<+0 5 is additional <+ cannot arise !rom t e sale o! t e commodity0 For all @ o sell one anot er commodities sell at 1<+ t at @ ic costs 1== in @ages# @ ic is t e same as i! t ey ad all sold at 1==0 5 %s, t e operation m%st be considered independently o! t e circ%lation process0 &! t e t ree s are t e commodity itsel!, @ ic no@ costs 1<+ I and it does not alter matters any i! t e capitalist !irst sells at 1<+, and t en pays 1== to t e labo%rer, 1= to imsel!, and 1+ to t e landlord I t e labo%rer recei8es 2N+ R 1== o! t e 8al%e and o! t e prod%ct0 5 e capitalist recei8es <N<+ o! t e 8al%e and o! t e prod%ct, and t e landlord 3N<+0 $ince t e capitalist sells at 1<+ instead o! 1==, e gi8es t e labo%rer only 2N+ o! t e prod%ct incorporating t e latterGs labo%r0 5 %s, it @o%ld be H%st t e same as i! e ad gi8en 8= to t e labo%rer and retained <= I o! @ ic 8 @o%ld !all to is s are and 1< to t e landlord0 &n t is case e @o%ld a8e sold t e commodity at its 8al%e, since in !act t e additions to t e price represent increases t at are independent o! t e 8al%e o! t e commodity, @ ic %nder t e ass%mption made abo8e is determined by t e 8al%e o! @ages0 5 is, in a ro%ndabo%t @ay, amo%nts to saying t at according to t is conception t e term K@ages,L ere 1==, means t e 8al%e o! t e prod%ct, i0e0, t e s%m o! money in @ ic t is de!inite D%antity o! labo%r is represented# b%t t at t is 8al%e in t%rn di!!ers !rom t e real @age and t ere!ore lea8es a s%rpl%s0 A%t, ere t e s%rpl%s is realised by a nominal addition to t e price0 6ence, i! @ages @ere eD%al to 11= instead o! 1==, t e pro!it @o%ld a8e to be R 11 and t e gro%nd-rent R 16Z, so t at t e price o! t e commodity @o%ld R 13>Z0 5 is @o%ld lea8e t e proportions %naltered0 A%t since t e di8ision @o%ld al@ays be obtained by @ay o! a nominal addition o! de!inite percentages to @ages, t e price @o%ld rise and !all @it t e @ages0 Wages are ere !irst set eD%al to t e 8al%e o! t e commodity, and t en di8orced !rom it again0 &n !act, o@e8er, t is amo%nts to saying in a ro%ndabo%t and meaningless @ay t at t e 8al%e o! t e commodity is determined by t e D%antity o! labo%r contained in it, @ ereas t e 8al%e o! @ages is determined by t e price o! t e necessary means o! s%bsistence, and t e excess o! 8al%e abo8e t e @age !orms pro!it and rent0 5 e splitting o! t e 8al%e o! commodities a!ter s%btracting t e 8al%e o! t e means o! prod%ction cons%med in t eir creation# t e splitting o! t is gi8en D%antity o! 8al%e, determined by t e D%antity o! labo%r incorporated in t e prod%ced commodities, into t ree component parts, @ ic ass%me, as @ages, pro!it and rent, independent and m%t%ally %nrelated !orms o! re8en%e I t is splitting appears in a per8erted !orm on t e s%r!ace o! capitalist prod%ction, and conseD%ently in t e minds o! t ose capti8ated by t e latter0 'et t e total 8al%e o! a certain commodity R 3==, o! @ ic <== is t e 8al%e o! t e means o! prod%ction, or elements o! constant capital, cons%med in its prod%ction0 5 is lea8es 1== as t e amo%nt o! ne@ 8al%e added to t e commodity d%ring its process o! prod%ction0 5 is ne@ 8al%e o! 1== is all t at is a8ailable !or di8ision among t e t ree !orms o! re8en%e0 &! @e let @ages R x, pro!it R y and gro%nd-rent R E, t en t e s%m o! x U y U E @ill al@ays R 1== in o%r case0 A%t to t e ind%strialists, merc ants and bankers, and to t e 8%lgar economists, t is appears D%ite di!!erent0 For t em, t e 8al%e o! t e commodity, a!ter s%btracting t e 8al%e o! t e means o! prod%ction cons%med by it, is not gi8en R 1==, t is 1== t en being di8ided into x, y and E0 A%t rat er, t e price o! t e commodity simply consists o! t e 8al%e o! @ages, t e 8al%e o! pro!it and t e 8al%e o! rent, @ ic magnit%des are determined independently o! t e 8al%e o! t e commodity and o! eac ot er, so t at x, y and E are eac gi8en and determined independently, and only !rom t e s%m o! t ese magnit%des, @ ic t e may be smaller or larger t an 1==, is t e magnit%de o! 8al%e o! t e commodity itsel! obtained by adding t ese component 8al%es toget er0 5 is 3uid pro 3uo is ine8itable beca%se: 'irst: 5 e component parts o! t e 8al%e o! a commodity, appear as independent re8en%es in relation to one anot er, and as s%c are related to t ree 8ery dissimilar prod%ction !actors, namely labo%r, capital and land, and t ere!ore t ey seem to arise !rom t e latter0 3@ners ip o! labo%rpo@er, capital and land is t e ca%se !or t ese 8ario%s component 8al%es o! commodities !alling to t e s are o! t e respecti8e o@ners, and t %s trans!orming t emsel8es into re8en%e !or t em0 A%t

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t e 8al%e does not arise !rom a trans!ormation into re8en%e# it m%st rat er exist be!ore it can be con8erted into re8en%e, be!ore it can ass%me t is !orm0 5 e ill%sion t at t e opposite is tr%e is strengt ened all t e more as t e determination o! t e relati8e magnit%des o! t ese t ree components in relation to one anot er !ollo@s di!!erent la@s, @ ose connection @it , and limitation by, t e 8al%e o! t e commodities t emsel8es no@ise appear on t e s%r!ace0 Secondly: We a8e seen t at a general rise or !all in @ages, by ca%sing a mo8ement o! t e general rate o! pro!it in t e opposite direction I ot er circ%mstances remaining t e same I c anges t e prices o! prod%ction o! t e 8ario%s commodities, i0e0, raises some and lo@ers ot ers, depending on t e a8erage composition o! capital in t e respecti8e sp eres o! prod%ction0 5 %s, experience s o@s ere t at in some sp eres o! prod%ction, at any rate, t e a8erage price o! a commodity rises beca%se @ages a8e risen, and !alls beca%se @ages a8e !allen0 A%t KexperienceL does not s o@ t at t e 8al%e o! commodities, @ ic is independent o! @ages, secretly reg%lates t ese c anges0 6o@e8er, i! t e rise in @ages is local, i! it only takes place in partic%lar sp eres o! prod%ction as a res%lt o! special circ%mstances, t en a corresponding nominal rise in t e prices o! t ese commodities may occ%r0 5 is rise in t e relati8e 8al%e o! one kind o! commodity in relation to t e ot ers, !or @ ic @ages a8e remained %nc anged, is t en merely a reaction against t e local dist%rbance in t e %ni!orm distrib%tion o! s%rpl%s-8al%e among t e 8ario%s sp eres o! prod%ction, a means o! eD%alising t e partic%lar rates o! pro!it into t e general rate0 KExperienceL s o@s in t is case t at @ages again determine t e price0 5 %s, in bot o! t ese cases experience s o@s t at @ages determine t e prices o! commodities0 A%t KexperienceL does not s o@ t e idden ca%se o! t is interrelation0 F%rt ermore: 5 e a8erage price o! labo%r, i0e0, t e 8al%e o! labo%r-po@er, is determined by t e prod%ction price o! t e necessary means o! s%bsistence0 &! t e latter rises or !alls, t e !ormer rises or !alls accordingly0 5 %s, experience again s o@s t e existence o! a connection bet@een @ages and t e price o! commodities0 A%t t e ca%se may appear as an e!!ect, and t e e!!ect as a ca%se, @ ic is also t e case in t e mo8ements o! market-prices, @ ere a rise o! @ages abo8e t eir a8erage corresponds to t e rise o! market-prices abo8e t e prices o! prod%ction d%ring periods o! prosperity, and t e s%bseD%ent !all o! @ages belo@ t eir a8erage corresponds to a !all o! market-prices belo@ t e prices o! prod%ction0 5o t e dependence o! prices o! prod%ction %pon t e 8al%es o! commodities prima facie t ere @o%ld al@ays a8e to correspond, apart !rom t e oscillatory mo8ements o! market-prices, t e experience t at @ ene8er @ages rise t e rate o! pro!it !alls, and 8ice 8ersa0 A%t @e a8e seen t at t e rate o! pro!it may be determined by mo8ements in t e 8al%e o! constant capital, independently o! t e mo8ements o! @ages# so t at @ages and rate o! pro!it, instead o! mo8ing in opposite directions, may mo8e in t e same direction, may rise or !all toget er0 &! t e rate o! s%rpl%s-8al%e @ere to directly coincide @it t e rate o! pro!it, t is @o%ld not be possible0 $imilarly i! @ages s o%ld rise as a res%lt o! a rise in t e prices o! t e means o! s%bsistence, t e rate o! pro!it may remain t e same, or e8en rise, d%e to greater intensity o! labo%r or prolongation o! t e @orking-day0 ?ll t ese experiences bear o%t t e ill%sion created by t e independent and distorted !orm o! t e component 8al%es, namely, t at eit er @ages alone, or @ages and pro!it toget er, determine t e 8al%e o! commodities0 3nce s%c an ill%sion appears @it respect to @ages, once t e price o! labo%r and t e 8al%e created by labo%r seem to coincide, t e same a%tomatically applies to pro!it and rent0 5 eir prices, i0e0, t eir money-expression, m%st t en be reg%lated independently o! labo%r and o! t e 8al%e created by t e latter0 4hirdly: 'et %s ass%me t at according to direct experience t e 8al%es o! a commodity, or t e prices o! prod%ction I @ ic merely appear to be independent o! t e 8al%es I al@ays coincide @it t e market-prices o! t e commodity rat er t an merely pre8ailing as t e reg%lating a8erage prices by constant compensation o! t e contin%al !l%ct%ations in market-price0 'et %s ass%me, !%rt ermore, t at reprod%ction al@ays takes place %nder t e same %naltered conditions, i0e0, labo%r prod%cti8ity remains constant in all elements o! capital0 Finally, let %s ass%me t at t e component 8al%e o! t e commodity-prod%ct, @ ic is !ormed in e8ery sp ere o! prod%ction by

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t e addition o! a ne@ D%antity o! labo%r I i0e0, a ne@ly prod%ced 8al%e I to t e 8al%e o! t e means o! prod%ction, al@ays split into constant proportions o! @ages, pro!it and rent, so t at t e @age act%ally paid al@ays directly coincides @it t e 8al%e o! labo%r-po@er, t e pro!it act%ally realised I @it t e portion o! t e total s%rpl%s-8al%e @ ic !alls to t e s are o! e8ery independently !%nctioning part o! t e total capital by 8irt%e o! t e a8erage rate o! pro!it, and t e act%al rent is al@ays limited by t e bo%nds @it in @ ic gro%nd-rent on t is basis is normally con!ined0 &n a @ord, let %s ass%me t at t e di8ision o! t e socially prod%ced 8al%es and t e reg%lation o! t e prices o! prod%ction takes place on a capitalist basis, b%t t at competition is eliminated0 5 %s, %nder t ese ass%mptions, namely, i! t e 8al%e o! commodities @ere constant and appeared so, i! t e component 8al%e o! t e commodity-prod%ct @ ic resol8es itsel! into re8en%es @ere to remain a constant magnit%de and al@ays appeared as s%c , and !inally, i! t is gi8en and constant component 8al%e al@ays split into constant proportions o! @ages, pro!it and rent I e8en %nder t ese ass%mptions, t e real mo8ement @o%ld necessarily appear in distorted !orm# not as t e splitting o! a pre8io%sly gi8en magnit%de o! 8al%e into t ree parts @ ic ass%me m%t%ally independent !orms o! re8en%e, b%t, on t e contrary, as t e !ormation o! t is magnit%de o! 8al%e !rom t e s%m o! t e independent and separately determined, eac by itsel!, constit%ent elements I @ages, pro!it and gro%nd-rent0 5 is ill%sion @o%ld necessarily arise, beca%se in t e act%al mo8ement o! indi8id%al capitals, and t e commodities prod%ced by t em, not t e 8al%e o! commodities @o%ld appear to be a precondition o! its splitting b%t, con8ersely, t e components into @ ic it is split !%nction as a precondition o! t e 8al%e o! t e commodities0 &n t e !irst place, @e a8e seen t at to e8ery capitalist t e cost-price o! is commodities appears as a gi8en magnit%de and contin%ally appears as s%c in t e act%al price o! prod%ction0 5 e cost-price, o@e8er, is eD%al to t e 8al%e o! t e constant capital, t e ad8anced means o! prod%ction, pl%s t e 8al%e o! labo%r-po@er, @ ic , o@e8er, appears to t e agent o! prod%ction in t e irrational !orm o! t e price o! labo%r, so t at @ages sim%ltaneo%sly appear as re8en%e o! t e labo%rer0 5 e a8erage price o! labo%r is a gi8en magnit%de, beca%se t e 8al%e o! labo%r-po@er, like t at o! any ot er commodity, is determined by t e necessary labo%r-time reD%ired !or its reprod%ction0 A%t as concerns t at portion o! t e 8al%e o! commodities @ ic is embodied in @ages, it does not arise !rom t e !act t at it ass%mes t is !orm o! @ages, t at t e capitalist ad8ances to t e labo%rer is s are o! is o@n prod%ct in t e !orm o! @ages, b%t !rom t e !act t at t e labo%rer prod%ces an eD%i8alent !or is @ages, i0e0, t at a portion o! is daily or ann%al labo%r prod%ces t e 8al%e contained in t e price o! is labo%r-po@er0 A%t @ages are stip%lated by contract, be!ore t eir corresponding 8al%e eD%i8alent as been prod%ced0 ?s an element o! price, @ ose magnit%de is gi8en be!ore t e commodity and its 8al%e a8e been prod%ced, as a constit%ent part o! t e costprice, @ages t ereby do not appear as a portion @ ic detac es itsel! in independent !orm !rom t e total 8al%e o! t e commodity, b%t rat er, con8ersely, as a gi8en magnit%de, @ ic predetermines t is 8al%e, i0e0, as a creator o! price and 8al%e0 ? role similar to t at o! @ages in t e cost-price o! commodities is played by t e a8erage pro!it in t eir price o! prod%ction, !or t e price o! prod%ction is eD%al to cost-price pl%s a8erage pro!it on t e ad8anced capital0 5 is a8erage pro!it !ig%res practically, in t e mind and calc%lation o! t e capitalist imsel!, as a reg%lating element, not merely in so !ar as it determines t e trans!er o! capitals !rom one sp ere o! in8estment into anot er, b%t also in all sales and contracts @ ic embrace a process o! reprod%ction extending o8er long periods0 A%t so !ar as it !ig%res in t is manner, it is a preexistent magnit%de, @ ic is in !act independent o! t e 8al%e and s%rpl%s-8al%e prod%ced in any partic%lar sp ere o! prod%ction, and t %s e8en more so in t e case o! any indi8id%al in8estment o! capital in any sp ere o! prod%ction0 )at er t an appearing as a res%lt o! a splitting o! 8al%e, it mani!ests itsel! m%c more as a magnit%de independent o! t e 8al%e o! t e prod%ced commodities, as pre-existing in t e process o! prod%ction o! commodities and itsel! determining t e a8erage price o! t e commodities, i0e0, as a creator o! 8al%e0 &ndeed, t e s%rpl%s-8al%e, o@ing to t e separation o! its 8ario%s portions into m%t%ally, completely %nrelated !orms, appears in still

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more concrete !orm as a prereD%isite !or creating commodity-8al%e0 ? part o! t e a8erage pro!it in t e !orm o! interest con!ronts t e !%nctioning capitalist independently as an ass%med element in t e prod%ction o! commodities and o! t eir 8al%e0 -o matter o@ m%c t e magnit%de o! t e interest !l%ct%ates, at eac moment and !or e8ery capitalist it is a gi8en magnit%de entering into t e cost-price o! t e commodities prod%ced by im as indi8id%al capitalist0 5 e same role is played by gro%nd-rent in t e !orm o! lease money !ixed by contract !or t e agric%lt%ral capitalist, and in t e !orm o! rent !or b%siness premises in t e case o! ot er entreprene%rs0 5 ese portions into @ ic s%rpl%s-8al%e is split, being gi8en as elements o! cost-price !or t e indi8id%al capitalist, appear con8ersely t ere!ore as creators o! s%rpl%s-8al%e# creators o! a portion o! t e price o! commodities, H%st as @ages create t e ot er0 5 e secret @ ere!ore t ese prod%cts o! t e splitting o! commodity-8al%e constantly appear as prereD%isites !or t e !ormation o! 8al%e itsel! is simply t is, t at t e capitalist mode o! prod%ction, like any ot er, does not merely constantly reprod%ce t e material prod%ct, b%t also t e social and economic relations, t e c aracteristic economic !orms o! its creation0 &ts res%lt, t ere!ore, appears H%st as constantly pres%pposed by it, as its pres%ppositions appear as its res%lts0 ?nd it is t is contin%al reprod%ction o! t e same relations @ ic t e indi8id%al capitalist anticipates as sel!-e8ident, as an ind%bitable !act0 $o long as t e capitalist mode o! prod%ction persists as s%c , a portion o! t e ne@ly added labo%r contin%ally resol8es itsel! into @ages, anot er into pro!it Binterest and pro!it o! enterpriseC, and a t ird into rent0 &n contracts bet@een t e o@ners o! 8ario%s agencies o! prod%ction t is is al@ays ass%med, and t is ass%mption is correct, o@e8er m%c t e relati8e proportions may !l%ct%ate in indi8id%al cases0 5 e de!inite !orm in @ ic t e parts o! 8al%e con!ront eac ot er is pres%pposed beca%se it is contin%ally reprod%ced, and it is contin%ally reprod%ced beca%se it is contin%ally pres%pposed0 5o be s%re, experience and appearance no@ also demonstrate t at market-prices, in @ ose in!l%ence t e capitalist act%ally sees t e only determination o! 8al%e, are by no means dependent %pon s%c anticipation, so !ar as t eir magnit%de is concerned# t at t ey do not correspond to @ et er t e interest or rent @ere set ig or lo@0 A%t t e market-prices are constant only in t eir 8ariation, and t eir a8erage o8er longer periods res%lts precisely in t e respecti8e a8erages o! @ages, pro!it and rent as t e constant magnit%des, and t ere!ore, in t e last analysis, t ose dominating t e market-prices0 3n t e ot er and, it seems plain on re!lection t at i! @ages, pro!it and rent are creators o! 8al%e since t ey seem to be pres%pposed in t e prod%ction o! 8al%e, and are ass%med by t e indi8id%al capitalist in is cost-price and price o! prod%ction, t en t e constant portion, @ ose 8al%e enters as gi8en into t e prod%ction o! e8ery commodity, is also a creator o! 8al%e0 A%t t e constant portion o! capital is no more t an a s%m o! commodities and, t ere!ore, o! commodity-8al%es0 5 %s @e s o%ld arri8e at t e abs%rd ta%tology t at commodity-8al%e is t e creator and ca%se o! commodity-8al%e0 6o@e8er, i! t e capitalist @ere at all interested in re!lecting abo%t t is I and is re!lections as capitalist are dictated excl%si8ely by is interests and sel!-interested moti8es I experience @o%ld s o@ im t at t e prod%ct @ ic e imsel! prod%ces enters into ot er sp eres o! prod%ction as a constant portion o! capital, and t at prod%cts o! t ese ot er prod%ction sp eres enter into is o@n prod%ct as constant portions o! capital0 $ince t e additional 8al%e, so !ar as is ne@ prod%ction is concerned, seems to be !ormed, !rom is point o! 8ie@, by t e magnit%des o! @ages, pro!it and rent, t en t is also olds good !or t e constant portion consisting o! t e prod%cts o! ot er capitalists0 ?nd t %s, t e price o! t e constant portion o! capital, and t ereby t e total 8al%e o! t e commodities, red%ces itsel! in t e !inal analysis, alt o%g in a manner @ ic is some@ at %nacco%ntable, to a s%m o! 8al%es res%lting !rom t e addition o! independent creators o! 8al%e I @ages, pro!it and rent I @ ic are reg%lated according to di!!erent la@s and arise !rom di!!erent so%rces0

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'ourthly: W et er t e commodities are sold at t eir 8al%es or not, and ence t e determination o! 8al%e itsel!, is D%ite immaterial !or t e indi8id%al capitalist0 &t is, !rom t e 8ery o%tset, a process t at takes place be ind is back and is controlled by t e !orce o! circ%mstances independent o! imsel!, beca%se it is not t e 8al%es, b%t t e di8ergent prices o! prod%ction, @ ic !orm t e reg%lating a8erage prices in e8ery sp ere o! prod%ction0 5 e determination o! 8al%e as s%c interests and as a determining e!!ect on t e indi8id%al capitalist and t e capital in eac partic%lar sp ere o! prod%ction only in so !ar as t e red%ced or increased D%antity o! labo%r reD%ired to prod%ce commodities, as a conseD%ence o! a rise or !all in prod%cti8eness o! labo%r, enables im in one instance to make an extra pro!it, at t e pre8ailing market-prices, and compels im in anot er to raise t e price o! is commodities, beca%se more @ages, more constant capital, and t %s more interest, !all %pon eac portion o! t e prod%ct, or indi8id%al commodity0 &t interests im only in so !ar as it raises or lo@ers t e cost o! prod%ction o! commodities !or imsel!, t %s only in so !ar as it makes is position exceptional0 3n t e ot er and, @ages, interest and rent appear to im as reg%lating limits not only o! t e price at @ ic e can realise t e pro!it o! enterprise, t e portion o! pro!it !alling to is s are as !%nctioning capitalist, b%t also at @ ic e m%st generally be able to sell is commodities, i! contin%ed reprod%ction is to take place0 &t is D%ite immaterial to im @ et er or not e realises, t ro%g sale, t e 8al%e and s%rpl%s-8al%e incorporated in is commodities, pro8ided only t at e makes t e c%stomary, or larger, pro!it o! enterprise at gi8en prices, o8er and abo8e is indi8id%al cost-price determined by @ages, interest and rent0 ?part !rom t e constant portion o! capital@ages, interest and rent appear to im, t ere!ore, as t e limiting and t ereby prod%cti8e determining elements o! t e commodity-price0 $ o%ld e s%cceed, e0g0, in depressing @ages belo@ t e 8al%e o! labo%r-po@er, i0e0, belo@ its normal le8el, in obtaining capital at a lo@er interest rate, and in paying less lease money t an t e normal amo%nt !or rent, t en it is completely irrele8ant to im @ et er e sells is prod%ct belo@ its 8al%e, or e8en belo@ t e general price o! prod%ction, t ereby gi8ing a@ay gratis a portion o! t e s%rpl%s-labo%r contained in t e commodities0 5 is also applies to t e constant portion o! capital0 &! an ind%strialist, e0g0, can b%y is ra@ material belo@ its price o! prod%ction, t en t is b%!!ers im against loss, e8en s o%ld e sell it in t e !inis ed prod%ct %nder its price o! prod%ction0 6is pro!it o! enterprise may remain t e same, or e8en increase, i! only t e excess o! t e commodity-price o8er its elements, @ ic m%st e paid, replaced by an eD%i8alent, remains t e same or increases0 A%t aside !rom t e 8al%e o! t e means o! prod%ction @ ic enter into t e prod%ction o! is commodities as a gi8en price magnit%de, it is precisely @ages, interest and rent @ ic enter into t is prod%ction as limiting and reg%lating price magnit%des0 ;onseD%ently t ey appear to im as t e elements determining t e price o! t e commodities0 ,ro!it o! enterprise, !rom t is standpoint, seems to be eit er determined by t e excess o! market-prices, dependent %pon accidental conditions o! competition, o8er t e immanent 8al%e o! commodities determined by t e abo8e-mentioned elements o! price# or, to t e extent t at t is pro!it itsel! exerts a determining in!l%ence %pon market-prices, it seems itsel!, in t%rn, dependent %pon t e competition bet@een b%yers and sellers0 &n t e competition o! indi8id%al capitalists among t emsel8es as @ell as in t e competition on t e @orld-market, it is t e gi8en and ass%med magnit%des o! @ages, interest and rent @ ic enter into t e calc%lation as constant and reg%lating magnit%des# constant not in t e sense o! being %nalterable magnit%des, b%t in t e sense t at t ey are gi8en in eac indi8id%al case and constit%te t e constant limit !or t e contin%ally !l%ct%ating market-prices0 For instance, in competition on t e @orld-market it is solely a D%estion o! @ et er commodities can be sold ad8antageo%sly @it existing @ages, interest and rent at, or belo@, existing general market-prices, i0e0, realising a corresponding pro!it o! enterprise0 &! @ages and t e price o! land are lo@ in one co%ntry, @ ile interest on capital is ig , beca%se t e capitalist mode o! prod%ction as not been de8eloped generally, @ ereas in anot er co%ntry @ages and t e price o! land are nominally ig , @ ile interest on capital is lo@, t en t e capitalist employs more labo%r and land in t e one co%ntry, and

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in t e ot er relati8ely more capital0 5 ese !actors enter into calc%lation as determining elements in so !ar as competition bet@een t ese t@o capitalists is possible0 6ere, t en, experience s o@s t eoretically, and t e sel!-interested calc%lation o! t e capitalist s o@s practically, t at t e prices o! commodities are determined by @ages, interest and rent, by t e price o! labo%r, capital and land, and t at t ese elements o! price are indeed t e reg%lating constit%ent !actors o! price0 3! co%rse, t ere al@ays remains an element ere @ ic is not ass%med, b%t @ ic res%lts !rom t e market-price o! commodities, namely, t e excess abo8e t e cost-price !ormed by t e addition o! t e a!orementioned elements: @ages, interest and rent0 5 is !o%rt element seems to be determined by competition in eac indi8id%al case, and in t e a8erage case by t e a8erage pro!it, @ ic in its t%rn is reg%lated by t is same competition, only o8er longer periods0 'ifthly: 3n t e basis o! t e capitalist mode o! prod%ction, it becomes so m%c a matter o! co%rse to split %p t e 8al%e, in @ ic ne@ly added labo%r is represented, into t e !orms o! re8en%e, o! @ages, pro!it and gro%nd-rent, t at t is met od is applied Blea8ing aside earlier stages o! istory, !rom @ ic @e ga8e ill%strations in o%r st%dy o! gro%nd-rentC e8en @ ere t e preconditions !or t ese !orms o! re8en%e are missing0 5 at is, all is s%bs%med by analogy %nder t ese !orms o! re8en%e0 W en an independent labo%rer I let %s take a small !armer, since all t ree !orms o! re8en%e may ere be applied I @orks !or imsel! and sells is o@n prod%ct, e is !irst considered as is o@n employer BcapitalistC, @ o makes %se o! imsel! as a labo%rer, and second as is o@n landlord, @ o makes %se o! imsel! as is o@n tenant0 5o imsel! as @age-@orker e pays @ages, to imsel! as capitalist e gi8es t e pro!it, and to imsel! as landlord e pays rent0 ?ss%ming t e capitalist mode o! prod%ction and t e relations corresponding to it to be t e general basis o! society, t is s%bs%mption is correct, in so !ar as it is not t anks to is labo%r, b%t to is o@ners ip o! means o! prod%ction I @ ic a8e ass%med ere t e general !orm o! capital I t at e is in a position to appropriate is o@n s%rpl%s-labo%r0 ?nd !%rt ermore, to t e extent t at e prod%ces is prod%ct as commodities, and t %s depends %pon its price Band e8en i! not, t is price is calc%lableC, t e D%antity o! s%rpl%s-labo%r @ ic e can realise depends not on its o@n magnit%de, b%t on t e general rate o! pro!it# and like@ise any e8ent%al excess abo8e t e amo%nt o! s%rpl%s-8al%e determined by t e general rate o! pro!it is, in t%rn, not determined by t e D%antity o! labo%r per!ormed by im, b%t can be appropriated by im only beca%se e is o@ner o! t e land0 $ince s%c a !orm o! prod%ction not corresponding to t e capitalist mode o! prod%ction may t %s be s%bs%med %nder its !orms o! re8en%e I and to a certain extent not incorrectly I t e ill%sion is all t e more strengt ened t at capitalist relations are t e nat%ral relations o! e8ery mode o! prod%ction0 3! co%rse, i! @ages are red%ced to t eir general basis, namely, to t at portion o! t e prod%ct o! t e prod%cerGs o@n labo%r @ ic passes o8er into t e indi8id%al cons%mption o! t e labo%rer# i! @e relie8e t is portion o! its capitalist limitations and extend it to t at 8ol%me o! cons%mption @ ic is permitted, on t e one and, by t e existing prod%cti8ity o! society Bt at is, t e social prod%cti8ity o! is o@n indi8id%al labo%r as act%ally socialC, and @ ic , on t e ot er and, t e !%ll de8elopment o! t e indi8id%ality reD%ires# i!, !%rt ermore, @e red%ce t e s%rpl%s-labo%r and s%rpl%s-prod%ct to t at meas%re @ ic is reD%ired %nder pre8ailing conditions o! prod%ction o! society, on t e one side to create an ins%rance and reser8e !%nd, and on t e ot er to constantly expand reprod%ction to t e extent dictated by social needs# !inally, i! @e incl%de in -o0 1 t e necessary labo%r, and in -o0 < t e s%rpl%s-labo%r, t e D%antity o! labo%r @ ic m%st al@ays be per!ormed by t e able-bodied in be al! o! t e immat%re or incapacitated members o! society, i0e0, i! @e strip bot @ages and s%rpl%s-8al%e, bot necessary and s%rpl%s labo%r, o! t eir speci!ically capitalist c aracter, t en certainly t ere remain not t ese !orms, b%t merely t eir r%diments, @ ic are common to all social modes o! prod%ction0 Moreo8er, t is met od o! s%bs%mption @as also c aracteristic o! pre8io%s dominant modes o! prod%ction, e0g0, !e%dalism0 ,rod%ction relations @ ic no@ise corresponded to it, standing

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entirely beyond it, @ere s%bs%med %nder !e%dal relations, e0g0, in England, t e ten%res in common socage Bas distinct !rom ten%res on knig tGs ser8iceC, @ ic comprised merely monetary obligations and @ere !e%dal in name only0

Chapter 51. 'istri9ution Relations and Production Relations

5 e ne@ 8al%e added by t e ann%al ne@ly added labo%r I and t %s also t at portion o! t e ann%al prod%ct in @ ic t is 8al%e is represented and @ ic may be dra@n o%t o! t e total o%tp%t and separated !rom it I is t %s split into t ree parts, @ ic ass%me t ree di!!erent !orms o! re8en%e, into !orms @ ic express one portion o! t is 8al%e as belonging or !alling to t e s are o! t e o@ner o! labo%r-po@er, anot er portion to t e o@ner o! capital, and a t ird portion to t e o@ner o! landed property0 5 ese, t en, are relations, or !orms o! distrib%tion, !or t ey express t e relations %nder @ ic t e ne@ly prod%ced total 8al%e is distrib%ted among t e o@ners o! t e 8ario%s prod%ction !actors0 From t e common 8ie@point t ese distrib%tion relations appear as nat%ral relations, as relations arising directly !rom t e nat%re o! all social prod%ction, !rom t e la@s o! %man prod%ction in general0 &t cannot, indeed, be denied t at pre-capitalist societies disclose ot er modes o! distrib%tion, b%t t e latter are interpreted as %nde8eloped, %nper!ected and disg%ised, not red%ced to t eir p%rest expression and t eir ig est !orm and di!!erently s aded modes o! t e nat%ral distrib%tion relations0 5 e only correct aspect o! t is conception is: ?ss%ming some !orm o! social prod%ction to exist Be0g0, primiti8e &ndian comm%nities, or t e more ingenio%sly de8eloped comm%nism o! t e ,er%8iansC, a distinction can al@ays be made bet@een t at portion o! labo%r @ ose prod%ct is directly cons%med indi8id%ally by t e prod%cers and t eir !amilies and I aside !rom t e part @ ic is prod%cti8ely cons%med I t at portion o! labo%r @ ic is in8ariably s%rpl%s-labo%r, @ ose prod%ct ser8es constantly to satis!y t e general social needs no matter o@ t is s%rpl%sprod%ct may be di8ided, and no matter @ o may !%nction as representati8e o! t ese social needs0 5 %s, t e identity o! t e 8ario%s modes o! distrib%tion amo%nts merely to t is: t ey are identical i! @e abstract !rom t eir di!!erences and speci!ic !orms and keep in mind only t eir %nity as distinct !rom t eir dissimilarity0 ? more ad8anced, more critical mind, o@e8er, admits t e istorically de8eloped c aracter o! distrib%tion relations,lxix b%t ne8ert eless clings all t e more tenacio%sly to t e %nc anging c aracter o! prod%ction relations t emsel8es, arising !rom %man nat%re and t %s independent o! all istorical de8elopment0 3n t e ot er and, scienti!ic analysis o! t e capitalist mode o! prod%ction demonstrates t e contrary, t at it is a mode o! prod%ction o! a special kind, @it speci!ic istorical !eat%res# t at, like any ot er speci!ic mode o! prod%ction, it pres%pposes a gi8en le8el o! t e social prod%cti8e !orces and t eir !orms o! de8elopment as its istorical precondition: a precondition @ ic is itsel! t e istorical res%lt and prod%ct o! a preceding process, and !rom @ ic t e ne@ mode o! prod%ction proceeds as its gi8en basis# t at t e prod%ction relations corresponding to t is speci!ic, istorically determined mode o! prod%ction I relations @ ic %man beings enter into d%ring t e process o! social li!e, in t e creation o! t eir social li!e I possess a speci!ic, istorical and transitory c aracter# and, !inally, t at t e distrib%tion relations essentially coincident @it t ese prod%ction relations are t eir opposite side, so t at bot s are t e same istorically transitory c aracter0 &n t e st%dy o! distrib%tion relations, t e initial point o! depart%re is t e alleged !act t at t e ann%al prod%ct is apportioned among @ages, pro!it and rent0 A%t i! so expressed, it is a misstatement0 5 e prod%ct is apportioned on one side to capital, on t e ot er to re8en%e0 3ne o!

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t ese re8en%es, @ages, ne8er itsel! ass%mes t e !orm o! re8en%e, re8en%e o! t e labo%rer, %ntil a!ter it as !irst con!ronted t is labo%rer in t e form of capital. 5 e con!rontation o! prod%ced conditions o! labo%r and o! t e prod%cts o! labo%r generally, as capital, @it t e direct prod%cers implies !rom t e o%tset a de!inite social c aracter o! t e material conditions o! labo%r in relation to t e labo%rers, and t ereby a de!inite relations ip into @ ic t ey enter @it t e o@ners o! t e means o! prod%ction and among t emsel8es d%ring prod%ction itsel!0 5 e trans!ormation o! t ese conditions o! labo%r into capital implies in t%rn t e expropriation o! t e direct prod%cers !rom t e land, and t %s a de!inite !orm o! landed property0 &! one portion o! t e prod%ct @ere not trans!ormed into capital, t e ot er @o%ld not ass%me t e !orms o! @ages, pro!it and rent0 3n t e ot er and, i! t e capitalist mode o! prod%ction pres%pposes t is de!inite social !orm o! t e conditions o! prod%ction, so does it reprod%ce it contin%ally0 &t prod%ces not merely t e material prod%cts, b%t reprod%ces contin%ally t e prod%ction relations in @ ic t e !ormer are prod%ced, and t ereby also t e corresponding distrib%tion relations0 &t may be said, o! co%rse, t at capital itsel! Band landed property @ ic it incl%des as its antit esisC already pres%pposes a distrib%tion: t e expropriation o! t e labo%rer !rom t e conditions o! labo%r, t e concentration o! t ese conditions in t e ands o! a minority o! indi8id%als, t e excl%si8e o@ners ip o! land by ot er indi8id%als, in s ort, all t e relations @ ic a8e been described in t e part dealing @it primiti8e acc%m%lation BA%c &, Kap0 JJ&4C /Englis edition: ,art 4&&& I 0d10 A%t t is distrib%tion di!!ers altoget er !rom @ at is %nderstood by distrib%tion relations @ en t e latter are endo@ed @it a istorical c aracter in contradistinction to prod%ction relations0 W at is meant t ereby are t e 8ario%s titles to t at portion o! t e prod%ct @ ic goes into indi8id%al cons%mption0 5 e a!orementioned distrib%tion relations, on t e contrary, are t e basis o! special social !%nctions per!ormed @it in t e prod%ction relations by certain o! t eir agents, as opposed to t e direct prod%cers0 5 ey imb%e t e conditions o! prod%ction t emsel8es and t eir representati8es @it a speci!ic social D%ality0 5 ey determine t e entire c aracter and t e entire mo8ement o! prod%ction0 ;apitalist prod%ction is disting%is ed !rom t e o%tset by t@o c aracteristic !eat%res0 'irst. &t prod%ces its prod%cts as commodities0 5 e !act t at it prod%ces commodities does not di!!erentiate it !rom ot er modes o! prod%ction# b%t rat er t e !act t at being a commodity is t e dominant and determining c aracteristic o! its prod%cts0 5 is implies, !irst and !oremost, t at t e labo%rer imsel! comes !or@ard merely as a seller o! commodities, and t %s as a !ree @agelabo%rer, so t at labo%r appears in general as @age-labo%r0 &n 8ie@ o! @ at as already been said, it is s%per!l%o%s to demonstrate ane@ t at t e relation bet@een capital and @age-labo%r determines t e entire c aracter o! t e mode o! prod%ction0 5 e principal agents o! t is mode o! prod%ction itsel!, t e capitalist and t e @age-labo%rer, are as s%c merely embodiments, personi!ications o! capital and @age-labo%r# de!inite social c aracteristics stamped %pon indi8id%als by t e process o! social prod%ction# t e prod%cts o! t ese de!inite social prod%ction relations0 5 e c aracteristic 1C o! t e prod%ct as a commodity, and <C o! t e commodity as a prod%ct o! capital, already implies all circ%lation relations, i0e0, a de!inite social process t ro%g @ ic t e prod%cts m%st pass and in @ ic t ey ass%me de!inite social c aracteristics# it like@ise implies de!inite relations o! t e prod%ction agents, by @ ic t e 8al%e-expansion o! t eir prod%ct and its recon8ersion, eit er into means o! s%bsistence or into means o! prod%ction, are determined0 A%t e8en apart !rom t is, t e entire determination o! 8al%e and t e reg%lation o! t e total prod%ction by 8al%e res%lts !rom t e abo8e t@o c aracteristics o! t e prod%ct as a commodity, or o! t e commodity as a capitalistically prod%ced commodity0 &n t is entirely speci!ic !orm o! 8al%e, labo%r pre8ails on t e one and solely as social labo%r# on t e ot er and, t e distrib%tion o! t is social labo%r and t e m%t%al s%pplementing and interc anging o! its prod%cts, t e s%bordination

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%nder, and introd%ction into, t e social mec anism, are le!t to t e accidental and m%t%ally n%lli!ying moti8es o! indi8id%al capitalists0 $ince t ese latter con!ront one anot er only as commodity-o@ners, and e8eryone seeks to sell is commodity as dearly as possible Bapparently e8en g%ided in t e reg%lation o! prod%ction itsel! solely by is o@n !ree @illC, t e inner la@ en!orces itsel! only t ro%g t eir competition, t eir m%t%al press%re %pon eac ot er, @ ereby t e de8iations are m%t%ally cancelled0 3nly as an inner la@, 8is-O-8is t e indi8id%al agents, as a blind la@ o! -at%re, does t e la@ o! 8al%e exert its in!l%ence ere and maintain t e social eD%ilibri%m o! prod%ction amidst its accidental !l%ct%ations0 F%rt ermore, already implicit in t e commodity, and e8en more so in t e commodity as a prod%ct o! capital, is t e materialisation o! t e social !eat%res o! prod%ction and t e personi!ication o! t e material !o%ndations o! prod%ction, @ ic c aracterise t e entire capitalist mode o! prod%ction0 5 e second distincti8e !eat%re o! t e capitalist mode o! prod%ction is t e prod%ction o! s%rpl%s8al%e as t e direct aim and determining moti8e o! prod%ction0 ;apital prod%ces essentially capital, and does so only to t e extent t at it prod%ces s%rpl%s-8al%e0 We a8e seen in o%r disc%ssion o! relati8e s%rpl%s-8al%e, and !%rt er in considering t e trans!ormation o! s%rpl%s8al%e into pro!it, o@ a mode o! prod%ction pec%liar to t e capitalist period is !o%nded ereon I a special !orm o! de8elopment o! t e social prod%cti8e po@ers o! labo%r, b%t con!ronting t e labo%rer as po@ers o! capital rendered independent, and standing in direct opposition t ere!ore to t e labo%rerGs o@n de8elopment0 ,rod%ction !or 8al%e and s%rpl%s-8al%e implies, as as been s o@n in t e co%rse o! o%r analysis, t e constantly operating tendency to red%ce t e labo%r-time necessary !or t e prod%ction o! a commodity, i0e0, its 8al%e, belo@ t e act%ally pre8ailing social a8erage0 5 e press%re to red%ce cost-price to its minim%m becomes t e strongest le8er !or raising t e social prod%cti8eness o! labo%r, @ ic , o@e8er, appears ere only as a contin%al increase in t e prod%cti8eness o! capital0 5 e a%t ority ass%med by t e capitalist as t e personi!ication o! capital in t e direct process o! prod%ction, t e social !%nction per!ormed by im in is capacity as manager and r%ler o! prod%ction, is essentially di!!erent !rom t e a%t ority exercised on t e basis o! prod%ction by means o! sla8es, ser!s, etc0 W ereas, on t e basis o! capitalist prod%ction, t e mass o! direct prod%cers is con!ronted by t e social c aracter o! t eir prod%ction in t e !orm o! strictly reg%lating a%t ority and a social mec anism o! t e labo%r-process organised as a complete ierarc y I t is a%t ority reac ing its bearers, o@e8er, only as t e personi!ication o! t e conditions o! labo%r in contrast to labo%r, and not as political or t eocratic r%lers as %nder earlier modes o! prod%ction I among t e bearers o! t is a%t ority, t e capitalists t emsel8es, @ o con!ront one anot er only as commodity-o@ners, t ere reigns complete anarc y @it in @ ic t e social interrelations o! prod%ction assert t emsel8es only as an o8er@ elming nat%ral la@ in relation to indi8id%al !ree @ill0 3nly beca%se labo%r pre-exists in t e !orm o! @age-labo%r, and t e means o! prod%ction in t e !orm o! capital I i0e0, solely beca%se o! t is speci!ic social !orm o! t ese essential prod%ction !actors I does a part o! t e 8al%e Bprod%ctC appear as s%rpl%s-8al%e and t is s%rpl%s-8al%e as pro!it BrentC, as t e gain o! t e capitalist, as additional a8ailable @ealt belonging to im0 A%t only beca%se t is s%rpl%s-8al%e t %s appears as his profit do t e additional means o! prod%ction, @ ic are intended !or t e expansion o! reprod%ction, and @ ic constit%te a part o! t is pro!it, present t emsel8es as ne@ additional capital, and t e expansion o! t e process o! reprod%ction in general as a process o! capitalist acc%m%lation0 ?lt o%g t e !orm o! labo%r as @age-labo%r is decisi8e !or t e !orm o! t e entire process and t e speci!ic mode o! prod%ction itsel!, it is not @age-labo%r @ ic determines 8al%e0 &n t e determination o! 8al%e, it is a D%estion o! social labo%r-time in general, t e D%antity o! labo%r @ ic society generally as at its disposal, and @ ose relati8e absorption by t e 8ario%s prod%cts determines, as it @ere, t eir respecti8e social importance0 5 e de!inite !orm in @ ic t e social

6=8

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labo%r-time pre8ails as decisi8e in t e determination o! t e 8al%e o! commodities is o! co%rse connected @it t e !orm o! labo%r as @age-labo%r and @it t e corresponding !orm o! t e means o! prod%ction as capital, in so !ar as solely on t is basis does commodity-prod%ction become t e general !orm o! prod%ction0 'et %s moreo8er consider t e so-called distrib%tion relations t emsel8es0 5 e @age pres%pposes @age-labo%r, and pro!it I capital0 5 ese de!inite !orms o! distrib%tion t %s pres%ppose de!inite social c aracteristics o! prod%ction conditions, and de!inite social relations o! prod%ction agents0 5 e speci!ic distrib%tion relations are t %s merely t e expression o! t e speci!ic istorical prod%ction relations0 ?nd no@ let %s consider pro!it0 5 is speci!ic !orm o! s%rpl%s-8al%e is t e precondition !or t e !act t at t e ne@ creation o! means o! prod%ction takes place in t e !orm o! capitalist prod%ction# t %s, a relation dominating reprod%ction, alt o%g it seems to t e indi8id%al capitalist as i! e co%ld in reality cons%me is entire pro!it as re8en%e0 6o@e8er, e t ereby meets barriers e8en in t e !orm o! ins%rance and reser8e !%nds la@s o! competition, etc0, @ ic amper im and pro8e to im in practice t at pro!it is not a mere distrib%tion category o! t e indi8id%ally cons%mable prod%ct0 5 e entire process o! capitalist prod%ction is !%rt ermore reg%lated by t e prices o! t e prod%cts0 A%t t e reg%lating prices o! prod%ction are t emsel8es in t%rn reg%lated by t e eD%alisation o! t e rate o! pro!it and its corresponding distrib%tion o! capital among t e 8ario%s social sp eres o! prod%ction0 ,ro!it, t en, appears ere as t e main !actor, not o! t e distrib%tion o! prod%cts, b%t o! t eir prod%ction itsel!, as a !actor in t e distrib%tion o! capitals and labo%r itsel! among t e 8ario%s sp eres o! prod%ction0 5 e di8ision o! pro!it into pro!it o! enterprise and interest appears as t e distrib%tion o! t e same re8en%e0 A%t it arises, to begin @it , !rom t e de8elopment o! capital as a sel!-expanding 8al%e, a creator o! s%rpl%s-8al%e, i0e0, !rom t is speci!ic social !orm o! t e pre8ailing process o! prod%ction0 &t e8ol8es credit and credit instit%tions o%t o! itsel!, and t ereby t e !orm o! prod%ction0 ?s interest, etc0, t e ostensible distrib%tion !orms enter into t e price as determining prod%ction !actors0 :ro%nd-rent mig t seem to be a mere !orm o! distrib%tion, beca%se landed property as s%c does not per!orm any, or at least any normal, !%nction in t e process o! prod%ction itsel!0 A%t t e circ%mstance t at 1C rent is limited to t e excess abo8e t e a8erage pro!it, and t at <C t e landlord is red%ced !rom t e manager and master o! t e process o! prod%ction and o! t e entire process o! social li!e to t e position o! mere lessor o! land, %s%rer in land and mere collector o! rent, is a speci!ic istorical res%lt o! t e capitalist mode o! prod%ction0 5 e !act t at t e eart recei8ed t e !orm o! landed property is a istorical precondition !or t is0 5 e !act t at landed property ass%mes !orms @ ic permit t e capitalist mode o! operation in agric%lt%re is a prod%ct o! t e speci!ic c aracter o! t is mode o! prod%ction0 5 e income o! t e landlord may be called rent, e8en %nder ot er !orms o! society0 A%t it di!!ers essentially !rom rent as it appears in t is mode o! prod%ction0 5 e so-called distrib%tion relations, t en, correspond to and arise !rom istorically determined speci!ic social !orms o! t e process o! prod%ction and m%t%al relations entered into by men in t e reprod%ction process o! %man li!e0 5 e istorical c aracter o! t ese distrib%tion relations is t e istorical c aracter o! prod%ction relations, o! @ ic t ey express merely one aspect0 ;apitalist distrib%tion di!!ers !rom t ose !orms o! distrib%tion @ ic arise !rom ot er modes o! prod%ction, and e8ery !orm o! distrib%tion disappears @it t e speci!ic !orm o! prod%ction !rom @ ic it is descended and to @ ic it corresponds0 5 e 8ie@ @ ic regards only distrib%tion relations as istorical, b%t not prod%ction relations, is, on t e one and, solely t e 8ie@ o! t e initial, b%t still andicapped, criticism o! bo%rgeois economy0 3n t e ot er and, it rests on t e con!%sion and identi!ication o! t e process o! social prod%ction @it t e simple labo%r-process, s%c as mig t e8en be per!ormed by an abnormally isolated %man being @it o%t any social assistance0 5o t e extent t at t e labo%r-process is solely a process bet@een man and -at%re, its simple elements remain common to all social !orms o!

6=*

; apter '&

de8elopment0 A%t eac speci!ic istorical !orm o! t is process !%rt er de8elops its material !o%ndations and social !orms0 W ene8er a certain stage o! mat%rity as been reac ed, t e speci!ic istorical !orm is discarded and makes @ay !or a ig er one0 5 e moment o! arri8al o! s%c a crisis is disclosed by t e dept and breadt attained by t e contradictions and antagonisms bet@een t e distrib%tion relations, and t %s t e speci!ic istorical !orm o! t eir corresponding prod%ction relations, on t e one and, and t e prod%cti8e !orces, t e prod%ction po@ers and t e de8elopment o! t eir agencies, on t e ot er and0 ? con!lict t en ens%es bet@een t e material de8elopment o! prod%ction and its social !orm0 lxx

Chapter 52. Classes

5 e o@ners merely o! labo%r-po@er, o@ners o! capital, and land-o@ners, @ ose respecti8e so%rces o! income are @ages, pro!it and gro%nd-rent, in ot er @ords, @age-labo%rers, capitalists and land-o@ners, constit%te t en t ree big classes o! modern society based %pon t e capitalist mode o! prod%ction0 &n England, modern society is indisp%tably most ig ly and classically de8eloped in economic str%ct%re0 -e8ert eless, e8en ere t e strati!ication o! classes does not appear in its p%re !orm0 Middle and intermediate strata e8en ere obliterate lines o! demarcation e8ery@ ere Balt o%g incomparably less in r%ral districts t an in t e citiesC0 6o@e8er, t is is immaterial !or o%r analysis0 We a8e seen t at t e contin%al tendency and la@ o! de8elopment o! t e capitalist mode o! prod%ction is more and more to di8orce t e means o! prod%ction !rom labo%r, and more and more to concentrate t e scattered means o! prod%ction into large gro%ps, t ereby trans!orming labo%r into @age-labo%r and t e means o! prod%ction into capital0 ?nd to t is tendency, on t e ot er and, corresponds t e independent separation o! landed property !rom capital and labo%r, lxxi or t e trans!ormation o! all landed property into t e !orm o! landed property corresponding to t e capitalist mode o! prod%ction0 5 e !irst D%estion to e ans@ered is t is: W at constit%tes a classQ I and t e reply to t is !ollo@s nat%rally !rom t e reply to anot er D%estion, namely: W at makes @age-labo%rers, capitalists and landlords constit%te t e t ree great social classesQ ?t !irst glance I t e identity o! re8en%es and so%rces o! re8en%e0 5 ere are t ree great social gro%ps @ ose members, t e indi8id%als !orming t em, li8e on @ages, pro!it and gro%nd-rent respecti8ely, on t e realisation o! t eir labo%r-po@er, t eir capital, and t eir landed property0 6o@e8er, !rom t is standpoint, p ysicians and o!!icials, e0g0, @o%ld also constit%te t@o classes, !or t ey belong to t@o distinct social gro%ps, t e members o! eac o! t ese gro%ps recei8ing t eir re8en%e !rom one and t e same so%rce0 5 e same @o%ld also be tr%e o! t e in!inite !ragmentation o! interest and rank into @ ic t e di8ision o! social labo%r splits labo%rers as @ell as capitalists and landlords-t e latter, e0g0, into o@ners o! 8ineyards, !arm o@ners, o@ners o! !orests, mine o@ners and o@ners o! !is eries0 /6ere t e man%script breaks o!!01

Supple)ent /' (re"eric0 Engels

Introduction
5 e t ird book o! Capital is recei8ing many and 8ario%s interpretations e8er since it as been s%bHect to p%blic H%dgement0 &t @as not to be ot er@ise expected0 &n p%blis ing it, @ at & @as c ie!ly concerned @it @as to prod%ce as a%t entic a text as possible, to demonstrate t e ne@ res%lts obtained by Marx in MarxGs o@n @ords as !ar as possible, to inter8ene mysel! only @ ere absol%tely %na8oidable, and e8en t en to lea8e t e reader in no do%bt as to @ o @as talking to im0 5 is as been deprecated0 &t as been said t at & s o%ld a8e con8erted t e material a8ailable to me into a systematically @ritten book, en faire un livre, as t e Frenc say# in ot er @ords, sacri!ice t e a%t enticity o! t e text to t e readerGs con8enience0 A%t t is @as not o@ & concei8ed my task0 & lacked all H%sti!ication !or s%c a re8ision, a man like Marx as t e rig t to be eard imsel!, to pass on is scienti!ic disco8eries to posterity in t e !%ll gen%ineness o! is o@n presentation0 Moreo8er, & ad no desire t %s to in!ringe I as it m%st seem to me I %pon t e legacy o! so pre-eminent a man# it @o%ld a8e meant to me a breac o! !ait 0 ?nd t ird, it @o%ld a8e been D%ite %seless0 For t e people @ o cannot or do not @ant to read, @ o, e8en in 4ol%me &, took more tro%ble to %nderstand it @rongly t an @as necessary to %nderstand it correctly I !or s%c people it is altoget er %seless to p%t onesel! o%t in any @ay0 A%t !or t ose @ o are interested in a real %nderstanding, t e original text itsel! @as precisely t e most important t ing# !or t em my recasting @o%ld a8e ad at most t e 8al%e o! a commentary, and, @ at is more, a commentary on somet ing %np%blis ed and inaccessible0 5 e original text @o%ld a8e ad to be re!erred to at t e !irst contro8ersy, and at t e second and t ird its p%blication in e tenso @o%ld a8e become D%ite %na8oidable0 $%c contro8ersies are a matter o! co%rse in a @ork t at contains so m%c t at is ne@, and in a astily sketc ed and partly incomplete !irst dra!t to boot0 ?nd ere my inter8ention, o! co%rse, can be o! %se: to eliminate di!!ic%lties in %nderstanding, to bring more to t e !ore important aspects @ ose signi!icance is not strikingly eno%g e8ident in t e text, and to make some important additions to t e text @ritten in 186+ to !it t e state o! a!!airs in 18*+0 &ndeed, t ere are already t@o points @ ic seem to me to reD%ire a brie! disc%ssion0

La$ of Value and )ate of Profit

&t @as to be expected t at t e sol%tion o! t e apparent contradiction bet@een t ese t@o !actors @o%ld lead to debates H%st as m%c a!ter, as be!ore, t e p%blication o! Marx"s text0 $ome @ere prepared !or a complete miracle, and !ind t emsel8es disappointed beca%se t ey see a simple, rational, prosaically-sober sol%tion o! t e contradiction, instead o! t e oc%s-poc%s t ey ad expected0 Most Hoy!%lly disappointed, o! co%rse, is t e @ell-kno@n, ill%strio%s 'oria0 6e as at last !o%nd t e ?rc imedian !%lcr%m !rom @ ic e8en a gnome o! is calibre can li!t t e solidly b%ilt, gigantic Marxian str%ct%re into t e air and explode it0 W atS e declaims indignantly0 &s t at s%pposed to be a sol%tionQ 5 at is p%re mysti!icationS W en economists speak o! 8al%e, t ey mean 8al%e t at is act%ally establis ed in exc ange0 K-o economist @it concerned any trace o! sense as e8er imsel! or @ill e8er @ant to concern

imsel! @it a 8al%e @ ic commodities do not sell

61<

$%pplement: Engels

!or and ne8er can sell !or )ne possono vendersi mai*0000 &n asserting t at t e 8al%e !or @ ic commodities never sell is proportional to t e labor t ey contain, @ at does Marx do except repeat in an in8erted !orm t e t esis o! t e ort odox economists, t at t e 8al%e !or @ ic commodities sell is not proportional to t e labor expended on t emQ 000 Matters are not elped by Marx"s saying t at despite t e di8ergency o! indi8id%al prices !rom indi8id%al 8al%es, t e total price o! all commodities al@ays coincides @it t eir total 8al%e, or t e amo%nt o! labor contained in t e totality o! t e commodities0 For inasm%c as 8al%e is not ing more t an t e exc ange ratio bet@een one commodity and anot er, t e 8ery concept o! a total 8al%e is an abs%rdity, nonsense 000 a contradiction in abYecto0000L ?t t e 8ery beginning o! t e book, e arg%es, Marx says t at exc ange can eD%ate t@o commodities only by 8irt%e o! a similar and eD%ally large element contained in t em I namely, t e eD%al amo%nt o! labor0 ?nd no@ e most solemnly rep%diates imsel! by asserting t at commodities exc ange @it one anot er in a totally di!!erent ratio t an t at o! t e amo%nt o! labor contained in t em0 KWas t ere e8er s%c an %tter reductio ad absurdum, s%c complete t eoretical bankr%ptcyQ Was e8er scienti!ic s%icide committed @it greater pomp and more solemnitySL B$ouva +ntologia, Feb01, 18*+, pp02>8->*0C We see: o%r 'oria is more t an appy0 Wasn"t e rig t in treating Marx as one o! is o@n, as an ordinary c arlatanQ 5 ere yo% see it I Marx sneers at is p%blic H%st like 'oria# e li8es on mysti!ication H%st like t e most insigni!icant &talian pro!essor o! economics0 A%t, @ ereas 7%lcamara can a!!ord t at beca%se e kno@s is trade, t e cl%msy -ort erner, Marx, commits not ing b%t ineptit%des, @rites nonsense and abs%rdities, so t at t ere is not ing le!t !inally !or im b%t solemn s%icide0 'et %s sa8e !or later t e statement t at commodities a8e ne8er been sold, nor can e8er be sold, at t e 8al%es determined by labor0 'et %s deal ere merely @it Mr0 'oria"s ass%rance t at K8al%e is not ing more t an t e exc ange ratio bet@een one commodity and anot er,L and t at t ere!ore Kt e 8ery concept o! a total 8al%e is an abs%rdity, nonsense000L

613

$%pplement: Engels

5 e ratio in @ ic t@o commodities are exc anged !or eac ot er, t eir 8al%e, is t ere!ore somet ing p%rely accidental, st%ck on to t e commodities !rom t e o%tside, @ ic can be one t ing today and somet ing else tomorro@0 W et er a metric %ndred@eig t o! @ eat is exc anged !or a gramme or a kilogramme o! gold does not in t e least depend %pon conditions in erent in t at @ eat or gold0 For ot er@ise t ese conditions @o%ld also a8e to assert t emsel8es in t e exc ange, dominate t e latter on t e @ ole, and also a8e an independent existence apart !rom exc ange, so t at one co%ld speak o! a total 8al%e o! commodities0 5 at is nonsense, says t e ill%strio%s 'oria0 -o matter in @ at ratio t@o commodities may be exc anged !or eac ot er, t at is t eir 8al%e I and t at"s all t ere is to it0 6ence, 8al%e is identical @it price, and e8ery commodity as as many 8al%es as t e prices it can get0 ?nd price is determined by s%pply and demand# and any one asking any more D%estions is a !ool to expect an ans@er0 A%t t ere is a little itc to t e matter0 &n t e normal state, s%pply and demand balance0 5 ere!ore, let %s di8ide all t e commodities in t e @orld into t@o al8es, t e s%pply gro%p and t e eD%ally large demand gro%p0 'et %s ass%me t at eac represents a price o! 1,=== billion marks, !rancs, po%nds, or @ at yo% @ill0 ?ccording to elementary arit metic, t at makes a price o! <,=== billions0 -onsense, abs%rd, says Mr0 'oria0 5 e t@o gro%ps toget er may represent a price o! <,=== billions0 A%t it is ot er@ise @it 8al%e0 &! @e say price: 1,=== U 1,=== R <,===0 A%t i! @e say 8al%e: 1,=== U 1,=== R =0 ?t least in t is case, @ ere t e totality o! commodities is in8ol8ed0 For ere t e commodities o! eac o! t e t@o gro%ps are @ort 1,=== billion only beca%se eac o! t e t@o can and @ill gi8e t is s%m !or t e commodities o! t e ot er0 A%t i! @e %nite t e totality o! t e commodities o! t e t@o in t e ands o! a t ird person, t e !irst as no 8al%e in is and any longer, nor t e second, and t e t ird certainly not I in t e end, no one as anyt ing0 ?nd again @e mar8el at t e s%periority @it @ ic o%r so%t ern ;agliostro as man andled t e concept o! 8al%e in s%c a !as ion t at not t e slig test trace o! it as been le!t0 5 is is t e acme o! 8%lgar economicsS &n Ara%n"s +rchiv fr so#iale Geset#gebung, 4ol0 4&&, -o02, Werner $ombart gi8es an o%tline o! t e Marxian system @ ic , taken all in all, is excellent0 &t is t e !irst time t at a :erman %ni8ersity pro!essor s%cceeds on t e @ ole in seeing in Marx"s @ritings @ at Marx really says, stating t at t e criticism o! t e Marxian system cannot consist o! a re!%tation I Klet t e political careerist deal @it t atL I b%t merely in a !%rt er de8elopment0 $ombart, too, deals @it o%r s%bHect, as is to be expected0 6e in8estigates t e importance o! 8al%e in t e Marxian system, and arri8es at t e !ollo@ing res%lts0 4al%e is not mani!est in t e exc ange relation o! capitalistically prod%ced commodities# it does not li8e in t e conscio%sness o! t e agents o! capitalist prod%ction# it is not an empirical, b%t a mental, a logical !act# t e concept o! 8al%e in its material de!initeness in Marx is not ing b%t t e economic expression !or t e !act o! t e social prod%cti8e po@er o! labor as t e basis o! economic existence# in t e !inal analysis, t e la@ o! 8al%e dominates economic processes in a capitalist economic system, and !or t is economic system D%ite generally as t e !ollo@ing content: t e 8al%e o! commodities is t e speci!ic and istorical !orm in @ ic t e prod%cti8e po@er o! labor, in t e last analysis dominating all economic processes, asserts itsel! as a determining !actor0 $o, says $ombart, it cannot be said t at t is conception o! t e signi!icance o! t e la@ o! 8al%e !or t e capitalist !orm o! prod%ction is @rong0 A%t it does seem to me to be too broad, and s%sceptible o! a narro@er, more precise !orm%lation: in my opinion it by no means ex a%sts t e entire signi!icance o! t e la@ o! 8al%e !or t e economic stages o! society"s de8elopment dominated by t is la@0 5 ere is a like@ise excellent article by ;onrad $c midt on t e t ird 8ol%me o! Capital in Ara%n"s So#ialpolitisches %entralblatt, Febr%ary <+, 18*+, -o0<<0 Especially to be emp asiEed ere is t e proo! o! o@ t e Marxian deri8ation o! a8erage pro!it !rom s%rpl%s-8al%e !or t e !irst time gi8es an ans@er to t e D%estion not e8en posed by economics %p to no@: o@ t e magnit%de o! t is

612

$%pplement: Engels

a8erage rate o! pro!it is determined, and o@ it comes abo%t t at it is, say, 1= or 1+ per cent and not += or 1== per cent0 $ince @e kno@ t at t e s%rpl%s-8al%e !irst appropriated by t e ind%strial capitalist is t e sole and excl%si8e so%rce !rom @ ic pro!it and rent !lo@, t is D%estion sol8es itsel!0 5 is passage o! $c midt"s article mig t be directly @ritten !or economists a la 'oria, i! it @ere not labor in 8ain to open t e eyes o! t ose @ o do not @ant to see0 $c midt, too, as is !ormal misgi8ings regarding t e la@ o! 8al%e0 6e calls it a scienti!ic hypothesis, set %p to explain t e act%al exc ange process, @ ic pro8es to be t e necessary t eoretical starting point, ill%minating and indispensable, e8en in respect o! t e p enomena o! competiti8e prices @ ic seem in absol%te contradiction to it0 ?ccording to im, @it o%t t e la@ o! 8al%e all t eoretical insig t into t e economic mac inery o! capitalist reality ceases0 ?nd in a pri8ate letter t at e permits me to D%ote, $c midt declares t e la@ o! 8al%e @it in t e capitalist !orm o! prod%ction to be a p%re, alt o%g t eoretically necessary, !iction0 5 is 8ie@, o@e8er, is D%ite incorrect in my opinion0 5 e la@ o! 8al%e as a !ar greater and more de!inite signi!icance !or capitalist prod%ction t an t at o! a mere ypot esis, not to mention a !iction, e8en t o%g a necessary one0 $ombart, as @ell as $c midt, I & mention t e ill%strio%s 'oria merely as an am%sing 8%lgareconomist !oil I does not make s%!!icient allo@ance !or t e !act t at @e are dealing ere not only @it a p%rely logical process, b%t @it a istorical process, and its explanatory re!lection in t o%g t, t e logical p%rs%ance o! its inner connections0 5 e decisi8e passage is to be !o%nd in Marx, 4ol0 &&&,: K5 e @ ole di!!ic%lty arises !rom t e !act t at commodities are not exc anged simply as commodities, b%t as products of capitals, @ ic claim participation in t e total amo%nt o! s%rpl%s-8al%e, proportional to t eir magnit%de, or eD%al i! t ey are o! eD%al magnit%de0L 5o ill%strate t is di!!erence, it is s%pposed t at t e @orkers are in possession o! t eir means o! prod%ction, t at t ey @ork on t e a8erage !or eD%ally long periods o! time and @it eD%al intensity, and exc ange t eir commodities @it one anot er directly0 5 en, in one day, t@o @orkers @o%ld a8e added by t eir labor an eD%al amo%nt o! ne@ 8al%e to t eir prod%cts, b%t t e prod%ct o! eac @o%ld a8e di!!erent 8al%e, depending on t e labor already embodied in t e means o! prod%ction0 5 is latter part o! t e 8al%e @o%ld represent t e constant capital o! capitalist economy, @ ile t at part o! t e ne@ly-added 8al%e employed !or t e @orker"s means o! s%bsistence @o%ld represent t e 8ariable capital, and t e portion o! t e ne@ 8al%e still remaining @o%ld represent t e s%rpl%s-8al%e, @ ic in t is case @o%ld belong to t e @orker0 5 %s, a!ter ded%cting t e amo%nt to replace t e KconstantL part o! 8al%e only ad8anced by t em, bot @orkers @o%ld get eD%al 8al%es# b%t t e ratio o! t e part representing s%rpl%s-8al%e to t e 8al%e o! t e means o! prod%ction I @ ic correspond to t e capitalist rate o! pro!it I @o%ld be di!!erent in eac case0 A%t since eac o! t em gets t e 8al%e o! t e means o! prod%ction replaced t ro%g t e exc ange, t is @o%ld be a @ olly immaterial circ%mstance0 K5 e exc ange o! commodities at t eir 8al%es, or approximately at t eir 8al%es, t %s reD%ires a much lower stage t an t eir exc ange at t eir prices o! prod%ction, @ ic reD%ires a de!inite le8el o! capitalist de8elopment0000 ?part !rom t e domination

61+

$%pplement: Engels

o! prices and price mo8ement by t e la@ o! 8al%e, it is D%ite appropriate to regard t e 8al%es o! commodities as not only theoretically b%t also historically antecedent Bpri%sC to t e prices o! prod%ction0 5 is applies to conditions in which the laborer owns his own means of production, and t is is t e condition o! t e land-o@ning @orking !armer and t e cra!tsman, in t e ancient as @ell as in t e modern @orld0 5 is agrees also @it t e 8ie@ @e expressed pre8io%sly, t at t e e8ol%tion o! prod%cts into commodities arises t ro%g exc ange bet@een di!!erent comm%nities, not bet@een t e members o! t e same comm%nity0 &t olds not only !or t is primiti8e condition, b%t also !or s%bseD%ent conditions, based on sla8ery and ser!dom, and !or t e g%ild organiEation o! andicra!ts, so long as t e means o! prod%ction in8ol8ed in eac branc o! prod%ction can be trans!erred !rom one sp ere to anot er only @it di!!ic%lty and t ere!ore t e 8ario%s sp eres o! prod%ction are related to one anot er, @it in certain limits, as !oreign co%ntries or comm%nist comm%nities0L 6ad Marx an opport%nity to go o8er t e t ird 8ol%me once more, e @o%ld do%btless a8e extended t is passage considerably0 ?s it stands, it gi8es only a sketc y o%tline o! @ at is to be said on t e point in D%estion0 'et %s, t ere!ore, examine it some@ at closer0 We all kno@ t at at t e beginning o! society, prod%cts are cons%med by t e prod%cers t emsel8es, and t at t ese prod%cers are spontaneo%sly organiEed in more or less comm%nistic comm%nities# t at t e exc ange o! t e s%rpl%s o! t ese prod%cts @it strangers, @ ic %s ers in t e con8ersion o! prod%cts into commodities, is o! a later date# t at it takes places at !irst only bet@een indi8id%al comm%nities o! di!!erent tribes, b%t later also pre8ails @it in t e comm%nity, and contrib%tes considerably to t e latter"s dissol%tion into bigger or smaller !amily gro%ps0 A%t e8en a!ter t is dissol%tion, t e exc anging !amily eads remain @orking peasants, @ o prod%ce almost all t ey reD%ire @it t e aid o! t eir !amilies on t eir o@n !armsteads, and get only a slig t portion o! t e reD%ired necessities !rom t e o%tside in exc ange !or s%rpl%s prod%cts o! t eir o@n0 5 e !amily is engaged not only in agric%lt%re and li8estock-raising# it also @orks t eir prod%cts %p into !inis ed articles o! cons%mption# no@ and t en it e8en does its o@n milling @it t e andmill# it bakes bread, spins, dyes, @ea8es !lax and @ool, tans leat er, b%ilds and repairs @ooden b%ildings, makes tools and %tensils, and not in!reD%ently does Hoinery and blacksmit ing# so t at t e !amily, or !amily gro%p, is in t e main sel!-s%!!icient0 5 e little t at s%c a !amily ad to obtain by barter or b%y !rom o%tside, e8en %p to t e beginning o! t e 1*t cent%ry in :ermany, consisted principally o! t e obHects o! andicra!t prod%ction I t at is, s%c t ings t e nat%re o! @ ose man%!act%re @as by no means %nkno@n to t e peasant,

616

$%pplement: Engels

and @ ic e did not prod%ce imsel! only beca%se e lacked t e ra@ material or beca%se t e p%rc ased article @as m%c better or 8ery m%c c eaper0 6ence, t e peasant o! t e Middle ?ges kne@ !airly acc%rately t e labor-time reD%ired !or t e man%!act%re o! t e articles obtained by im in barter0 5 e smit and t e cart@rig t o! t e 8illage @orked %nder is eyes# like@ise, t e tailor and s oemaker I @ o in my yo%t still paid t eir 8isits to o%r ) ine peasants, one a!ter anot er, t%rning ome-made materials into s oes and clot ing0 5 e peasants, as @ell as t e people !rom @ om t ey bo%g t, @ere t emsel8es @orkers# t e exc anged articles @ere eac one"s o@n prod%cts0 W at ad t ey expended in making t ese prod%ctsQ 'abor and labor alone: to replace tools, to prod%ce ra@ material, and to process it, t ey spent not ing b%t t eir o@n labor-po@er# o@ t en co%ld t ey exc ange t ese prod%cts o! t eirs !or t ose o! ot er laboring prod%cers ot er@ise t an in t e ratio o! labor expended on t emQ -ot only @as t e labor-time spent on t ese prod%cts t e only s%itable meas%re !or t e D%antitati8e determination o! t e 8al%es to be exc anged: no ot er @ay @as at all possible0 3r is it belie8ed t at t e peasant and t e artisan @ere so st%pid as to gi8e %p t e prod%ct o! 1= o%rs" labor o! one person !or t at o! a single o%rs" labor o! anot erQ -o ot er exc ange is possible in t e @ ole period o! peasant nat%ral economy t an t at in @ ic t e exc anged D%antities o! commodities tend to be meas%red more and more according to t e amo%nts o! labor embodied in t em0 From t e moment money penetrates into t is mode o! economy, t e tendency to@ards adaptation to t e la@ o! 8al%e Bin t e Marxian !orm%lation, nota beneSC gro@s more prono%nced on t e one and, @ ile on t e ot er it is already interr%pted by t e inter!erence o! %s%rers" capital and !leecing by taxation# t e periods !or @ ic prices, on a8erage, approac to @it in a negligible margin o! 8al%es, begin to gro@ longer0 5 e same olds good !or exc ange bet@een peasant prod%cts and t ose o! t e %rban artisans0 ?t t e beginning, t is barter takes places directly, @it o%t t e medi%m o! t e merc ant, on t e cities" market days, @ en t e peasant sells and makes is p%rc ases0 6ere, too, not only does t e peasant kno@ t e artisan"s @orking conditions, b%t t e latter kno@s t ose o! t e peasant as @ell0 For t e artisan is imsel! still a bit o! a peasant I e not only as a 8egetable and !r%it garden, b%t 8ery o!ten also as a small piece o! land, one or t@o co@s, pigs, po%ltry, etc0 ,eople in t e Middle ?ges @ere t %s able to c eck %p @it considerable acc%racy on eac ot er"s prod%ction costs !or ra@ material, a%xiliary material, and labor-time I at least in respect o! articles o! daily general %se0 A%t o@, in t is barter on t e basis o! t e D%antity o! labor, @as t e latter to be calc%lated, e8en i! only indirectly and relati8ely, !or prod%cts reD%iring a longer labor, interr%pted at reg%lar inter8als, and %ncertain in yield I grain or cattle, !or exampleQ ?nd among people, to boot, @ o co%ld not calc%lateQ 3b8io%sly, only by means o! a lengt y process o! EigEag approximation, o!ten !eeling t e @ay ere and t ere in t e dark, and, as is %s%al, learning only t ro%g mistakes0 A%t eac one"s necessity !or co8ering is o@n o%tlay on t e @ ole al@ays elped to ret%rn to t e rig t direction# and t e small n%mber o! kinds o! articles in circ%lation, as @ell as t e o!ten cent%ry-long stable nat%re o! t eir prod%ction, !acilitated t e attaining o! t is goal0 ?nd t at it by no means took so long !or t e relati8e amo%nt o! 8al%e o! t ese prod%cts to be !ixed !airly closely is already pro8ed by t e !act t at cattle, t e commodity !or @ ic t is appears to be most di!!ic%lt beca%se o! t e long time o! prod%ction o! t e indi8id%al ead, became t e !irst rat er generally accepted money commodity0 5o accomplis t is, t e 8al%e o! cattle, its exc ange ratio to a large n%mber o! ot er commodities, m%st already a8e attained a relati8ely %n%s%al stabiliEation, ackno@ledged @it o%t contradiction in t e territories o! many tribes0 ?nd t e people o! t at time @ere certainly cle8er eno%g I bot t e cattlebreeders and t eir c%stomers I not to gi8e a@ay t e labor-time expended by t em @it o%t an eD%i8alent in barter0 3n t e contrary, t e closer people are to t e primiti8e state o! commodity prod%ction I t e )%ssians and 3rientals, !or example I t e more time do t ey still @aste today, in order to sD%eeEe o%t, t ro%g long tenacio%s bargaining, t e !%ll compensation !or t eir labor-time expended on a prod%ct0

61>

$%pplement: Engels

$tarting @it t is determination o! 8al%e by labor-time, t e @ ole o! commodity prod%ction de8eloped, and @it it, t e m%lti!ario%s relations in @ ic t e 8ario%s aspects o! t e la@ o! 8al%e assert t emsel8es, as described in t e !irst part o! 4ol0 & o! Capital# t at is, in partic%lar, t e conditions %nder @ ic labor alone is 8al%e-creating0 5 ese are conditions @ ic assert t emsel8es @it o%t entering t e conscio%sness o! t e participants and can t emsel8es be abstracted !rom daily practice only t ro%g laborio%s, t eoretical in8estigation# @ ic act, t ere!ore, like nat%ral la@s, as Marx pro8ed to !ollo@ necessarily !rom t e nat%re o! commodity prod%ction0 5 e most important and most incisi8e ad8ance @as t e transition to metallic money, t e conseD%ence o! @ ic , o@e8er, @as t at t e determination o! 8al%e by labor-time @as no longer 8isible %pon t e s%r!ace o! commodity exc ange0 From t e practical point o! 8ie@, money became t e decisi8e meas%re o! 8al%e, all t e more as t e commodities entering trade became more 8aried, t e more t ey came !rom distant co%ntries, and t e less, t ere!ore, t e labor-time necessary !or t eir prod%ction co%ld be c ecked0 Money itsel! %s%ally came !irst !rom !oreign parts# e8en @ en precio%s metals @ere obtained @it in t e co%ntry, t e peasant and artisan @ere partly %nable to estimate approximately t e labor employed t erein, and partly t eir o@n conscio%sness o! t e 8al%e-meas%ring property o! labor ad been !airly @ell dimmed by t e abit o! reckoning @it money# in t e pop%lar mind, money began to represent absol%te 8al%e0 &n a @ord: t e Marxian la@ o! 8al%e olds generally, as !ar as economic la@s are 8alid at all, !or t e @ ole period o! simple commodity prod%ction I t at is, %p to t e time @ en t e latter s%!!ers a modi!ication t ro%g t e appearance o! t e capitalist !orm o! prod%ction0 (p to t at time, prices gra8itate to@ards t e 8al%es !ixed according to t e Marxian la@ and oscillate aro%nd t ose 8al%es, so t at t e more !%lly simple commodity prod%ction de8elops, t e more t e a8erage prices o8er long periods %ninterr%pted by external 8iolent dist%rbances coincide @it 8al%es @it in a negligible margin0 5 %s, t e Marxian la@ o! 8al%e as general economic 8alidity !or a period lasting !rom t e beginning o! exc ange, @ ic trans!orms prod%cts into commodities, do@n to t e 1+t cent%ry o! t e present era0 A%t t e exc ange o! commodities dates !rom a time be!ore all @ritten istory I @ ic in Egypt goes back to at least <+== A0;0, and per aps +=== A0;0, and in Aabylon to 2=== A0;0, per aps to 6=== A0;0# t %s, t e la@ o! 8al%e as pre8ailed d%ring a period o! !rom !i8e to se8en t o%sand years0 ?nd no@, let %s admire t e t oro%g ness o! Mr0 'oria, @ o calls t e 8al%e generally and directly 8alid d%ring t is period a 8al%e at @ ic commodities are ne8er sold nor can e8er be sold, and @it @ ic no economist a8ing a spark o! common sense @o%ld e8er occ%py imsel!S We a8e not spoken o! t e merc ant %p to no@0 We co%ld sa8e t e consideration o! t is inter8ention !or no@, @ en @e pass to t e trans!ormation o! simple into capitalist commodity prod%ction0 5 e merc ant @as t e re8ol%tionary element in t is society @ ere e8eryt ing else @as stable I stable, as it @ere, t ro%g in eritance# @ ere t e peasant obtained not only is ide o! land, b%t is stat%s as a !ree old proprietor, as a !ree or ent ralled D%it-rent peasant or ser!, and t e %rban artisan is trade and g%ild pri8ileges by in eritance and almost inalienably, and eac o! t em, in addition, is c%stomer, is market, as @ell as is skill, trained !rom c ild ood !or t e in erited cra!t0 &nto t is @orld t en entered t e merc ant, @it @ om its re8ol%tion @as to start0 A%t not as a conscio%s re8ol%tionary# on t e contrary, as !les o! its !les , bone o! its bone0 5 e merc ant o! t e Middle ?ges @as by no means an indi8id%alist# e @as essentially an associate like all is contemporaries0 5 e mark association, gro@n o%t o! primiti8e comm%nism, pre8ailed in t e co%ntryside0 Eac peasant originally ad an eD%al ide, @it eD%al pieces o! land o! eac D%ality, and a corresponding, eD%al s are in t e rig ts o! t e mark0 ?!ter t e mark ad become a closed association, and no ne@ ides @ere allocated any longer, s%bdi8ision o! t e ides occ%rred t ro%g in eritance, etc0, @it corresponding s%bdi8isions o! t e common rig ts in t e mark# b%t t e !%ll ide remained t e %nit, so t at t ere @ere al!, D%arter and eig t - ides @it al!, D%arter and eig t -rig ts in t e mark0 ?ll later prod%cti8e associations, partic%larly t e g%ilds in t e cities, @ ose stat%tes @ere not ing b%t t e application o! t e mark constit%tion to a cra!t pri8ilege

618

$%pplement: Engels

instead o! to a restricted area o! land, !ollo@ed t e pattern o! t e mark association0 5 e central point o! t e @ ole organiEation @as t e eD%al participation o! e8ery member in t e pri8ileges and prod%ce ass%red to t e g%ild, as is strikingly expressed in t e 1+<> licence o! t e Elber!eld and Aarmen yarn trade0 B5 %n:Dndustrie am $iederrhein, 4ol0 &&, 162 !!0C 5 e same olds tr%e o! t e mine g%ilds, @ ere eac s are participated eD%ally and @as also di8isible, toget er @it its rig ts and obligations, like t e ide o! t e mark member0 ?nd t e same olds good in no less degree o! t e merc ant companies, @ ic initiated o8erseas trade0 5 e 4enetians and t e :enoese in t e arbor o! ?lexandria or ;onstantinople, eac KnationL in its o@n fondaco I d@elling, inn, @are o%se, ex ibition and salesrooms, toget er @it central o!!ices I !ormed complete trade associations# t ey @ere closed to competitors and c%stomers# t ey sold at prices !ixed among t emsel8es# t eir commodities ad a de!inite D%ality g%aranteed by p%blic inspection and o!ten by stamp# t ey deliberated in common on t e prices to be paid by t e nati8es !or t eir prod%cts, etc0 -or did 6anseatic merc ants act ot er@ise on t e :erman Aridge B5ydske AryggenC in Aergen, -or@ay# t e same olds tr%e o! t eir 7%tc and Englis competitors0 Woe to t e man @ o sold %nder t e price or bo%g t abo8e t e priceS 5 e boycott t at str%ck im meant at t at time ine8itable r%in, not co%nting t e direct penalties imposed by t e association %pon t e g%ilty0 ?nd e8en close associations @ere !o%nded !or de!inite p%rposes, s%c as t e Maona o! :enoa in t e 12t and 1+t cent%ries, !or years t e r%ler o! t e al%m mines in , ocaea in ?sia Minor, as @ell as o! t e &sland o! ; ios# !%rt ermore, t e great )a8ensberg 5rading ;ompany, @ ic dealt @it &taly and $pain since t e end o! t e 12t cent%ry, !o%nding branc es in t ose co%ntries# t e :erman company o! t e ?%gsb%rgers: F%gger, Welser, 4d lin, 6dc stetter, etc# t at o! t e -ernbergers: 6irsc 8ogel and ot ers, @ ic participated @it a capital o! 66,=== d%cats and t ree s ips in t e 1+=+-=6 ,ort%g%ese expedition to &ndia, making a net pro!it o! 1+= per cent, according to ot ers 1>+ per cent B6eyd# ,evantehandel, 4ol0 &&, p0+<2C# and a large n%mber o! ot er companies, KMonopolia,L o8er @ ic '%t er @axes so indignant0 6ere, !or t e !irst time, @e meet @it a pro!it and a rate o! pro!it0 5 e merc ant"s e!!orts are deliberately and conscio%sly aimed at making t is rate o! pro!it eD%al !or all participants0 5 e 4enetians in t e 'e8ant, and t e 6anseatics in t e -ort , eac paid t e same prices !or is commodities as is neig bor# is transport c arges @ere t e same, e got t e same prices as e8ery ot er merc ant o! is KnationL0 5 %s, t e rate o! pro!it @as eD%al !or all0 &n t e big trading companies, t e allocation o! pro!it pro rata o! t e paid-in capital s are is as m%c a matter o! co%rse as t e participation in mark rig ts pro rata o! t e entitled ide s are, or as t e mining pro!it pro rata o! t e mining s are0 5 e eD%al rate o! pro!it, @ ic in its !%lly de8eloped !orm is one o! t e !inal res%lts o! capitalist prod%ction, t %s mani!ests itsel! ere in its simplest !orm as one o! t e points !rom @ ic capital started istorically, as a direct o!!s oot in !act o! t e mark association, @ ic in t%rn is a direct o!!s oot o! primiti8e comm%nism0 5 is original rate o! pro!it @as necessarily 8ery ig 0 5 e b%siness @as 8ery risky, not only beca%se o! @ide-spread piracy# t e competing nations also permitted t emsel8es all sorts o! acts o! 8iolence @ en t e opport%nity arose# !inally, sales and marketing conditions @ere based %pon licences granted by !oreign princes, @ ic @ere broken or re8oked o!ten eno%g 0 6ence, t e pro!it ad to incl%de a ig ins%rance premi%m0 5 e t%rno8er @as slo@, t e andling o! transactions protracted, and in t e best periods I @ ic , admittedly, @ere seldom o! long d%ration I t e b%siness @as a monopoly trade @it monopoly pro!it0 5 e 8ery ig interest rates pre8ailing at t e time, @ ic al@ays ad to be lo@er on t e @ ole t an t e percentage o! %s%al commercial pro!it, also pro8e t at t e rate o! pro!it @as on t e a8erage 8ery ig 0 A%t t is ig rate o! pro!it, eD%al !or all participants and obtained t ro%g Hoint labor o! t e comm%nity, eld only locally @it in t e associations I t at is, in t is case t e Knation,L 4enetians, :enoese, 6anseatics, and 7%tc men eac ad a special rate o! pro!it, and at t e beginning more or less eac indi8id%al market areas, as @ell0 ED%aliEation o! t ese di!!erent company pro!it rates took place in t e opposite @ay, t ro%g competition0 First, t e pro!it rates o!

61*

$%pplement: Engels

t e di!!erent markets !or one and t e same nation0 &! ?lexandria o!!ered more pro!it !or 4enetian goods t an ;ypr%s, ;onstantinople, or 5rebiEond, t e 4enetians @o%ld start more capital mo8ing to@ards ?lexandria, @it dra@ing it !rom trade @it ot er markets0 5 en, t e grad%al eD%aliEation o! pro!it rates among t e di!!erent nations, exporting t e same or similar goods to t e same markets, ad to !ollo@, and some o! t ese nations @ere 8ery o!ten sD%eeEed to t e @all and disappeared !rom t e scene0 A%t t is process @as being contin%ally interr%pted by political e8ents, H%st as all 'e8antine trade collapsed o@ing to t e Mongolian and 5%rkis in8asions# t e great geograp ic-commercial disco8eries a!ter 12*< only accelerated t is decline and t en made it !inal0 5 e s%dden expansion o! t e market area t at !ollo@ed t e re8ol%tion in comm%nications connected @it it, introd%ced no essential c ange at !irst in t e nat%re o! trade operations0 ?t t e beginning, co-operati8e companies also dominated trade @it &ndia and ?merica0 A%t in t e !irst place, bigger nations stood be ind t ese companies0 &n trade @it ?merica, t e @ ole o! great %nited $pain took t e place o! t e ;atalonians trading @it t e 'e8ant# alongside it, t@o co%ntries like England and France# and e8en 6olland and ,ort%gal, t e smallest, @ere still at least as large and strong as 4enice, t e greatest and strongest trading nation o! t e preceding period0 5 is ga8e t e tra8eling merc ant, t e merc ant ad8ent%rer o! t e 16t and 1>t cent%ries, a backing t at made t e company, @ ic protected its companions @it arms, also, more and more s%per!l%o%s, and its expenses an o%trig t b%rden0 Moreo8er, t e @ealt in a single and gre@ considerably !aster, so t at single merc ants soon co%ld in8est as large s%ms in an enterprise as !ormerly an entire company0 5 e trading companies, @ ere8er still existent, @ere %s%ally con8erted into armed corporations, @ ic conD%ered and monopolistically exploited @ ole ne@ly disco8ered co%ntries %nder t e protection and t e so8ereignty o! t e mot er co%ntry0 A%t t e more colonies @ere !o%nded in t e ne@ areas, largely by t e state, t e more did company trade recede be!ore t at o! t e indi8id%al merc ant, and t e eD%aliEation o! t e pro!it rate became t ere@it more and more a matter o! competition excl%si8ely0 (p to no@, @e a8e become acD%ainted @it a rate o! pro!it only !or merc ant capital0 For only merc ant and %s%rers" capital ad existed %p to t at time# ind%strial capital @as yet to be de8eloped0 ,rod%ction @as still predominantly in t e ands o! @orkers o@ning t eir o@n means o! prod%ction, @ ose @ork t ere!ore yielded no s%rpl%s-8al%e to any capital0 &! t ey ad to s%rrender a part o! t e prod%ct to t ird parties @it o%t compensation, it @as in t e !orm o! trib%te to !e%dal lords0 Merc ant capital, t ere!ore, co%ld only make its pro!it, at least at t e beginning, o%t o! t e !oreign b%yers o! domestic prod%cts, or t e domestic b%yers o! !oreign prod%cts# only to@ard t e end o! t is period I !or &taly, t at is, @it t e decline o! 'e8antine trade I @ere !oreign competition and t e di!!ic%lty o! marketing able to compel t e andicra!t prod%cers o! export commodities to sell t e commodity %nder its 8al%e to t e exporting merc ant0 ?nd t %s @e !ind ere t at commodities are sold at t eir 8al%e, on t e a8erage, in t e domestic retail trade o! indi8id%al prod%cers @it one anot er, b%t, !or t e reasons gi8en, not in international trade as a r%le0 M%ite t e opposite o! t e present-day @orld, @ ere t e prod%ction prices old good in international and @ olesale trade, @ ile t e !ormations o! prices in %rban retail trade is go8erned by D%ite ot er rates o! pro!it0 $o t at t e meat o! an ox, !or example, experiences today a greater rise in price on its @ay !rom t e 'ondon @ olesaler to t e indi8id%al 'ondon cons%mer t an !rom t e @ olesaler in ; icago, incl%ding transport, to t e 'ondon @ olesaler0 5 e instr%ment t at grad%ally bro%g t abo%t t is re8ol%tion in price !ormation @as ind%strial capital0 )%diments o! t e latter ad been !ormed as early as t e Middle ?ges, in t ree !ields I s ipping, mining, and textiles0 $ ipping on t e scale practiced by t e &talian and 6anseatic maritime rep%blics @as impossible @it o%t sailors, i0e0, @age-laborers B@ ose @age relations ip may a8e been concealed %nder association !orms @it pro!it-s aringC, or @it o%t oarsmen I @age-laborers or sla8es I !or t e galleys o! t at day0 5 e g%ilds in t e ore mines, originally associated @orkers, ad already been con8erted in almost e8ery case into stock companies !or

6<=

$%pplement: Engels

exploiting t e deposits by means o! @age-laborers0 ?nd in t e textile ind%stry, t e merc ant ad beg%n to place t e little master-@ea8er directly in is ser8ice, by s%pplying im @it yarn and a8ing it made into clot !or is acco%nt in ret%rn !or a !ixed @age I in s ort, by imsel! c anging !rom a mere b%yer into a so-called contractor0 6ere @e a8e t e !irst beginnings o! t e !ormation o! capitalist s%rpl%s-8al%e0 We can ignore t e mining g%ilds as closed monopoly corporations0 Wit regard to t e s ip-o@ners, it is ob8io%s t at t eir pro!it ad to be at least as ig as t e c%stomary one in t e co%ntry, pl%s an extra increment !or ins%rance, depreciation o! s ips, etc0 A%t o@ @ere matters @it t e textile contractors, @ o !irst bro%g t commodities, directly man%!act%red !or capitalist acco%nt, into competition @it t e commodities o! t e same sort made !or andicra!t acco%ntQ Merc ant capital"s rate o! pro!it @as at and to start @it 0 'ike@ise, it ad already been eD%aliEed to an approximate a8erage rate, at least !or t e locality in D%estion0 -o@, @ at co%ld ind%ce t e merc ant to take on t e extra b%siness o! a contractorQ 3nly one t ing: t e prospect o! greater pro!it at t e same selling price as t e ot ers0 ?nd e ad t is prospect0 Ay taking t e little master into is ser8ice, e broke t ro%g t e traditional bonds o! prod%ction @it in @ ic t e prod%cer sold is !inis ed prod%ct and not ing else0 5 e merc ant capitalist bo%g t t e labor-po@er, @ ic still o@ned its prod%ction instr%ments b%t no longer t e ra@ material0 Ay t %s g%aranteeing t e @ea8er reg%lar employment, e co%ld depress t e @ea8er"s @age to s%c a degree t at a part o! t e labor-time !%rnis ed remained %npaid !or0 5 e contractor t %s became an appropriator o! s%rpl%s-8al%e o8er and abo8e is commercial pro!it0 ?dmittedly, e ad to employ additional capital to b%y yarn, etc0, and lea8e it in t e @ea8er"s ands %ntil t e article !or @ ic e !ormerly ad to pay !%ll price only %pon p%rc asing it, @as !inis ed0 A%t, in t e !irst place, e ad already %sed extra capital in most cases !or ad8ances to t e @ea8er, @ o as a r%le s%bmitted to t e ne@ prod%ction conditions only %nder t e press%re o! debt0 ?nd, secondly, apart !rom t at, t e calc%lation took t e !ollo@ing !orm: ?ss%me t at o%r merc ant operates is export b%siness @it capital o! 3=,=== d%cats, seD%ins, po%nds sterling or @ ate8er is t e case0 3! t at, say 1=,=== are engaged in t e p%rc ase o! domestic goods, @ ereas <=,=== are %sed in t e o8erseas market0 $ay t e capital is t%rned o8er once in t@o years0 ?nn%al t%rno8er R 1+,===0 -o@, o%r merc ant @ants to become a contractor, to a8e clot @o8en !or is o@n acco%nt0 6o@ m%c additional capital m%st e in8estQ 'et %s ass%me t at t e prod%ction time o! t e piece o! clot , s%c as e sells, a8erages t@o mont s I @ ic is certainly 8ery ig 0 'et %s !%rt er ass%me t at e as to pay !or e8eryt ing in cas 0 6ence, e m%st ad8ance eno%g capital to s%pply is @ea8ers @it yarn !or t@o mont s0 $ince is t%rno8er is 1+,=== a year, e b%ys clot !or <,+== in t@o mont s0 'et %s say t at <,=== o! t at represents t e 8al%e o! yarn, and +== @ea8ers" @ages# t en o%r merc ant reD%ires an additional capital o! <,===0 We ass%me t at t e s%rpl%s-8al%e e appropriates !rom t e @ea8er by t e ne@ met od totals only + per cent o! t e 8al%e o! t e clot , @ ic constit%tes t e certainly 8ery modest s%rpl%s-8al%e rate o! <+ per cent0 B <,===c U +==8 U 1<+s# s" R 1<+N+== R <+T, p" R 1<+N<,+== R +TC0 3%r man t en makes an extra pro!it o! >+= on is ann%al t%rno8er o! 1+,===, and as t %s got is additional capital back in <W years0 A%t in order to accelerate is sales and ence is t%rno8er, t %s making t e same pro!it @it t e same capital in a s orter period o! time, and ence a greater pro!it in t e same time, e @ill donate a small portion o! is s%rpl%s-8al%e to t e b%yer I e @ill sell c eaper t an is competitors0 5 ese @ill also grad%ally be con8erted into contractors, and t en t e extra pro!it !or all o! t em @ill be red%ced to t e ordinary pro!it, or e8en to a lo@er pro!it on t e capital t at as been increased !or all o! t em0 5 e eD%ality o! t e pro!it rate is re-establis ed, alt o%g possibly on anot er le8el, by a part o! t e s%rpl%s-8al%e made at ome being t%rned o8er to t e !oreign b%yers0 5 e next step in t e s%bH%gation o! ind%stry by capital takes place t ro%g t e introd%ction o! man%!act%re0 5 is, too, enable t e man%!act%rer, @ o is most o!ten is o@n export trader in t e

6<1

$%pplement: Engels

1>t and 18t cent%ries I generally in :ermany do@n to 18+=, and still today ere and t ere I to prod%ce c eaper t an is old-!as ioned competitor, t e andicra!tsman0 5 e same process is repeated# t e s%rpl%s-8al%e appropriated by t e man%!act%ring capitalist enables im Bor t e export merc ant @ o s ares @it imC to sell c eaper t an is competitors, %ntil t e general introd%ction o! t e ne@ mode o! prod%ction, @ en eD%aliEation against takes place0 5 e already existing mercantile rate o! pro!it, e8en i! it is le8elled o%t only locally, remains t e ,rocr%stean bed in @ ic t e excessi8e ind%strial s%rpl%s-8al%e is lopped o!! @it o%t mercy0 &! man%!act%ring spr%ng a ead by c eapening its prod%cts, t is is e8en more tr%e o! modern ind%stry, @ ic !orces t e prod%ction costs o! commodities lo@er and lo@er t ro%g its repeated re8ol%tions in prod%ction, relentlessly eliminating all !ormer modes o! prod%ction0 &t is largescale ind%stry, too, t at t %s !inally conD%ers t e domestic market !or capital, p%ts an end to t e small-scale prod%ction and nat%ral economy o! t e sel!-s%!!icient peasant !amily, and places t e entire nation in ser8ice o! capital0 'ike@ise, it eD%aliEes t e pro!it rate o! t e di!!erent commercial and ind%strial branc es o! b%siness into onegeneral rate o! pro!it, and !inally ens%res ind%stry t e position o! po@er d%e to it in t is eD%aliEation by eliminating most o! t e obstacles !ormerly indering t e trans!er o! capital !rom one branc to anot er0 5 ereby t e con8ersion o! 8al%es into prod%ction prices is accomplis ed !or all exc ange as a @ ole0 5 is con8ersion t ere!ore proceeds according to obHecti8e la@s, @it o%t t e conscio%sness or t e intent o! t e participants0 5 eoretically, t ere is no di!!ic%lty at all in t e !act t at competition red%ces to t e general le8el pro!its @ ic exceed t e general rate, t %s again depri8ing t e !irst ind%strial appropriator o! t e s%rpl%s-8al%e exceeding t e a8erage0 ?ll t e more so in practice, o@e8er, !or t e sp eres o! prod%ction @it excessi8e s%rpl%s-8al%e, @it ig 8ariable and lo@ constant capital I i0e0, @it lo@ capital composition I are by t eir 8ery nat%re t e ones t at are last and least completely s%bHected to capitalist prod%ction, especially agric%lt%re0 3n t e ot er and, t e rise o! prod%ction prices abo8e commodity 8al%es, @ ic is reD%ired to raise t e belo@-a8erage s%rpl%s-8al%e, contained in t e prod%cts o! t e sp eres o! ig capital composition, to t e le8el o! t e a8erage rate o! pro!it, appears to be extremely di!!ic%lt t eoretically, b%t is soonest and most easily e!!ected in practice, as @e a8e seen0 For @ en commodities o! t is class are !irst prod%ced capitalistically and enter capitalist commerce, t ey compete @it commodities o! t e same nat%re prod%ced by per-capitalist met ods and ence dearer0 5 %s, e8en i! t e capitalist prod%cer reno%nces a part o! t e s%rpl%s-8al%e, e can still obtain t e rate o! pro!it pre8ailing in is locality, @ ic originally ad no direct connection @it s%rpl%s-8al%e beca%se it ad arisen !rom merc ant capital long be!ore t ere @as any capitalist prod%ction at all, and t ere!ore be!ore an ind%strial rate o! pro!it @as possible0

The Stoc2 !change

10 5 e position o! t e stock exc ange in capitalist prod%ction in general is clear !rom 4ol0 &&&, ,art +, especially ; apter /<>10 A%t since 186+, @ en t e book @as @ritten, a c ange as taken place @ ic today assigns a considerably increased and constantly gro@ing role to t e stock exc ange, and @ ic , as it de8elops, tends to concentrate all prod%ction, ind%strial as @ell as agric%lt%ral, and all commerce, t e means o! comm%nication as @ell as t e !%nctions o! exc ange, in t e ands o! stock exc ange operators, so t at t e stock exc ange becomes t e most prominent representati8e o! capitalist prod%ction itsel!0 <0 &n 186+ t e stock exc ange @as still a secondary element in t e capitalist system0 :o8ernment bonds represented t e b%lk o! exc ange sec%rities, and e8en t eir s%m-total @as still relati8ely small0 Aesides, t ere @ere Hoint-stock banks, predominant on t e continent and in ?merica, and H%st beginning to absorb t e aristocratic pri8ate banks in England, b%t still relati8ely insigni!icant en masse. )ail@ay s ares @ere still comparati8ely @eak compared to t e present time0 5 ere @ere still only !e@ directly prod%cti8e establis ments in stock company !orm I and, like t e

6<<

$%pplement: Engels

banks, most o! all in t e poorerco%ntries: :ermany, ?%stria, ?merica, etc0 5 e KministerGs eyeL @as still an %nconD%ered s%perstition0 ?t t at time, t e stock exc ange @as still a place @ ere t e capitalists took a@ay eac ot erGs acc%m%lated capital, and @ ic directly concerned t e @orkers only as ne@ proo! o! t e demoralising general e!!ect o! capitalist economy and as con!irmation o! t e ;al8inist doctrine t at predestination Balias c anceC decides, e8en in t is li!e, blessedness and damnation, @ealt , i0e0, enHoyment and po@er, and po8erty, i0e0, pri8ation and ser8it%de0 30 -o@ it is ot er@ise0 $ince t e crisis o! 1866 acc%m%lation as proceeded @it e8er-increasing rapidity, so t at in no ind%strial co%ntry, least o! all in England, co%ld t e expansion o! prod%ction keep %p @it t at o! acc%m%lation, or t e acc%m%lation o! t e indi8id%al capitalist be completely %tilised in t e enlargement o! is o@n b%siness# Englis cotton ind%stry as early as 182+# t e rail@ay s@indles0 A%t @it t is acc%m%lation t e n%mber o! rentiers, people @ o @ere !ed %p @it t e reg%lar tension in b%siness and t ere!ore @anted merely to am%se t emsel8es or to !ollo@ a mild p%rs%it as directors or go8ernors o! companies, also rose0 ?nd t ird, in order to !acilitate t e in8estment o! t is mass !loating aro%nd as money-capital, ne@ legal !orms o! limited liability companies @ere establis ed @ ere8er t at ad not yet been done, and t e liability o! t e s are older, !ormerly %nlimited, @as also red%ced Y /more or less1 BHoint-stock companies in :ermany, 18*=0 $%bscription 2= per centSC0 20 5 erea!ter, grad%al con8ersion o! ind%stry into stock companies0 3ne branc a!ter anot er s%!!ers t is !ate0 First iron, @ ere giant plants are no@ necessary Bbe!ore t at, mines, @ ere not already organised on s aresC0 5 en t e c emical ind%stry, like@ise mac inery plants0 3n t e continent, t e textile ind%stry# in England, only in a !e@ areas in 'ancas ire B3ld am $pinning Mill, A%rnley Wea8ing Mill, etc0, tailor co-operati8es, b%t t is is only a preliminary stage @ ic @ill again !all into t e mastersG ands at t e next crisisC, bre@eries Bt e ?merican ones sold a !e@ years ago to Englis capital, t en :%inness, Aass, ?llsoppC0 5 en t e tr%sts, @ ic create gigantic enterprises %nder common management Bs%c as (nited ?lkaliC0 5 e ordinary indi8id%al !irm is more and more only a preliminary stage to bring t e b%siness to t e point @ ere it is big eno%g to be K!o%nded0L 'ike@ise in trade: 'ea!s, ,arsons, Morleys, Morrison, 7illon I all !o%nded0 5 e same in retail stores by no@, and not merely %nder t e cloak o! co-operation . la Lstores0L 'ike@ise banks and ot er credit establis ments e8en in England0 ? tremendo%s n%mber o! ne@ banks, all s ares delimited0 E8en old banks etc0, are con8erted, @it se8en pri8ate s are olders, into limited companies0 +0 5 e same in t e !ield o! agric%lt%re0 5 e enormo%sly expanded banks, especially in :ermany %nder all sorts o! b%rea%cratic names, more and more t e olders o! mortgages# @it t eir s ares t e act%al ig er o@ners ip o! landed property is trans!erred to t e stock exc ange, and t is is e8en more tr%e @ en t e !arms !all into t e creditorsG ands0 6ere t e agric%lt%ral re8ol%tion o! prairie c%lti8ation is 8ery impressi8e# i! it contin%es, t e time can be !oreseen @ en EnglandGs and FranceGs land @ill also be in t e ands o! t e stock exc ange0 60 -o@ all !oreign in8estments in t e !orm o! s ares0 5o mention England alone: ?merican rail@ays, -ort and $o%t Bcons%lt t e stock exc ange listC, :oldberger, etc0 >0 5 en colonisation0 5oday t is is p%rely a s%bsidiary o! t e stock exc ange, in @ ose interests t e E%ropean po@ers di8ided ?!rica a !e@ years ago, and t e Frenc conD%ered 5%nis and 5onkin0 ?!rica leased directly to companies B-iger, $o%t ?!rica, :erman $o%t -West and :erman East ?!ricaC, and Mas onaland and -atal seiEed by ) odes !or t e stock exc ange0

&n Aook & BKap0 4&&, 3, $0 <16N<=6 !!0C /Englis edition: ; 0 &J, 3, <<+ !!0 I Ed01 @e a8e gi8en t e example o! -0 W0 $enior to s o@ @ at con!%sion t is may create in t e mind o! t e economist0 < KFrom @ at as gone be!ore, @e kno@ t at s%rpl%s-8al%e is p%rely t e res%lt o! a 8ariation in t e 8al%e o! 8, o! t at portion o! t e capital @ ic is trans!ormed into labo%r-po@er# conseD%ently, 8 U s R 8 U 78 Bor 8 pl%s an increment o! 8C0 A%t t e !act t at it is 8 alone t at 8aries, and t e conditions o! t at 8ariation, are obsc%red by t e circ%mstance t at in conseD%ence o! t e increase in t e 8ariable component o! t e capital, t ere is also an increase in t e s%m total o! t e ad8anced capital0 &t @as originally V+==, and becomes V+*=0L BA%c &, Kap0 4& &, 1, $0 <=3N1*+0C /Englis edition: ; 0 &J, 1, p0 <120 I Ed01 3 Malt %s, ,rinciples o! ,olitical Economy, <nd ed0, 'ondon, 1836, p0 <680 2 K;apital is t at @ ic is expended @it a 8ie@ to pro!it0L Malt %s, 7e!initions in ,olitical Economy, 'ondon, 18<>, p0 860 + ;!0 A%c &0 Kap0 J4&&&, 1, $0 +>1N+61 !!0 /Englis edition: ; 0 JJ, 1, p0 +2* !!0 I Ed01 6 )0 5orrens, ?n Essay on t e ,rod%ction o! Wealt , 'ondon, 18<1, pp0 +1-+3, and 32*0 > Malt %s, 7e!initions in ,olitical Economy, 'ondon, 18+3, pp0 >=, >10 8 K5 e masses o! 8al%e and o! s%rpl%s-8al%e prod%ced by di!!erent capitals I t e 8al%e o! labo%r-po@er being gi8en and its degree o! exploitation being eD%al I 8ary directly as t e amo%nts o! t e 8ariable constit%ents o! t ese capitals, i0e0, as t eir constit%ents trans!ormed into li8ing labo%r-po@er0L BA%c 1, Kap0 &J0 $0 31<N3=30C /Englis edition: ; 0 J&, pp0 3=6N3=>0 I Ed01 1 5 e man%script as t e !ollo@ing note at t is point: K&n8estigate later in @ at manner t is case is connected @it gro%nd-rent0L '. 0. < 5 e man%script contains also 8ery detailed calc%lations o! t e di!!erence bet@een t e rate o! s%rpl%s-8al%e and t e rate o! pro!it Bs"-p"C, @ ic as 8ery interesting pec%liarities, and @ ose mo8ement indicates @ ere t e t@o rates dra@ apart or approac one anot er0 5 ese mo8ements may also be represented by c%r8es0 & am not reprod%cing t is material, beca%se it is o! less importance to t e immediate p%rposes o! t is @ork, and beca%se it is eno%g ere to call attention to t is !act !or readers @ o @is to p%rs%e t is point !%rt er0 I F0E0
1

K$ince in all !actories t ere is a 8ery large amo%nt o! !ixed capital in b%ildings and mac inery, t e greater t e n%mber o! o%rs t at mac inery can be kept at @ork t e greater @ill be t e ret%rn0L B)eports o! &nsp0 o! Fact0, 31st 3ctober, 18+8, p0 80C < ;!0 (re on t e progress in !actory constr%ction0 1 5 e Factory M%estion and t e 5en 6o%rs" Aill by )0 60 :reg, 'ondon, 183>, p0 11+0 < 5 e report errs in t e !inal sentence0 &nstead o! 6d0 it s o%ld be 3d0 !or loss t ro%g @aste0 5 is loss amo%nts to <+T in t e case o! $%rat, and only 1<Z to 1+T in t e case o! ?merican cotton, and t is latter is meant, t e same percentage a8ing been correctly calc%lated !or t e price o! + to 6d0 &t is tr%e, o@e8er, t at also in t e case o! ?merican cotton bro%g t to E%rope d%ring t e latter years o! t e ;i8il War t e proportion o! @aste o!ten rose considerably ig er t an be!ore0 I F0 E0 3 For examples see Aabbage /3n t e Economy o! Mac inery and Man%!act%res, 'ondon, 183<, pp0 <8=-810IEd0 1, among ot ers0 5 e %s%al expedient I a red%ction o! @ages I is also employed in t is instance, so t at t is contin%al depreciation acts D%ite contrary to t e dreams o! Mr0 ;arey"s K armonio%s brainL0 2 $ince t e abo8e @as @ritten B186+C, competition on t e @orld-market as been considerably intensi!ied by t e rapid de8elopment o! ind%stry in all ci8ilised co%ntries, especially in ?merica and :ermany0 5 e !act t at t e rapidly and enormo%sly expanding prod%cti8e !orces today o%tgro@ t e control o! t e la@s o! t e capitalist mode o! commodity exc ange, @it in @ ic t ey are s%pposed to operate, impresses itsel! more and more e8en on t e minds o! t e capitalists0 5 is is disclosed especially by t@o symptoms0 First, by t e ne@ general mania !or a protecti8e tari!!, @ ic di!!ers !rom t e old protectionism in t at no@ articles !it !or export are t ose best protected0 ?nd secondly, by t e tr%sts o! man%!act%rers o! @ ole sp eres o! prod%ction @ ic reg%late prod%ction, and t %s prices and pro!its0 &t goes @it o%t saying t at t ese experiments are practicable only so long as t e economic climate is relati8e !a8o%rable0 5 e !irst storm m%st %pset t em and pro8e t at, alt o%g prod%ction ass%redly needs reg%lation, it is certainly not t e capitalist class @ ic is !itted !or t at task0 Mean@ ile, t e tr%sts a8e no ot er mission b%t to see to it t at t e little !is are s@allo@ed by t e big !is still more rapidly t an be!ore0 I F0E0

&t goes @it o%t saying t at @e do not, like Mr0 Aaker, explain t e @ool crisis o! 18+> on t e basis o! t e disproportion bet@een t e prices o! ra@ material and prod%ct0 5 is disproportion @as itsel! b%t a symptom, and t e crisis @as a general one0 I F0E0 6 ? s arp distinction is made in England bet@een @oollen man%!act%re, @ ic spins carded yarn !rom s ort @ool and @ea8es it Bmain centre 'eedsC, and @orsted man%!act%re, @ ic makes @orsted yarn !rom long @ool and @ea8es it Bmain seat Arad!ord, in .orks ireC0 I F0E0 > 5 is rapid expansion o! o%tp%t o! mac ine-made linen yarn in &reland dealt a deat -blo@ to exports o! linen made o! and-made yarn in :ermany B$ilesia, '%satia, and Westp aliaC0 I F0E0 1 /&t !ollo@s !rom ; apter &4 t at t e abo8e statement correctly applies only @ en capitals ? and A are di!!erently composed in respect to t eir 8al%es, b%t t at t e percentages o! t eir 8ariable parts are proportionate to t eir periods o! t%rno8er, i0 e0, in8ersely proportionate to t eir n%mber o! t%rno8ers0 'et capital ? a8e t e !ollo@ing percentages o! composition: <=c !ixed U >=c circ%lating and t %s *=c U 1=8 R 1==0 ?t a rate o! s%rpl%s-8al%e o! 1==T t e l=8 prod%ces 1=s in one t%rno8er, yielding a rate o! pro!it !or one t%rno8er R 1=T0 'et capital A R 6=c !ixed U <=c circ%lating, and t %s 8=c U <=8 R 1==0 5 e <=8 prod%ce <=s in one t%rno8er at t e abo8e rate o! s%rpl%s-8al%e, yielding a rate o! pro!it !or one t%rno8er R <=T, @ ic is do%ble t at o! ?0 A%t i! ? is t%rned o8er t@ice per year, and A only once, t en < \ 1= also make <=s per year, and t e ann%al rate o! pro!it is t e same !or bot , namely <=T0 I F0E01 1 5 e contro8ersy bet@een $torc and )icardo @it regard to gro%nd-rent Ba contro8ersy pertaining only to t e s%bHect# in !act, t e t@o opponents pay no attention to one anot erC, @ et er t e market-8al%e Bor rat er @ at t ey call market-price and price o! prod%ction respecti8elyC @as reg%lated by t e commodities prod%ced %nder %n!a8o%rable conditions B)icardoC /3n t e ,rinciples o! ,olitical Economy, and 5axation, 5 ird edition, 'ondon, 18<1, pp0 6610 I Ed0 1, or by t ose prod%ced %nder !a8o%rable conditions B$torc C /;o%rs d"economie politiD%e, o% exposition des principes, D%determinent la prosperite des nations, tome &&, $t0-,etersbo%rg, 181+, pp0 >8->*0 I Ed0 1, resol8es itsel! in t e !inal analysis in t at bot are rig t and bot @rong, and t at bot o! t em a8e !ailed to consider t e a8erage case0 ;ompare ;orbet /?n &nD%iry into t e ;a%ses and Modes o! t e Wealt o! &ndi8id%als, 'ondon, 1821, pp0 2<-220 I Ed0 1 on t e cases in @ ic t e price is reg%lated by commodities prod%ced %nder t e most !a8o%rable conditions0 I K&t is not meant to be asserted by im B)icardoC t at t@o partic%lar lots o! t@o di!!erent articles, as a at and a pair o! s oes, exc ange @it one anot er @ en t ose t@o partic%lar lots @ere prod%ced by eD%al D%antities o! labo%r0 Ay "commodity" @e m%st ere %nderstand t e "description o! commodity", not a partic%lar indi8id%al at, pair o! s oes etc0 5 e @ ole labo%r @ ic prod%ces all t e ats in England is to be considered, to t is p%rpose, as di8ided among all t e ats0 5 is seems to me not to a8e been expressed at !irst, and in t e general statement o! t is doctrine0L B3bser8ations on ;ertain 4erbal 7isp%tes in ,olitical Economy, etc0, 'ondon, 18<1, pp0 +3-+20C < 5 e !ollo@ing s%btility is s eer nonsense: KW ere t e D%antity o! @ages, capital, and land, reD%ired to prod%ce an article, are become di!!erent !rom @ at t ey @ere, t at @ ic ?dam $mit calls t e nat%ral price o! it is also di!!erent, and t at price, @ ic @as pre8io%sly its nat%ral price becomes, @it re!erence to t is alteration, its market-price# beca%se, t o%g neit er t e s%pply, nor t e D%antity @anted, may a8e been c angedL I bot o! t em c ange ere, H%st beca%se t e market-8al%e, or, in t e case o! ?dam $mit , t e price o! prod%ction, c anges in conseD%ence o! a c ange o! 8al%e I Kt at s%pply is not no@ exactly eno%g !or t ose persons @ o are able and @illing to pay @ at is no@ t e cost o! prod%ction, b%t is eit er greater or less t an t at# so t at t e proportion bet@een t e s%pply and @ at is @it re!erence to t e ne@ cost o! prod%ction t e e!!ect%al demand, is di!!erent !rom @ at it @as0 ?n alteration in t e rate o! s%pply @ill t en take place i! t ere is no obstacle in t e @ay o! it, and at last bring t e commodity to its ne@ nat%ral price0 &t may t en seem good to some persons to say t at as t e commodity gets to its nat%ral price by an alteration in its s%pply, t e nat%ral price is as m%c o@ing to one proportion bet@een t e demand and s%pply, as t e market-price is to anot er# and conseD%ently, t at t e nat%ral price, H%st as m%c as t e market-price, depends on t e proportion t at demand and s%pply bear to eac ot er0L BK5 e great principle o! demand and s%pply is called into action to determine @ at ?0 $mit calls nat%ral prices as @ell as market-prices0L I Malt %s0C /,rinciples o! ,olitical Economy, 'ondon, 18<=, p0 >+0 I Ed01 B3bser8ations on ;ertain 4erbal 7isp%tes, etc0, 'ondon, 18<1, pp0 6=-610C 5 e good man does not grasp t e !act t at it is precisely t e c ange in t e cost o! prod%ction, and t %s in t e 8al%e @ ic ca%sed a c ange in t e demand, in t e present case, and t %s in t e proportion bet@een demand and s%pply, and t at t is c ange in t e demand may bring abo%t a c ange in t e s%pply0 5 is @o%ld pro8e H%st t e re8erse o! @ at o%r good t inker @ants to pro8e0 &t @o%ld pro8e t at t e c ange in t e cost o! prod%ction is by no means d%e to t e proportion o! demand and s%pply, b%t rat er reg%lates t is proportion0L 3 K&! eac man o! a class co%ld ne8er a8e more t an a gi8en s are, or aliD%ot part, o! t e gains and possessions o! t e @ ole, e @o%ld readily combine to raise t e gainL# B e does it as soon as t e proportion o! demand to s%pply permits

it C Kt is is monopoly0 A%t @ ere eac man t inks t at e may any@ay increase t e absol%te amo%nt o! is o@n s are, t o%g by a process @ ic lessens t e @ ole amo%nt, e @ill o!ten do it# t is is competition0L B?n &nD%iry into 5 ose ,rinciples )especting t e -at%re o! 7emand, etc,, 'ondon, 18<1, p0 1=+0C 1 &t is 8ery pec%liar t at )icardo /3n t e ,rinciples o! ,olitical Economy, and 5axation, 5 ird edition, 'ondon, 18<1, pp0 36-210I Ed01 B@ o nat%rally proceeds di!!erently !rom %s, since e did not %nderstand t e le8elling o! 8al%es to prices o! prod%ctionC did not once consider t is e8ent%ality, b%t only t e !irst case, t at o! a @age rise and its in!l%ence on t e prices o! prod%ction o! commodities0 ?nd t e ser8%m pec%s imitator%m /6orace, Epistles, Aook &, Epistle 1*0I Ed01 did not e8en attempt to make t is extremely sel!-e8ident, act%ally ta%tological, practical application0 1 KWe s o%ld also expect t at, o@e8er t e rate o! t e pro!its o! stock mig t diminis in conseD%ence o! t e acc%m%lation o! capital on t e land and t e rise o! @ages, yet t e aggregate amo%nt o! pro!its @o%ld increase0 5 %s, s%pposing t at, @it repeated acc%m%lations o! V1==,===, t e rate o! pro!it s o%ld !all !rom <= to 1*, to 28, to 1>T, a constantly diminis ing rate, @e s o%ld expect t at t e @ ole amo%nt o! pro!its recei8ed by t ose s%ccessi8e o@ners o! capital @o%ld be al@ays progressi8e# t at it @o%ld be greater @ en t e capital @as V<==,===, t an @ en V1==,===# still greater @ en V3==,===# and so on, increasing, t o%g at a diminis ing rate, @it e8ery increase o! capital0 5 is progression, o@e8er, is only tr%e !or a certain time# t %s 1*T on V<==,=== is more t an <=T on V1==,===# again 18T on V3==,=== is more t an 1*T on V<==,===# b%t a!ter capital as acc%m%lated to a large amo%nt, and pro!its a8e !allen, t e !%rt er acc%m%lation diminis es t e aggregate o! pro!its0 5 %s, s%ppose t e acc%m%lation s o%ld be V1,===,===, and t e pro!its >T, t e @ ole amo%nt o! pro!its @ill be V>=,===# no@ i! an addition o! V1==,=== capital be made to t e million, and pro!its s o%ld !all to 6T, V66,=== or a dimin%tion o! V2,=== @ill be recei8ed by t e o@ners o! t e stock, alt o%g t e @ ole amo%nt o! stock @ill be increased !rom V1,===,=== to V1,1==,===0L I )icardo, ,olitical Economy, ; ap0 4& BWorks, ed0 by Mac;%lloc , 18+<, pp0 68-6*C0 I 5 e !act is, t at t e ass%mption as ere been made t at t e capital increases !rom 1,===,=== to 1,1==,===, t at is, by 1=T, @ ile t e rate o! pro!it !alls !rom > to 6, ence by 12 <N> T0 6inc illae lacrimaeS /"5 %s t ese tears" - ,%bli%s, 5erence, ?ndria, ?ct &, $cene 10 I Ed01
1

?dam $mit @as rig t in t is respect, contrary to )icardo, @ o said: K5 ey contend t at t e eD%ality o! pro!its @ill be bro%g t abo%t by t e general rise o! pro!its# and & am o! t e opinion t at t e pro!its o! t e !a8o%red trade @ill speedily s%bmit to t e general le8el0L BWorks:, ed0 by Mac;%lloc , p0 >30C 1 5 e !oregoing is placed in brackets, beca%se, t o%g a re as o! t e notes o! t e original man%script, it goes in some points beyond t e scope o! t e material !o%nd in t e original0 I F0E0 1 5o be able to classi!y merc ant"s capital as prod%cti8e capital, )amsay con!o%nds it @it t e transportation ind%stry and calls commerce Kt e transport o! commodities !rom one place to anot er0L )+n 0ssay on the Distribution of "ealth, p0 1*0C 5 e same con!%sion by 4erri B Medita#ioni sulla 0conomia &olitica, p 2 /&n: Scrittori Classici Dtaliani di 0conomia &olitica. ,arte Moderna, t0 J4, p03<0 I 0d.1C and by $ay B4rait7 d57conomie politi3ue, &, 12, 1+C0 &n is 0lements of &olitical 0conomy B?ndo8er and -e@ .ork, 183+C $0,0 -e@man says: K&n t e existing economical arrangements o! society, t e 8ery act, @ ic is per!ormed by t e merc ant, o! standing bet@een t e prod%cer and t e cons%mer, ad8ancing to t e !ormer capital and recei8ing prod%cts in ret%rn, and t en anding o8er t ese prod%cts to t e latter, recei8ing back capital in ret%rn, is a transaction @ ic bot !acilitates t e economical processes o! t e comm%nity, and adds 8al%e to t e prod%cts in relation to @ ic it is per!ormedL Bp0 1>2C0 ,rod%cer and cons%mer t %s sa8e time and money t ro%g t e inter8ention o! t e merc ant0 5 is ser8ice reD%ires an ad8ance o! capital and labo%r, and m%st be re@arded, Ksince it adds 8al%e to prod%cts, !or t e same prod%cts in t e ands o! cons%mers are @ort more t an in t e ands o! prod%cers0L ?nd so commerce appears to im, as it does to M0 $ay, as Kstrictly an act o! prod%ctionL Bp0 1>+C0 5 is -e@man"s 8ie@ is !%ndamentally @rong0 5 e use1value o! a commodity is greater in t e ands o! t e cons%mer t an in t ose o! t e prod%cer, beca%se it is !irst realised by t e cons%mer0 For t e %se-8al%e o! a commodity does not ser8e its end, does not begin to !%nction %ntil t e commodity enters t e sp ere o! cons%mption0 $o long as it is in t e ands o! t e prod%cer, it exists only in potential !orm0 A%t one does not pay t@ice !or a commodity I !irst !or its exc ange-8al%e, and t en !or its %se-8al%e0 Ay paying !or its exc ange-8al%e, & appropriate its %se-8al%e0 ?nd its exc ange-8al%e is not in t e least a%gmented by trans!erring t e commodity !rom t e prod%cer or middleman to t e cons%mer0 1 Po n Aellers /Essays abo%t t e ,oor, Man%!act%res, 5rade, ,lantations, and &mmorality, 'ondon, 16**, p0 1=0 I Ed010 < 6o@ @ell t is !orecast o! t e !ate o! t e commercial proletariat, @ritten in 186+, as stood t e test o! time can be corroborated by %ndreds o! :erman clerks, @ o are trained in all commercial operations and acD%ainted @it t ree or !o%r lang%ages, and o!!er t eir ser8ices in 8ain in 'ondon ;ity at <+ s illings per @eek, @ ic is !ar belo@ t e @ages

o! a good mac inist0 ? blank o! t@o pages in t e man%script indicates t at t is point @as to a8e been treated at greater lengt 0 For t e rest, @e re!er t e reader to Aook && BKap0 4&0C BK5 e ;osts o! ;irc%lationLC /Englis edition: 4ol0 &&, ; 0 4&0 I Ed01, @ ere 8ario%s matters belonging %nder t is ead a8e already been disc%ssed0 I F0E0 1 K,ro!it, on t e general principle, is al@ays t e same, @ ate8er be price# keeping its place like an inc%mbent body on t e s@elling or sinking tide0 ?s, t ere!ore, prices rise, a tradesman raises price# as prices !all, a tradesman lo@ers price0L B;orbet, ?n &nD%iry into t e ;a%ses, etc0, o! t e Wealt o! &ndi8id%als, 'ondon, 1821, p0 <=0C 6ere, as in t e text generally# it is only a matter o! ordinary commerce, not o! spec%lation0 5 e analysis o! spec%lation, as @ell as e8eryt ing else pertaining to t e di8ision o! mercantile capital, !alls o%tside t e !ield o! o%r inD%iry0 K5 e pro!it o! trade is a 8al%e added to capital @ ic is independent o! price, t e secondL Bspec%lationC Kis !o%nded on t e 8ariation in t e 8al%e o! capital or in price itsel!L B10 c0, p0 1<8C0 < 5 is is a 8ery nai8e, b%t also a 8ery correct remark: K$%rely t e !act t at one and t e same commodity may be ad !rom di!!erent sellers at considerably di!!erent prices is !reD%ently d%e to mistakes o! calc%lation0L BFeller and 3dermann, 7as :anEe der ka%!mnnnisc en ?rit metik, >t ed0, 18+*, $02+10C 5 is s o@s o@ p%rely t eoretical, t at is, abstract, becomes t e determination o! prices0
1 <

9%r Kritik der politisc en 3ekonomie, $0 <>0 K5 e great di!!erences among coins as concerns t eir grain and coinage by many princes and to@ns t at @ere pri8ileged to coin money, necessitated t e creation o! b%siness establis ments to enable merc ants to %se local money @ ere8er compensation !or t e di!!erent coins @as reD%ired0 5o be able to make cas payments, merc ants @ o tra8elled to a !oreign market pro8ided t emsel8es @it %ncoined p%re sil8er, or gold0 &n t e same @ay t ey exc anged money recei8ed in local markets !or %ncoined sil8er or gold @ en ret%rning ome0 5 e b%siness o! exc anging money, t e exc ange o! %ncoined precio%s metals !or local coins, and 8ice 8ersa, t %s became a @idespread and paying b%siness0L B6ellmann, $tndte@esen des Mittelalters0 Aonn, 18<6-<*, &, $0 23>-380C KAanks o! exc ange do not o@e t eir name to t e !act t at t ey iss%e bills o! exc ange000 b%t to t e !act t at t ey %sed to exc ange coins0 'ong be!ore t e establis ment o! t e ?msterdam Aank o! Exc ange in 16=*, t ere existed in t e 7%tc merc ant to@ns money-c angers and exc ange o%ses, e8en exc ange banks 000 5 e b%siness o! t ese money-c angers consisted in exc anging t e n%mero%s 8arieties o! coin bro%g t into t e co%ntry by !oreign traders !or t e c%rrency o! t e realm0 :rad%ally t eir circle o! acti8ity extended 000 5 ey became t e bankers and cas iers o! t eir times0 A%t t e go8ernment o! ?msterdam 8ie@ed as dangero%s t e combination o! cas ier and exc ange b%sinesses, and to meet t is danger it @as resol8ed to establis a large c artered instit%tion able to per!orm bot t e cas ier and exc ange operations0 5 is instit%tion @as t e !amo%s ?msterdam Aank o! Exc ange o! 16=*0 &n like manner, t e exc ange banks o! 4enice, :enoa, $tock olm, 6amb%rg, o@e t eir origin to t e contin%al necessity o! c anging money0 3! all t ese, t e 6amb%rg Exc ange is t e only one today still doing b%siness, beca%se t e need !or s%c an instit%tion is still !elt in t at merc ants" to@n, @ ic as no Mint o! its o@n, etc0L B$0 4issering, 6andboek 8an ,raktisc e $taat %is o%dk%nde, ?msterdam, 186=-61, &, <2>-280C 3 K5 e instit%tion o! cas ier as probably no@ ere preser8ed its original independent c aracter so p%re as in t e 7%tc merc ant to@nsL Bc!0 on t e origin o! t e cas ier b%siness in ?msterdam0 E0 '%sac, 6olland"s )ykdom, ,art &&&C0 K&ts !%nctions coincide in part @it t ose o! t e old ?msterdam Aank o! Exc ange0 5 e cas ier recei8es !rom t e merc ants, @ o employ is ser8ices, a certain amo%nt o! money, !or @ ic e opens a "credit" !or t em in is books0 'ater, t ey send im t eir claims, @ ic e collects !or t em and credits to t eir acco%nt0 ?t t e same time, e makes payments on t eir dra!ts Bkassiers brie!esC and c arges t e amo%nts to t eir acco%nt0 6e makes a small c arge !or t ese receipts and payments, @ ic yields im a rem%neration !or is labo%rs only corresponding to t e siEe o! t e t%rno8er accomplis ed bet@een t e t@o parties0 &! payments are to be balanced bet@een t@o merc ants, @ o bot deal @it t e same cas ier, s%c payments are settled 8ery simply by m%t%al entries in t e books, !or t e cas iers balance t eir m%t%al claims !rom day to day0 5 e cas ier"s act%al b%siness t %s consists basically o! t is mediation in payments0 5 ere!ore, it excl%des ind%strial enterprises, spec%lation, and opening o! %nlimited credits# !or it m%st be t e r%le in t is b%siness t at t e cas ier makes no payment o8er and abo8e t e credit o! any one keeping an acco%nt @it im0L B4issering, loc0 cit0, p0 2320C )e t e banking associations o! 4enice: K5 e reD%irements and locality o! 4enice, @ ere carrying b%llion @as less con8enient t an in ot er places, ind%ced t e large merc ants o! t at city to !o%nd banking associations %nder d%e sa!eg%ards, s%per8ision and management0 Members o! s%c associations deposited certain s%ms, on @ ic t ey dre@ dra!ts !or t eir creditors, @ ere%pon t e paid s%m @as ded%cted !rom t e debtor"s acco%nt on t e page o! t e book reser8ed !or t at p%rpose and added to t e s%m credited in t e same book to t e creditor0 5 is is t e earliest beginning o! t e so-called giro banks0 5 ese associations are indeed old0 A%t i! attrib%ted to t e 1<t cent%ry, t ey are being con!o%nded @it t e $tate 'oan &nstit%te establis ed in 11>10L

B6ellmann, 'oc0 cit0, pp0 2+3-+20C 1 5 e sage Mr0 )osc er /7ie :r%ndlagen der -ationaldkonomie, 30 ?%!lage, 18+8, p 6=, +0 1=30 I Ed01 as !ig%red o%t t at, since certain people designate trade as mediation bet@een prod%cers and cons%mers, KoneL mig t H%st as @ell designate prod%ction itsel! as mediation o! cons%mption Bbet@een @ omQC, and t is implies, o! co%rse, t at merc ant"s capital is as m%c a part o! prod%cti8e capital as agric%lt%ral and ind%strial capital0 &n ot er @ords, beca%se & can say, t at man can mediate is cons%mption only by means o! prod%ction Band e as to do t is e8en @it o%t getting is ed%cation at 'eipEigC, or t at labo%r is reD%ired !or t e appropriation o! t e prod%cts o! -at%re B@ ic mig t be called mediationC, it !ollo@s, o! co%rse, t at social mediation arising !rom a speci!ic social !orm o! prod%ction I beca%se mediation I as t e same absol%te c aracter o! necessity, and t e same rank0 5 e @ord mediation settles e8eryt ing0 Ay t e @ay, t e merc ants are not mediators bet@een prod%cers and cons%mers Bcons%mers as distinct !rom prod%cers, cons%mers, t at is, @ o do not prod%ce, are le!t aside !or t e momentC, b%t mediators in t e exc ange o! t e prod%cts o! t ese prod%cers among t emsel8es0 5 ey are b%t middlemen in an exc ange, @ ic in t o%sands o! cases proceeds @it o%t t em0 < 6err W0 Kiesselbac Bin is 7er :ang des Welt andels im Mittelalter, 186=C is indeed still en@rapped in t e ideas o! a @orld, in @ ic merc ant"s capital is t e general !orm o! capital0 6e as not t e least idea o! t e modern meaning o! capital, any more t an Mommsen @ en e speaks in is istory o! )ome o! KcapitalL and t e r%le o! capital0 &n modern Englis istory, t e commercial estate proper and t e merc ant to@ns are also politically reactionary and in leag%e @it t e landed and moneyed interest against ind%strial capital0 ;ompare, !or instance, t e political role o! 'i8erpool @it t at o! Manc ester and Airming am0 5 e complete r%le o! ind%strial capital @as not ackno@ledged by Englis merc ant"s capital and moneyed interest %ntil a!ter t e abolition o! t e corn tax, etc0 3 K5 e in abitants o! trading cities, by importing t e impro8ed man%!act%res and expensi8e l%x%ries o! ric er co%ntries a!!orded some !ood to t e 8anity o! t e great proprietors, @ o eagerly p%rc ased t em @it great D%antities o! t e r%de prod%ce o! t eir o@n lands0 5 e commerce o! a great part o! E%rope in t ose times, accordingly consisted c ie!ly, in t e exc ange o! t eir o@n r%de prod%ce !or t e man%!act%red prod%ce o! more ci8ilised nations0000 W en t is taste became so general as to occasion a considerable demand, t e merc ants, in order to sa8e t e expense o! carriage, nat%rally endea8o%red to establis some man%!act%res o! t e same kind in t eir o@n co%ntry0L B?dam $mit /Wealt o! -ations1, Aook &&&, ; 0 &&&, 'ondon, 1>>6, pp0 28*, 2*=0C 2 K-o@ t ere is among merc ants m%c complaint abo%t t e nobles, or robbers, beca%se t ey m%st trade %nder great danger and r%n t e risk o! being kidnapped, beaten, blackmailed, and robbed0 &! t ey @o%ld s%!!er t ese t ings !or t e sake o! H%stice, t e merc ants @o%ld be saintly people0000 A%t since s%c great @rong and %nc ristian t ie8ery and robbery are committed all o8er t e @orld by merc ants, and e8en among t emsel8es, is it any @onder t at :od s o%ld proc%re t at s%c great @ealt , gained by @rong, s o%ld again be lost or stolen, and t ey t emsel8es be it o8er t e ead or made prisonerQ 000 ?nd t e princes s o%ld p%nis s%c %nH%st bargains @it d%e rigo%r and take care t at t eir s%bHects s all not be so o%trageo%sly ab%sed by merc ants0 Aeca%se t ey !ail to do so, :od employs knig ts and robbers, and p%nis es t e merc ants t ro%g t em !or t e @rongs t ey committed, and %ses t em as is de8ils, H%st as e plag%es Egypt and all t e @orld @it de8ils, or destroys t ro%g enemies0 6e t %s pits one against t e ot er, @it o%t t ereby insin%ating t at knig ts are any t e less robbers t an merc ants, alt o%g t e merc ants daily rob t e @ ole @orld, @ ile a knig t may rob one or t@o once or t@ice a year0L K:o by t e @ord o! &saia : 5 y princes a8e become t e companions o! robbers0 For t ey ang t e t ie8es, @ o a8e stolen a g%lden or a al! g%lden, b%t t ey associate @it t ose, @ o rob all t e @orld and steal @it greater ass%rance t an all ot ers, so t at t e pro8erb remains tr%e: Aig t ie8es ang little t ie8es# and as t e )oman senator ;ato said: Mean t ie8es lie in prisons and stocks, b%t p%blic t ie8es are clot ed in gold and silks0 A%t @ at @ill :od say !inallyQ 6e @ill do as e said to EEekiel# e @ill amalgamate princes and merc ants, one t ie! @it anot er, like lead and iron, as @ en a city b%rns do@n, lea8ing neit er princes nor merc ants0L BMartin '%t er, 4on Ka%!s andl%ng %nd W%c er, 1+<2, $0 <*6-*>0C + 6o@ predominant !is ery, man%!act%re and agric%lt%re, aside !rom ot er circ%mstances, @ere as t e basis !or 6olland"s de8elopment, as already been explained by 18t -cent%ry @riters, s%c as Massie /p0 6=10 &n contradistinction to t e !ormer 8ie@, @ ic %nderrated t e 8ol%me and importance o! commerce in ?sia, in ?ntiD%ity, and in t e Middle ?ges, it as no@ come to be t e c%stom to extremely o8errate it0 5 e best antidote against t is conception is to st%dy t e imports and exports o! England in t e early 18t cent%ry and to compare t em @it modern imports and exports0 ?nd yet t ey @ere incomparably greater t an t ose o! any !ormer trading nation0 B$ee ?nderson, ?n 6istorical and ; ronological 7ed%ction o! t e 3rigin o! ;ommerce0 /4ol0 &&, 'ondon, 1>62, p0 <61 et seD0 I Ed01C 6 &! any nation"s istory, t en t e istory o! t e Englis in &ndia is a string o! !%tile and really abs%rd Bin practice in!amo%sC economic experiments0 &n Aengal t ey created a caricat%re o! large-scale Englis landed estates# in so%t eastern &ndia a caricat%re o! small parcelled property# in t e nort -@est t ey did all t ey co%ld to trans!orm t e &ndian

economic comm%nity @it common o@ners ip o! t e soil into a caricat%re o! itsel!0 > $ince )%ssia as been making !rantic exertions to de8elop its o@n capitalist prod%ction, @ ic is excl%si8ely dependent %pon its domestic and t e neig bo%ring ?siatic market, t is is also beginning to c ange0 I F0E0 8 5 e same is tr%e o! t e ribbon and basting makers and t e silk @ea8ers o! t e ) ine0 E8en a rail@ay as been b%ilt near Kre!eld !or t e interco%rse o! t ese r%ral and-@ea8ers @it t e to@n Kman%!act%rer0L A%t t is @as later p%t o%t o! b%siness, toget er @it t e and-@ea8ers, by t e mec anical @ea8ing ind%stry0 I F0E0 * 5 is system as been de8eloped since 186+ on a still larger scale0 For details see t e First )eport o! t e $elect ;ommittee o! t e 6o%se o! 'ords on t e $@eating $ystem, 'ondon, 18880 I F0E0 1 ?t t is point certain passages may be D%oted, in @ ic t e economists so concei8e t e matter0 I K.o% Bt e Aank o! EnglandC are 8ery large dealers in t e commodity o! capitalQL is t e D%estion posed to a director o! t is bank @ en e @as interrogated !or t e )eport on Aank ?cts on t e @itness stand0 B60 o! ;0 18+>, p0 2=20C < K5 at a man @ o borro@s money @it a 8ie@ o! making a pro!it by it, s o%ld gi8e some portion o! is pro!it to t e lender, is a sel!-e8ident principle o! nat%ral H%stice0L B:ilbart, 5 e 6istory and ,rinciples o! Aanking, 'ondon, 1832, p02630C 3 K? o%se,L Kmoney,L etc0, are not to be loaned as KcapitalL i! ,ro%d on is to a8e is @ay, b%t are to be sold as Kcommodities 000 cost-priceL Bp0 22C0 '%t er stood some@ at abo8e ,ro%d on0 6e kne@ t at pro!it-making does not depend on t e manner o! lending or b%ying: K5 ey t%rn b%ying also into %s%ry0 A%t t is is really too m%c to bite o!! at once0 We m%st !irst con!ine o%rsel8es to one t ing, %s%ry in lending, and a!ter @e a8e stopped t at Ba!ter H%dgement-dayC, @e s all not !ail to preac against %s%ry in b%ying0L BMartin '%t er, ?n die ,!ar errn @ider den W%c er E% predigen, Wittenberg, 1+2=0C 2 K5 e eD%itableness o! taking interest depends not %pon a man"s making or not making pro!it, b%t %pon itsL Bt e borro@edC Kbeing capable o! prod%cing pro!it i! rig tly employedL0 B?n Essay on t e :o8erning ;a%ses o! t e -at%ral )ate o! &nterest, @ erein t e sentiments o! $ir W0 ,etty and Mr0 'ocke, on t at ead, are considered, 'ondon, 1>+=, p0 2*0 5 e a%t or o! t is anonymo%s @ork is P0 Massie0C + K)ic people, instead o! employing t eir money t emsel8es 000 let it o%t to ot er people !or t em to make pro!it o!, reser8ing !or t e o@ners a proportion o! t e pro!its so madeL Bl0 c0, pp0 <3-<2C0 6 K5 e term "8al%e," @ en applied to c%rrency, as t ree se8eral meanings 000 <C c%rrency, act%ally in and000 compared @it t e same amo%nt o! c%rrency to be recei8ed %pon a !%t%re day0 &n t is case t e 8al%e o! c%rrency is meas%red by t e rate o! interest, and t e rate o! interest being determined by t e ratio bet@een t e amo%nt o! liable capital and t e demand !or it0L B;olonel )0 5orrens, 3n t e 3peration o! t e Aank ; arter ?ct o! 1822, etc0, <nd ed0, 182>, pp0 +, 60C > K5 e ambig%ity o! t e term "8al%e o! money" or o! t e c%rrency, @ en employed indiscriminately as it is, to signi!y bot 8al%e in exc ange !or commodities and 8al%e in %se o! capital, is a constant so%rce o! con!%sion0L B5ooke, &nD%iry into t e ;%rrency ,rinciple, p0 >>0C 5 e main con!%sion Bimplied in t e matter itsel!C t at 8al%e as s%c BinterestC becomes t e %se-8al%e o! capital, as escaped 5ooke0 1 K5 e nat%ral rate o! interest is go8erned by t e pro!its o! trade to partic%lars0L BMassie, l0 c0, p0 +10C < ?t t is point t e man%script contains t e !ollo@ing remark: K5 e co%rse o! t is c apter s o@s t at it is pre!erable, be!ore analysing t e la@s o! t e distrib%tion o! pro!its, to ascertain !irst t e @ay in @ ic t e di8ision o! D%antity becomes one o! D%ality0 5o make a transition !rom t e pre8io%s c apter, @e need b%t ass%me t at interest is a certain inde!inite portion o! pro!it0L 3 K&n t e !irst period, immediately a!ter press%re, money is ab%ndant @it o%t spec%lation# in t e second period, money is ab%ndant and spec%lations abo%nd# in t e t ird period, spec%lation begins to decline and money is in demand, in t e !o%rt period, money is scarce and a press%re arri8es0L B:ilbart, ? ,ractical 5reatise on Aanking, +t ed0, 4ol0 &, 'ondon, 182*, p0 12*0C 2 5ooke explains t is Kby t e acc%m%lation o! s%rpl%s-capital necessarily accompanying t e scarcity o! pro!itable employment !or it in pre8io%s years, by t e release o! oards, and by t e re8i8al o! con!idence in commercial prospects0L B6istory o! ,rices !rom 183* till 182>, 'ondon, 1828, p0 +20 + K?n old c%stomer o! a banker @as re!%sed a loan %pon a V<==,=== bond# @ en abo%t to lea8e to make kno@n is s%spension o! payment, e @as told t ere @as no necessity !or t e step, %nder t e circ%mstances t e banker @o%ld b%y t e bond at V+=,===0L B/60 )oy1 5 e 5 eory o! t e Exc anges0 5 e Aank ; arter ?ct o! 1822, etc0, 'ondon, 186*, p0 +=0C

$ince t e rate o! interest is on t e @ ole determined by t e a8erage rate o! pro!it, inordinate s@indling is o!ten bo%nd %p @it a lo@ rate o! interest0 For instance, t e rail@ay s@indle in t e s%mmer o! 18220 5 e rate o! interest o! t e Aank o! England @as not raised to 3T %ntil 16t 3ctober, 18220 > P :0 3pdyke, !or instance, in is 5reatise on ,olitical Economy B-e@ .ork, 18+1C makes a 8ery %ns%ccess!%l attempt to explain t e %ni8ersality o! a +T rate o! interest by eternal la@s0 Mr0 Karl ?rnd is still more nai8e in 7ie nat%rgemnsse 4olks@irtsc a!t gegeneber dem Monopoltengeist %nd dem Komm%nism%s, etc0, 6ana%, 182+0 &t is stated t ere: K&n t e nat%ral co%rse o! goods prod%ction t ere is H%st one p enomenon, @ ic , in t e !%lly settled co%ntries, seems in some meas%re to reg%late t e rate o! interest# t is is t e proportion, in @ ic t e timber in E%ropean !orests is a%gmented t ro%g t eir ann%al gro@t 0 5 is ne@ gro@t occ%rs D%ite independently o! t eir exc ange-8al%e, at t e rate o! 3 or 2 to 1==0L B6o@ D%eer t at trees s o%ld see to t eir ne@ gro@t independently o! t eir exc ange-8al%eSC K?ccording to t is a drop in t e rate o! interest belo@ its present le8el in t e ric est co%ntries cannot be expectedL Bp0 1<2C0 B6e means, beca%se t e ne@ gro@t o! t e trees is independent o! t eir exc ange-8al%e, o@e8er m%c t eir exc ange-8al%e may depend on t eir ne@ gro@t 0C 5 is deser8es to be called Kt e primordial !orest rate o! interest0L &ts disco8erer makes a !%rt er la%dable contrib%tion in t is @ork to Ko%r scienceL as t e Kp ilosop er o! t e dog tax0L /Marx ironically calls K0 ?rnd t e Kp ilosop er o! t e dog taxL beca%se in a special paragrap in is book Bp 88, +02<=-<2C e ad8ocated t at tax0 I Ed01 8 5 e Aank o! England raises and lo@ers t e rate o! its disco%nt, al@ays, o! co%rse, @it d%e consideration o! t e rate pre8ailing in t e open market, in accordance @it imports and exports o! gold0 KAy @ ic gambling in disco%nts, by anticipation o! t e alterations in t e bank-rate, as no@ become al! t e trade o! t e great eads o! t e money centreL I i0e0, o! t e 'ondon money-market0 B/60 )oy1 5 e 5 eory o! t e Exc anges, etc0 , p0 1130C * K"5 e price o! commodities !l%ct%ates" contin%ally# t ey are all made !or di!!erent %ses# t e money ser8es !or all p%rposes0 5 e commodities, e8en t ose o! t e same kind, di!!er according to D%ality# cas money is al@ays o! t e same 8al%e, or at least is ass%med to be so0 5 %s it is t at t e price o! money, @ ic @e designate by t e term interest, as a greater stability and %ni!ormity t an t at o! any ot er t ing0L BP0 $te%art, ,rinciples o! ,olitical Economy, Frenc translation, 1>8*, &4, p0 <>0C 1= K5 is r%le o! di8iding pro!its is not, o@e8er, to be applied partic%larly to e8ery lender and borro@er, b%t to lenders and borro@ers in general 000 remarkably great and small gains are t e re@ard o! skill and t e @ant o! %nderstanding, @ ic lenders a8e not ing at all to do @it # !or as t ey @ill not s%!!er by t e one, t ey o%g t not to bene!it by t e ot er0 W at as been said o! partic%lar men in t e same b%siness is applicable to partic%lar sorts o! b%siness# i! t e merc ants and tradesmen employed in any one branc o! trade get more by @ at t ey borro@ t an t e common pro!its made by ot er merc ants and tradesmen o! t e same co%ntry, t e extraordinary gain is t eirs, t o%g it reD%ired only common skill and %nderstanding to get it# and not t e lenders", @ o s%pplied t em @it money 000 !or t e lenders @o%ld not a8e lent t eir money to carry on any branc o! trade %p on lo@er terms t an @o%ld admit o! paying so m%c as t e common rate o! interest# and t ere!ore t ey o%g t not to recei8e more t an t at, @ ate8er ad8antages may be made by t eir money0L BMassie, 10 c0, pp0 +=, +10C 11 Aank-rate +T Market rate o! disco%nt, 6= days" dra!ts 3 +N8T 7itto, 8 mont s" 3ZT 7itto, 6 mont s" 3 +N16T 'oans to bill-brokers, day to day 1 to <T 7itto, !or one @eek 3T 'ast rate !or !ortnig t, loans to stockbrokers 2` to +T 7eposit allo@ance BbanksC 3ZT 7itto Bdisco%nt o%sesC 3 to 3[ T 6o@ large t is di!!erence may be !or one and t e same day is s o@n in t e preceding !ig%res o! t e rate o! interest o! t e 'ondon money-market on 7ecember *, 188*, taken !rom t e ;ity article o! t e 7aily -e@s o! 7ecember 1=0 5 e minim%m is 1T, t e maxim%m +T0 /F0E01 1 K5 e pro!its o! enterprise depend %pon t e net pro!its o! capital, not t e latter %pon t e !ormer0L B)amsay, Essay on t e 7istrib%tion o! Wealt , p0 <120 For )amsay net pro!its al@ays mean interest0C

<

K$%perintendence is ereL Bin t e case o! t e !arm o@nerC Kcompletely dispensed @it 0L BP0 E0 ;airnes, 5 e $la8e ,o@er, 'ondon, 186<, p0 280C 3 K&! t e nat%re o! t e @ork reD%ires t at t e @orkmenL B8iE0, t e sla8esC Ks o%ld be dispersed o8er an extended area, t e n%mber o! o8erseers, and, t ere!ore, t e cost o! t e labo%r @ ic reD%ires t is s%per8ision, @ill be proportionately increased0L B;airnes, 10 c0, p0 220C 2 ?0 (re, , ilosop y o! Man%!act%res, Frenc translation, 1836, &, p0 6>, @ ere t is ,indar o! t e man%!act%rers at t e same time testi!ies t at most man%!act%rers a8e not t e slig test %nderstanding o! t e mec anism @ ic t ey set in motion0 + &n a case kno@n to me, !ollo@ing t e crisis o! 1868, a bankr%pt man%!act%rer became t e paid @age-labo%rer o! is o@n !ormer labo%rers0 5 e !actory @as operated a!ter t e bankr%ptcy o! its o@ner by a labo%rers" co-operati8e, and its !ormer o@ner @as employed as manager0 I F0 E0 6 5 e acco%nts D%oted ere go no !%rt er t an 1862, since t e abo8e @as @ritten in 186+0 I F0 E0 > KMasters are labo%rers as @ell as t eir Ho%rneymen0 &n t is c aracter t eir interest is precisely t e same as t at o! t eir men0 A%t t ey are also eit er capitalists, or t e agents o! t e capitalists, and in t is respect t eir interest is decidedly opposed to t e interests o! t e @orkmen0L Bp0 <>C0 K5 e @ide spread o! ed%cation among t e Ho%rneymen mec anics o! t is co%ntry diminis es daily t e 8al%e o! t e labo%r and skill o! almost all masters and employers by increasing t e n%mber o! persons @ o possess t eir pec%liar kno@ledgeL Bp0 3=, 6odgskin, 'abo%r 7e!ended ?gainst t e ;laims o! ;apital, etc0, 'ondon, 18<+C0 8 K5 e general relaxation o! con8entional barriers, t e increased !acilities o! ed%cation tend to bring do@n t e @ages o! skilled labo%r instead o! raising t ose o! t e %nskilled0L BP0 $t0 Mill, ,rinciples o! ,olitical Economy, <nd ed0, 'ondon, 182*, &, p0 2>*0C i )ic ard ,rice, ?n ?ppeal to t e ,%blic on t e $%bHect o! t e -ational 7ebt, <nd ed0, 'ondon, 1>>2, p0 1*0 6e cracks t e nai8e Hoke: K&t is borro@ing money at simple interest, in order to impro8e it at compo%nd interest0L B)0 6amilton, ?n &nD%iry into t e )ise and ,rogress o! t e -ational 7ebt o! :reat Aritain, <nd ed0, Edinb%rg , 1812, p0 1330C ?ccording to t is, borro@ing @o%ld be t e sa!est means also !or pri8ate people to gat er @ealt 0 A%t i! & borro@ V1== at +T ann%al interest, & a8e to pay V+ at t e end o! t e year, and e8en i! t e loan lasts !or 1== million years, & a8e mean@ ile only V1== to loan e8ery year and V+ to pay e8ery year0 & can ne8er manage by t is process to loan V1=+ @ en borro@ing V1==0 ?nd o@ am & going to pay +TQ Ay ne@ loans, or, i! it is t e state, by ne@ taxes0 -o@, i! t e ind%strial capitalist borro@s money, and is pro!it amo%nts to, say, 1+T, e may pay +T interest, spend +T !or is pri8ate expenses Balt o%g is appetite gro@s @it is incomeC, and capitalise +T0 &n t is case, 1+T is t e precondition !or paying contin%ally +T interest0 &! t is process contin%es, t e rate o! pro!it, !or t e reasons indicated in !ormer c apters, @ill !all !rom 1+T to, say, 1=T0 A%t ,rice entirely !orgets t at t e interest o! +T pres%pposes a rate o! pro!it o! 1+T, and ass%mes it to contin%e @it t e acc%m%lation o! capital0 6e as not ing @ atsoe8er to do @it t e act%al process o! acc%m%lation, b%t rat er only @it lending money and getting it back @it compo%nd interest0 6o@ t at is accomplis ed is immaterial to im, since it is t e innate property o! interest-bearing capital0 ii $ee Mill and ;arey, and )osc er"s mistaken commentary on t is score0 /Marx re!ers to t e !ollo@ing @orks: P0 $t0 Mill, ,rinciples o! ,olitical Economy, $econd edition, 4ol0 &, 'ondon, 182*, pp0 *1-*<# 60 ; 0 ;arey, ,rinciples o! $ocial $cience, 4ol0 &&&, , iladelp ia, 18+*, pp0 >10>3# W0 )osc er, 7ie :r%ndlagen der -ationaldkonomie, 3 ?%!lage, $t%ttgart %nd ?%gsb%rg, 18+8, p 2+0 I Ed01 iii K&t is clear, t at no labo%r, no prod%cti8e po@er, no ingen%ity, and no art, can ans@er t e o8er@ elming demand o! compo%nd interest0 A%t all sa8ing is made !rom t e re8en%e o! t e capitalist, so t at act%ally t ese demands are constantly made and as constantly t e prod%cti8e po@er o! labo%r re!%ses to satis!y t em0 ? sort o! balance is, t ere!ore, constantly str%ck0L B'abo%r 7e!ended ?gainst t e ;laims o! ;apital, p0 <30 Ay 6odgskin0C 1 &n ot er @ords, !ormerly t ey !irst !ixed t e di8idend, and t en ded%cted t e income tax as t e di8idend @as paid to t e indi8id%al stock older# a!ter 1822, o@e8er, t e Aank !irst paid t e income tax on its total pro!it, and t en paid t e di8idend K!ree o! income tax0L 5 e same nominal percentages are, t ere!ore, ig er in t e latter case by t e amo%nt o! t e tax0 I F0 E0 < More on 38erstone"s con!%sion o! terms in matters concerning capital at t e close o! ; apter JJJ&&0 I /F0E01 i8 K5 e a8erage o! notes in circ%lation d%ring t e year @as, in 181<, 1=6,+38,=== !rancs# in 1818, 1=1,<=+,=== !rancs# @ ereas t e mo8ement o! t e c%rrency, or t e ann%al aggregate o! disb%rsements and %pon all acco%nts, @as, in 181<, <,83>,>1<,=== !rancs# in 1818, *,66+,=3=,=== !rancs0 5 e acti8ity o! t e c%rrency in France, t ere!ore, d%ring t e year 1818, as compared @it its acti8ity in 181<, @as in t e proportion o! t ree to one0 5 e great reg%lator o! t e 8elocity

o! circ%lation is credit0000 5 is explains, @ y a se8ere press%re %pon t e money-market is generally coincident @it a !%ll circ%lation0L B5 e ;%rrency 5 eory )e8ie@ed, etc0, p0 6+C I KAet@een $eptember 1833 and $eptember 1823 nearly 3== banks @ere added to t e 8ario%s iss%ers o! notes t ro%g o%t t e (nited Kingdom# t e res%lt @as a red%ction in t e circ%lation to t e extent o! t@o million and a al!# it @as V36,=3+,<22 at t e close o! $eptember 1833, and V33,+18,++2 at t e close o! $eptember 18230L B'0 c0, p0 +3C I K5 e prodigio%s acti8ity o! $cottis circ%lation enables it, @it V1==, to e!!ect t e same D%antity o! monetary transactions, @ ic in England it reD%ires V2<= to accomplis 0L B'0 c0, p0 ++0 5 is last re!ers only to t e tec nical side o! t e operation0C 8 Ae!ore t e establis ment o! t e banks 000 t e amo%nt o! capital @it dra@n !or t e p%rposes o! c%rrency @as greater, at all times, t an t e act%al circ%lation o! commodities reD%ired0L BEconomist, 182+, p0 <380C 8i $ee, !or instance, in t e 5imes t e list o! b%siness bankr%ptcies in a crisis year s%c as 18+> and compare t e pri8ate property o! t ose bankr%pt @it t e amo%nt o! t eir debts0 K5 e tr%t is t at t e po@er o! p%rc ase by persons a8ing capital and credit is m%c beyond anyt ing t at t ose @ o are %nacD%ainted practically @it spec%lati8e markets a8e any idea o!0L B5ooke, &nD%iry into t e ;%rrency ,rinciple, p0 >*0C K? person a8ing t e rep%tation o! capital eno%g !or is reg%lar b%siness, and enHoying good credit in is trade, i! e takes a sang%ine 8ie@ o! t e prospect o! a rise o! price o! t e article in @ ic e deals, and is !a8o%red by circ%mstances in t e o%tset and progress o! is spec%lation, may e!!ect p%rc ases to an extent per!ectly enormo%s compared @it is capitalL B&bid0, p0 136C0 KMerc ants, man%!act%rers, etc0, carry on operations m%c beyond t ose @ ic t e %se o! t eir o@n capital alone @o%ld enable t em to do0000 ;apital is rat er t e !o%ndation %pon @ ic a good credit is b%ilt t an t e limit o! t e transactions o! any commercial establis ment0L BEconomist, 182>, p0 3330C 8ii 5 0 ; almers /3n ,olitical Economy, etc0, :lasgo@, 183<0 I Ed010 8iii We ere gi8e t e related passage !rom 5ooke in t e original, @ ic @as cited in :erman on p0 3*= /present edition: ; 0 JJ4:1 K5 e b%siness o! bankers, setting aside t e iss%e o! promissory notes payable on demand, may be di8ided into t@o branc es, corresponding @it t e distinction pointed o%t by 7r0 B?damC $mit o! t e transactions bet@een dealers and dealers, and bet@een dealers and cons%mers0 3ne branc o! t e bankers" b%siness is to collect capital !rom t ose @ o a8e not immediate employment !or it, and to distrib%te or trans!er it to t ese @ o a8e0 5 e ot er branc is to recei8e deposits o! t e incomes o! t eir c%stomers, and to pay o%t t e amo%nt, as it is @anted !or expendit%re by t e latter in t e obHects o! t eir cons%mption 000 t e !ormer being a circ%lation o! capital, t e latter o! c%rrency0LB5ooke, &nD%iry into t e ;%rrency ,rinciple, 'ondon, p0 360C 5 e !irst is Kt e concentration o! capital on t e one and and t e distrib%tion o! it on t e ot erL# t e latter is Kadministering t e circ%lation !or local p%rposes o! t e district0L B&bid0, p0 3>0C ? !ar more correct conception is o%tlined in t e !ollo@ing passage by Kinnear: KMoney 000 is employed to per!orm t@o operations essentially distinct0000 ?s a medi%m o! exc ange bet@een dealers and dealers, it is t e instr%ment by @ ic trans!ers o! capital are e!!ected# t at is, t e exc ange o! a certain amo%nt o! capital in money !or an eD%al amo%nt o! capital in commodities0 A%t money employed in t e payment o! @ages and in p%rc ase and sale bet@een dealers and cons%mers is not capital, b%t income# t at portion o! t e incomes o! t e comm%nity, @ ic is de8oted to daily expendit%re0 &t circ%lates in constant daily %se, and is t at alone @ ic can, @it strict propriety, be termed c%rrency0 ?d8ances o! capital depend entirely on t e @ill o! t e Aank and ot er possessors o! capital, !or borro@ers are al@ays to be !o%nd# b%t t e amo%nt o! t e c%rrency depends on t e @ants o! t e comm%nity, among @ om t e money circ%lates, !or t e p%rposes o! daily expendit%re0L BP0 :0 Kinnear, 5 e ;risis and t e ;%rrency, 'ondon, 182> /pp0 3-210C ix K&t is a great error, indeed, to imagine t at t e demand !or pec%niary accommodation K Bt at is, !or t e loan o! capitalC Kis identical @it a demand !or additional means o! circ%lation, or e8en t at t e t@o are !reD%ently associated0 Eac demand originates in circ%mstances pec%liarly a!!ecting itsel!, and 8ery distinct !rom eac ot er0 &t is @ en e8eryt ing looks prospero%s, @ en @ages are ig , prices on t e rise, and !actories b%sy, t at an additional s%pply o! c%rrency is %s%ally reD%ired to per!orm t e additional !%nctions inseparable !rom t e necessity o! making larger and more n%mero%s payments# @ ereas it is c ie!ly in a more ad8anced stage o! t e commercial cycle, @ en di!!ic%lties begin to present t emsel8es, @ en markets are o8erstocked, and ret%rns delayed, t at interest rises, and a press%re comes %pon t e Aank !or ad8ances o! capital0 &t is tr%e t at t ere is no medi%m t ro%g @ ic t e Aank is acc%stomed to ad8ance capital except t at o! its promissory notes# and t at to re!%se t e notes, t ere!ore, is to re!%se t e accommodation0 A%t t e accommodation once granted, e8eryt ing adH%sts itsel! in con!ormity @it t e necessities o! t e market# t e loan remains, and t e c%rrency, i! not @anted, !inds its @ay ack to t e iss%er0 ?ccordingly, a 8ery slig t examination o! t e ,arliamentary )et%rns may con8ince any one, t at t e sec%rities in t e ands o! t e Aank o! England !l%ct%ate more !reD%ently in an opposite direction to its circ%lation t an in concert @it it, and t at t e example, t ere!ore, o! t at great establis ment !%rnis es no exception to t e doctrine so strongly pressed by t e co%ntry bankers, to t e e!!ect t at no ank can enlarge its circ%lation, i! t at circ%lation e already adeD%ate to t e

p%rposes to @ ic a bank-note c%rrency is commonly applied# b%t t at e8ery addition to its ad8ances, a!ter t at limit is passed, m%st e made !rom its capital, and s%pplied by t e sale o! some o! its sec%rities in reser8e, or by abstinence !rom !%rt er in8estment in s%c sec%rities0 5 e table compiled !rom t e ,arliamentary )et%rns !or t e inter8al bet@een 1833 and 182=, to @ ic & a8e re!erred in a preceding page, !%rnis es contin%ed examples o! t is tr%t # b%t t@o o! t ese are so remarkable t at it @ill be D%ite %nnecessary !or me to go beyond t em0 3n t e 3rd o! Pan%ary, 183>, @ en t e reso%rces o! t e Aank @ere strained to t e %ttermost to s%stain credit and meet t e di!!ic%lties o! t e money-market, @e !ind its ad8ances on loan and disco%nt carried to t e enormo%s s%m o! V1>,=<<,===, an amo%nt scarcely kno@n since t e @ar, and almost eD%al to t e entire aggregate iss%es @ ic , in t e mean@ ile, remain %nmo8ed at so lo@ a point as V1>,=>6,===S 3n t e ot er and, @e a8e on t e 2t o! P%ne, 1833, a circ%lation o! V18,8*<,===, @it a ret%rn o! pri8ate sec%rities in and, nearly, i! not t e 8ery lo@est on record !or t e last al!cent%ry, amo%nting to no more t an V*><,===SL BF%llarton, 10 c0, pp0 *>, *80C 5 at a demand !or pec%niary accommodation need not be identical by any means @it a demand !or gold B@ at Wilson, 5ooke and ot ers call capitalC is seen !rom t e !ollo@ing testimony o! Mr0 Weg%elin, :o8ernor o! t e Aank o! England: K5 e disco%nting o! bills to t at extentL Bone million daily !or t ree s%ccessi8e daysC K@o%ld not red%ce t e reser8eL Bo! bank-notesC, K%nless t e p%blic demanded a greater amo%nt o! acti8e circ%lation0 5 e notes iss%ed on t e disco%nt o! bills @o%ld be ret%rned t ro%g t e medi%m o! t e bankers and t ro%g deposits0 (nless t ese transactions @ere !or t e p%rpose o! exporting b%llion, and %nless t ere @ere an amo%nt o! internal panic @ ic ind%ced people to lock %p t eir notes, and not to pay t em into t e ands o! t e bankers 000 t e reser8e @o%ld not be a!!ected by t e magnit%de o! t e transactions0L I K5 e Aank may disco%nt a million and a al! a day, and t at is done constantly, @it o%t its reser8e being in t e slig test degree a!!ected, t e notes coming back again as deposits, and no ot er alteration taking place t an t e mere trans!er !rom one acco%nt to anot er0L B)eport on Aank ?cts, 18+>, E8idence -os0 <21, +==0C 5 e notes t ere!ore ser8e ere merely as means o! trans!erring credits0 x 5 e passage t at !ollo@s in t e original is %nintelligible in t is context and as been re@ritten by t e editor to t e end o! t e brackets0 &n anot er context t is point as already been to%c ed %pon in ; apter JJ4&0 I F0 E xi K5 e labo%rer possesses capital-8al%e, @ ic is arri8ed at by considering t e money-8al%e or is ann%al @age as income !rom interest0000 ;apitalising 000 t e a8erage daily @age at 2T, @e obtain t e a8erage 8al%e o! a male agric%lt%ral labo%rer to be: :erman ?%stria, 2,+== taler# ,r%ssia, 2,+==# England, 3,>+=# France, <,===# inner )%ssia, >+= taler0L B4on )eden,4ergleic ende K%lt%r-$tatistik, Aerlin, 1828, p0 2320C xii /&mmediately a!ter t e Febr%ary )e8ol%tion, @ en commodities and sec%rities @ere extremely depreciated and %tterly %nsaleable, a $@iss merc ant in 'i8erpool, Mr0 A0 9@ilc enbart I @ o told t is to my !at er I cas ed all is belongings, tra8elled @it cas in and to ,aris and so%g t o%t )ot sc ild, o!!ering to participate in a Hoint enterprise @it im0 )ot sc ild looked at im !ixedly, r%s ed to@ards im, grabbed im by is s o%lders and asked: K?8eE-8o%s de l"argent s%r 8o%sQL I K3%i, M0 le baron0L I K?lors 8o%s qtes mon ommeSL BK6a8e yo% money in yo%r possessionQL I K.es, Aaron0L I K5 en yo% are my manSLC I ?nd t ey did a t ri8ing b%siness toget er0 I F0E01 xiii /5 is do%bling and trebling o! capital as de8eloped considerably !%rt er in recent years, !or instance, t ro%g !inancial tr%sts, @ ic already occ%py a eading o! t eir o@n in t e report o! t e 'ondon $tock Exc ange0 ? company is organised !or t e p%rc ase o! a certain class o! interest-bearing o! !oreign go8ernment sec%rities, Englis m%nicipal or ?merican p%blic bonds, rail@ay stocks, etc0 5 e capital, !or example, V< million, is raised by stock s%bscriptions0 5 e Aoard o! 7irectors b%ys %p t e 8al%es in D%estion or spec%lates more or less acti8ely t erein, and a!ter ded%cting t e expenses distrib%tes among t e stock olders t e ann%al interest as di8idends0 F%rt ermore, some stock companies a8e adopted t e c%stom o! di8iding t e common stock into t@o classes, pre!erred and de!erred0 5 e pre!erred recei8e a !ixed rate o! interest, say, +T, pro8ided t at t e total pro!it permits it# i! t ere is anyt ing le!t a!ter t at, t e de!erred recei8e it0 &n t is manner, t e KsolidL in8estment o! capital in pre!erred s ares is more or less separated !rom act%al spec%lation I @it de!erred s ares0 $ince a !e@ large enterprises a8e been %n@illing to adopt t is ne@ c%stom, t e expedient as been resorted to o! organising ne@ companies @ ic in8est a million or se8eral million po%nds sterling in s ares o! t e !ormer companies and t en iss%e ne@ s ares amo%nting to t e nominal 8al%e o! t e p%rc ased s ares, b%t al! o! t em are iss%ed as pre!erred and t e ot er al! as de!erred0 &n s%c cases t e original s ares are do%bled, since t ey ser8e as a basis !or a ne@ iss%e o! s ares0 I F0E01 xi8 /5o @ at extent t is as intensi!ied since t en is s o@n by t e !ollo@ing o!!icial tab%lation o! t e bank reser8es o! t e !i!teen largest 'ondon banks in -o8ember 18*<, taken !rom t e 7aily -e@s o! 7ecember 1+, 18*<:

-ame o! Aank'iabilities;as )eser8es,ercentages;ityV*,31>,6<*V>26,++180=1;apital and ;o%nties11,3*<,>221,3=>,2831102>&mperial3,*8>,2==22>,1+>110<<'loyds<3,8==,*3><,*66,8=61<026' on0 ?nd Westminster<2,6>1,++*3,818,88+1+0+='on0 ?nd $0 Western+,+>=,<6881<,3+3120+8'ondon

Point $tock1<,1<>,**31,<88,*>>1=06<'ondon and Midland8,812,2**1,1<>,<8=1<0>*'ondon and ;o%nty3>,111,=3+3,6==,3>2*0>=-ational11,163,8<*1,2<6,<<+1<0>>-ational ,ro8incial021,*=>,3822,612,>8=210=1,arrs and t e ?lliance1<,>*2,28*1,+3<,>=>110*8,rescott g ;o2,=21,=+8+38,+1>130=>(nion o! 'ondon0,1+,+=<,618<,3==,=8212082Williams, 7eacon g Manc ester g ;o01=,2+<,3811,31>,6<81<06=Total:0;0,355,80;:0',845,8&'11.9'3! t is total reser8e o!
almost <8 million, at least <+ million are deposited in t e Aank o! England, and at most 3 million are in cas in t e sa!es o! t e 1+ banks t emsel8es0 A%t t e cas reser8e o! t e banking department o! t e Aank o! England amo%nted to less t an 16 million d%ring t at same mont o! -o8ember 18*<S I F0 E01 x8 5 e s%spension o! t e Aank ?ct o! 1822 permits t e Aank to iss%e any D%antity o! bank-notes regardless o! t e gold reser8e backing in its possession# t %s, to create an arbitrary D%antity o! !ictitio%s paper money-capital, and to %se it !or t e p%rpose o! making loans to banks, exc ange brokers, and t ro%g t em to commerce0 I F0 E01 x8i 5 e p%blic !%nd is not ing b%t imaginary capital, @ ic represents t at portion o! t e ann%al re8en%e, @ ic is set aside to pay t e debt0 ?n eD%i8alent amo%nt o! capital as been spent# it is t is @ ic ser8es as a denominator !or t e loan, b%t it is not t is @ ic is represented by t e p%blic !%nd# !or t e capital no longer exists0 -e@ @ealt m%st be created by t e @ork o! ind%stry# a portion o! t is @ealt is ann%ally set aside in ad8ance !or t ose @ o a8e loaned t at @ealt @ ic as been spent# t is portion is taken by means o! taxes !rom t ose @ o prod%ce it, and is gi8en to t e creditors o! t e state, and, according to t e c%stomary proportion bet@een capital and interest in t e co%ntry, an imaginary capital is ass%med eD%i8alent to t at @ ic co%ld gi8e rise to t e ann%al income @ ic t ese creditors are to recei8e0 B$ismondi, -o%8ea%x principes /$econde Fdition, ,aris, 18<>1, &&, p0 <3=0C x8ii ? portion o! t e acc%m%lated loanable money-capital is indeed merely an expression o! ind%strial capital0 For instance, @ en England, in 18+>, ad in8ested 18= million in ?merican rail@ays and ot er enterprises, t is in8estment @as transacted almost completely by t e export o! Englis commodities !or @ ic t e ?mericans did not a8e to make payment in ret%rn0 5 e Englis exporter dre@ bills o! exc ange !or t ese commodities on ?merica, @ ic t e Englis stock s%bscribers bo%g t %p and @ ic @ere sent to ?merica !or p%rc asing t e stock s%bscriptions0 x8iii /?s & a8e already stated else@ ere /Englis edition: 4ol0 &0 I Ed01, a c ange as taken place ere since t e last maHor general crisis0 5 e ac%te !orm o! t e periodic process @it its !ormer ten-year cycle, appears to a8e gi8en @ay to a more c ronic, long dra@n o%t, alternation bet@een a relati8ely s ort and slig t b%siness impro8ement and a relati8ely long, indecisi8e depression-taking place in t e 8ario%s ind%strial co%ntries at di!!erent times0 A%t per aps it is only a matter o! a prolongation o! t e d%ration o! t e cycle0 &n t e early years o! @orld commerce, 182+-2>, it can be s o@n t at t ese cycles lasted abo%t !i8e years# !rom 182> to 186> t e cycle is clearly ten years# is it possible t at @e are no@ in t e preparatory stage o! a ne@ @orld cras o! %nparalleled 8e emenceQ Many t ings seem to point in t is direction0 $ince t e last general crisis o! 186> many pro!o%nd c anges a8e taken place0 5 e colossal expansion o! t e means o! transportation and comm%nication I ocean liners, rail@ays, electrical telegrap y, t e $%eE ;anal I as made a real @orld-market a !act0 5 e !ormer monopoly o! England in ind%stry as been c allenged by a n%mber o! competing ind%strial co%ntries# in!initely greater and 8aried !ields a8e been opened in all parts o! t e @orld !or t e in8estment o! s%rpl%s E%ropean capital, so t at it is !ar more @idely distrib%ted and local o8er-spec%lation may be more easily o8ercome0 Ay means o! all t is, most o! t e old breeding-gro%nds o! crises and opport%nities !or t eir de8elopment a8e been eliminated or strongly red%ced0 ?t t e same time, competition in t e domestic market recedes be!ore t e cartels and tr%sts, @ ile in t e !oreign market it is restricted by protecti8e tari!!s, @it @ ic all maHor ind%strial co%ntries, England excepted, s%rro%nd t emsel8es0 A%t t ese protecti8e tari!!s are not ing b%t preparations !or t e %ltimate general ind%strial @ar, @ ic s all decide @ o as s%premacy on t e @orld-market0 5 %s e8ery !actor, @ ic @orks against a repetition o! t e old crises, carries @it in itsel! t e germ o! a !ar more po@er!%l !%t%re crisis0 I F0 E01 xix A0 ?0 18+>0 5estimony o! 5@ells, banker: K2+160 ?s a banker, do yo% deal in capital or in moneyQ I We deal in money0L I K2+1>0 6o@ are t e deposits paid into yo%r bankQ I &n money0L I K2+180 6o@ are t ey paid o%tQ I &n money0L I K2+1*0 5 en can t ey be called anyt ing else b%t moneyQ I -o0L 38erstone Bsee ; apter JJ4&C con!%ses contin%ally KcapitalL and Kmoney0L K4al%e o! moneyL also means interest to im, b%t in so !ar as it is determined by t e mass o! money, K8al%e o! capitalL is s%pposed to be interest, in so !ar as it is determined by t e demand !or prod%cti8e capital and t e pro!it made by it0 6e says: K212=0 5 e %se o! t e @ord fcapitalG is 8ery dangero%s0L I K21280 5 e export o! b%llion !rom t is co%ntry is a dimin%tion o! t e D%antity o! money in t is co%ntry, and a dimin%tion o! t e D%antity o! money in t is co%ntry m%st o! co%rse create a press%re %pon t e money-market generallyL /b%t not in t e capital-market, according to t is10 I K211<0 ?s t e money goes o%t o! t e co%ntry, t e D%antity in t e co%ntry is diminis ed0 5 at dimin%tion o! t e D%antity remaining in t e co%ntry

prod%ces an increased 8al%e o! t at moneyL /t is originally means in is t eory an increase in t e 8al%e o! money as s%c t ro%g a contraction o! circ%lation, as compared to t e 8al%es o! commodities# in ot er @ords, an increase in t e 8al%e o! money is t e same as a !all in t e 8al%e o! commodities0 A%t since in t e meantime e8en e as been con8inced beyond perad8ent%re t at t e mass o! circ%lating money does not determine prices, it is no@ t e dimin%tion in money as a medi%m o! circ%lation @ ic is s%pposed to raise its 8al%e as interest-bearing capital, and t %s t e rate o! interest10 K?nd t at increased 8al%e o! @ at remains stops t e exit o! money, and is kept %p %ntil it as bro%g t back t at D%antity o! money @ ic is necessary to restore t e eD%ilibri%m0L I More o! 38erstoneGs contradictions later on0 xx ?t t is point t e con!%sion starts: bot o! t ese t ings are s%pposed to be KmoneyL, namely, t e deposit as a claim to payment !rom t e banker, and t e deposited money in t e ands o! t e banker0 Aanker 5@ells, be!ore t e Aanking ;ommittee o! 18+>, o!!ers t e !ollo@ing example: K&! & begin b%siness @it V1=,===, & b%y @it V+,=== commodities and p%t t em into @are o%se0 & deposit t e ot er V+,=== @it a banker, to dra@ %pon it and %se it as & reD%ire it0 & consider it still V1=,=== capital to me, t o%g V+,=== is in t e s ape o! deposits or moneyL B2+<8C0 I 5 is no@ gi8es rise to t e !ollo@ing pec%liar debate0 I K2+310 .o% a8e parted @it yo%r V+,=== o! notes to somebody elseQ I .es0L I K2+3<0 5 en e as V+,=== o! depositsQ-.es0L I K2+330 ?nd yo% a8e V+,=== o! deposits le!tQ I Exactly0L I K2+320 6e as V+,=== in money, and yo% a8e V+,=== in moneyQ I .es0L I K2+3+0 A%t it is not ing b%t money at lastQ I -o0L 5 is con!%sion is d%e partly to t e circ%mstance t at ?, @ o as deposited V+,===, can dra@ on it and dispose o! it as t o%g e still ad it0 5o t at extent it ser8es im as potential money0 6o@e8er, in all cases in @ ic e dra@s on it e destroys is deposit pro tanto0 &! e dra@s o%t real money, and is o@n money as already been lent to someone else, e is not paid @it is o@n money, b%t @it t at o! some ot er depositor0 &! e pays a debt to A @it a c eD%e on is banker, and A deposits t is c eD%e @it is banker, and t e banker o! ? also as a c eD%e on t e banker o! A, so t at t e t@o bankers merely exc ange c eD%es, t e money deposited by ? as per!ormed t e !%nction o! money t@ice# !irst, in t e ands o! t e one @ o as recei8ed t e money deposited by ?# secondly, in t e ands o! ? imsel!0 &n t e second !%nction, it is a balancing o! claims Bt e claim o! ? on is banker, and t e claim o! t e latter on t e banker o! AC @it o%t %sing money0 6ere t e deposit acts t@ice as money, namely, as real money and t en as a claim on money0 Mere claims to money can take t e place o! money only by a balancing o! claims0
xxi

?8erage n%mber o! days d%ring @ ic a bank-note remained in circ%lation:

.earV+ -oteV1= -oteV<=-1==V<==-+==V1,===1>*<Q <36<=*31<<181812813>1<118131826>*>1321<818+6>=+8<>*>B;ompilation by Mars all, ;as ier o! t e

Aank o! England, in )eport on Aank ?ct, 18+>0 ?ppendix &&, pp0 3==-=10C ?t t e general meeting o! stock olders o! t e (nion Aank o! 'ondon on Pan%ary 1>, 18*2, ,resident )itc ie relates t at t e Aank o! England raised t e disco%nt in 18*3 !rom <ZT in P%ly to 3 and 2T in ?%g%st, and since it lost @it in !o%r @eeks !%lly V2Z million in gold despite t is, it raised t e bank-rate to +T, @ ere%pon gold !lo@ed back to it and t e bank rate @as red%ced to 2T in $eptember and t en to 3T in 3ctober0 A%t t is bank-rate @as not recognised in t e market0 KW en t e bank-rate @as +T, t e disco%nt rate @as 3ZT, and t e rate !or money <ZT# @ en t e bank-rate !ell to 2T, t e disco%nt rate @as < 3N8T and t e money rate 1`T# @ en t e bank-rate @as 3T, t e disco%nt rate !ell to 1ZT and t e money rate to somet ing belo@ t at0L B7aily -e@s, Pan%ary 18, 18*20C I F0E0 xxiii 5 e e!!ect t is ad on t e money-market is indicated by t e !ollo@ing testimony o! -e@marc : K1+=*0 ?t t e close o! 18+3, t ere @as a considerable appre ension in t e p%blic mind, and in $eptember o! t at year t e Aank o! England raised its disco%nt on t ree occasions000 &n t e early part o! 3ctober t ere @as a considerable degree o! appre ension and alarm in t e p%blic mind0 5 at appre ension and alarm @as relie8ed to a 8ery great extent be!ore t e end o! -o8ember, and @as almost @ olly remo8ed, in conseD%ence o! t e arri8al o! nearly V+,===,=== o! treas%re !rom ?%stralia000 5 e same t ing appened in t e a%t%mn o! 18+2, by t e arri8al in t e mont s o! 3ctober and -o8ember o! nearly V6,===,=== o! treas%re0 5 e same t ing appened again in t e a%t%mn o! 18++, @ ic @e kno@ @as a period o! excitement and alarm, by t e arri8als, in t e t ree mont s o! $eptember, 3ctober and -o8ember, o! nearly V8,===,=== o! treas%re# and t en at t e close o! last year, 18+6, @e !ind exactly t e same occ%rrence0 &n tr%t , & mig t appeal to t e obser8ation almost o! any member o! t e ;ommittee, @ et er t e nat%ral and complete sol8ent to @ ic @e a8e got into t e abit o! looking !or any !inancial press%re, is not t e arri8al o! a gold s ipL /A0 ?0 18+>10 xxi8 ?ccording to -e@marc , a drain o! gold to !oreign co%ntries can arise !rom t ree ca%ses: 1C !rom p%rely commercial conditions, t at is, i! imports a8e exceeded exports, as @as t e case in 1836 to 1822, and again in 182> I principally a ea8y import o! grain# <C in order to sec%re t e means !or in8esting Englis capital in !oreign co%ntries, as in 18+> !or rail@ays in &ndia, and 3C !or de!inite expendit%res abroad, as in 18+3 and 18+2 !or @ar p%rposes in t e
xxii

3rient0 xx8 1*180 -e@marc 0 KW en yo% combine &ndia and ; ina, @ en yo% bring into acco%nt t e transactions bet@een &ndia and ?%stralia, and t e still more important transactions bet@een ; ina and t e (nited $tates, t e trade being a triang%lar one, and t e adH%stment taking place t ro%g %s 000 t en it is tr%e t at t e balance o! trade @as not merely against t is co%ntry, b%t against France, and against t e (nited $tates0L I BA0 ?0 18+>0C xx8i $ee, !or instance, t e ridic%lo%s reply o! Weg%elin /A0?0 18+>1 @ ere e states t at a drain o! !i8e million in gold is so m%c capital less, and t %s attempts to explain certain p enomena @ ic do not take place @ en t ere is an in!initely greater increase in prices or depreciation, expansion or contraction o! real ind%strial capital0 3n t e ot er and, it is H%st as ridic%lo%s to attempt to explain t ese p enomena directly as symptoms o! an expansion or contraction o! t e mass o! real capital Bconsidered !rom t e 8ie@point o! its material elementsC0 xx8ii -e@marc BA0 ?0 18+>C: K13620 5 e reser8e o! b%llion in t e Aank o! England is, in tr%t , t e central reser8e or oard o! treas%re %pon @ ic t e @ ole trade o! t e co%ntry is made to t%rn# all t e ot er banks in t e co%ntry look to t e Aank o! England as t e central oard or reser8oir !rom @ ic t ey are to dra@ t eir reser8e o! coin# and it is %pon t at oard or reser8oir t at t e action o! t e !oreign exc anges al@ays !alls0L xx8iii K,ractically, t en, bot Mr0 5ooke and Mr0 'oyd @o%ld meet an additional demand !or gold 000 by an early 000 contraction o! credit by raising t e rate o! interest, and restricting ad8ances o! capital0000 A%t t e principles o! Mr0 'oyd lead to certain /legal1 restrictions and reg%lations @ ic prod%ce t e most serio%s incon8enience0L BEconomist /7ecember 111, 182>, p0 12180C xxix K.o% D%ite agree t at t ere is no mode by @ ic yo% can modi!y t e demand !or b%llion except by raising t e rate o! interestQL I ; apman /associate member o! t e great bill-brokers" !irm o! 38erend, :%rney g ;o01: K& s o%ld say so0000 W en o%r b%llion !alls to a certain point, @e ad better so%nd t e tocsin at once and say @e are drooping, and e8ery man sending money abroad m%st do it at is o@n peril0L BA0 ?0 18+>, E8idence -o0 +=+>0C
xxx

K&t is by !reD%ent !l%ct%ations @it in t e mont , and by pa@ning one article to relie8e anot er, @ ere a small s%m is obtained, t at t e premi%m !or money becomes so excessi8e0 5 ere are abo%t <2= licensed pa@nbrokers in t e metropolis, and nearly 1,2+= in t e co%ntry0 5 e capital employed is s%pposed some@ at to exceed a million po%nds sterling# and t is capital is t%rned ro%nd t rice in t e co%rse o! t e year, and yields eac time abo%t 33Z per cent on an a8erage# according to @ ic calc%lation, t e in!erior orders o! society in England pay abo%t one million a year !or t e %se o! a temporary loan, excl%si8e o! @ at t ey lose by goods being !or!eited0L BP0 70 5%ckett, ? 6istory o! t e ,ast and ,resent $tate o! t e 'abo%ring ,op%lation, 'ondon, 1826, 1, p0 1120C xxxi E8en in t e titles o! t eir @orks t ey state as t eir principal p%rpose Kt e general good o! t e landed men, t e great increase o! t e 8al%e o! land, t e exemption o! t e nobility, gentry, etc0, !rom taxes, enlarging t eir yearly estates, etc0L 3nly t e %s%rers @o%ld stand to lose, t ose @orst enemies o! t e nation @ o ad done more inH%ry to t e nobility and yeomanry t an an army o! in8asion !rom France co%ld a8e done0 xxxii K5 e ric goldsmit L Bt e prec%rsor o! t e bankerC, K!or example, made ; arles && o! England pay t@enty and t irty per cent !or accommodation0 ? b%siness so pro!itable, ind%ced t e goldsmit "more and more to become lender to t e King, to anticipate all t e re8en%e, to take e8ery grant o! ,arliament into pa@n as soon as it @as gi8en# also to o%t8ie eac ot er in b%ying and taking to pa@n bills, orders, and tallies, so t at, in e!!ect, all t e re8en%e passed t ro%g t eir ands"0L BPo n Francis, 6istory o! t e Aank o! England, 'ondon, 1828, &, p0310C K5 e erection o! a bank ad been s%ggested se8eral times be!ore t at0 &t @as at last a necessityL Bl0 c0, p0 38C0 K5 e bank @as a necessity !or t e go8ernment itsel!, s%cked dry by %s%rers, in order to obtain money at a reasonable rate, on t e sec%rity o! parliamentary grantsL Bl0 c0, pp0 +*, 6=C0 xxxiii Marx @o%ld s%rely a8e modi!ied t is passage considerably, ad e re@orked is man%script0 &t @as inspired by t e role o! t e ex-!ollo@ers o! $aint-$imon %nder France"s $econd Empire @ ere H%st at t e time t at Marx @rote t e abo8e, t e @orld redeeming credit !antasies o! t is sc ool t ro%g t e irony o! istory @ere being realised in t e !orm o! a tremendo%s s@indle on a scale ne8er seen be!ore0 'ater Marx spoke only @it admiration o! t e geni%s and encyclopaedic mind o! $aint $imon0 W en in is earlier @orks t e latter ignores t e antit esis bet@een t e bo%rgeoisie and t e proletariat @ ic @as H%st t en coming into existence in France @ en e incl%des among t e tra8aille%rs t at part o! t e bo%rgeoisie @ ic @as acti8e in prod%ction, t is corresponds to Fo%rier"s conception o! attempting to reconcile capital and labo%r and is explained by t e economic and political sit%ation o! France in t ose days0 5 e !act t at 3@en @as more !ar sig ted in t is respect is d%e to is di!!erent en8ironment, !or e li8ed in a period o! ind%strial re8ol%tion and o! ac%tely s arpening class antagonisms0 I F0 E0

xxxi8

Karl Marx, Misjre de la , ilosop ie, Ar%xelles et ,aris, 182>0 I Karl Marx, 9%r Kritik der politisc en 3ekonomie, $0 620 xxx8 -ot ing co%ld e more comical t an 6egel"s de8elopment o! pri8ate landed property0 ?ccording to t is, man as an indi8id%al m%st endo@ is @ill @it reality as t e so%l o! external nat%re, and m%st t ere!ore take possession o! t is nat%re and make it is pri8ate property0 &! t is @ere t e destiny o! t e Kindi8id%alL, o! man as an indi8id%al, it @o%ld !ollo@ t at e8ery %man being m%st be a lando@ner, in order to become a real indi8id%al0 Free pri8ate o@ners ip o! land, a 8ery recent prod%ct, is according to 6egel, not a de!inite social relation, b%t a relation o! man as an indi8id%al to Knat%re,L an absol%te rig t o! man to appropriate all t ings B6egel , ilosop ie des )ec ts, Aerlin 182= p >*C 5 is m%c at least is e8ident t e indi8id%al cannot maintain imsel! as a lando@ner by is mere K@illL against t e @ill o! anot er indi8id%al, @ o like@ise @ants to become a real indi8id%al by 8irt%e o! t e same strip o! land0 &t de!initely reD%ires some t ing ot er t an good@ill0 F%rt ermore, it is absol%tely impossible to determine @ ere t e Kindi8id%alL dra@s t e line !or realising is @ill I@ et er t is @ill reD%ires !or its realisation a @ ole co%ntry, or @ et er it reD%ires a @ ole gro%p o! co%ntries by @ ose appropriation Kt e s%premacy o! my @ill o8er t e t ing can be mani!ested0L 6ere 6egel comes to a complete impasse0 K5 e appropriation is o! a 8ery partic%lar kind# & do not take possession o! more t an & to%c @it my body# b%t it is clear, on t e ot er and, t at external t ings are more extensi8e t an & can grasp0 Ay t %s a8ing possession o! s%c a t ing, some ot er is t ereby connected to it0 & carry o%t t e act o! appropriation by means o! my and, b%t its scope can be extendedL Bp0*=C0 A%t t is ot er t ing is again linked @it still anot er and so t e bo%ndary @it in @ ic my @ill, as t e so%l, can po%r into t e soil, disappears0 KW en & possess somet ing, my mind at once passes o8er to t e idea t at not only t is property in my immediate possession, b%t @ at is associated @it it is also mine0 6ere positi8e rig t m%st decide, !or not ing more can be ded%ced !rom t e conceptL Bp0 *1C0 5 is is an extraordinarily nai8e admission Ko! t e conceptL, and pro8es t at t is concept @ ic makes t e bl%nder at t e 8ery o%tset o! regarding as absol%te a 8ery de!inite legal 8ie@ o! landed property belonging to bo%rgeois society I %nderstands Knot ingL o! t e act%al nat%re o! t is landed property0 5 is contains at t e same time t e admission t at Kpositi8e rig tL can, and m%st, alter its determinations as t e reD%irements o! social, i0e0, economic, de8elopment c ange0 xxx8i 4ery conser8ati8e agric%lt%ral c emists, s%c as Po nston, admit t at a really rational agric%lt%re is con!ronted e8ery@ ere @it ins%rmo%ntable barriers stemming !rom pri8ate property0 $o do @riters @ o are ex pro!esso ad8ocates o! t e monopoly o! pri8ate property in t e @orld, !or instance, ; arles ;omte in is t@o-8ol%me @ork, @ ic as as its special aim t e de!ence o! pri8ate property0 K? nation,L e says, Kcannot attain to t e degree o! prosperity and po@er compatible @it its nat%re, %nless e8ery portion o! t e soil no%ris ing it is assigned to t at p%rpose @ ic agrees best @it t e general interest0 &n order to gi8e to its @ealt a strong de8elopment, one sole and abo8e all ig ly enlig tened @ill s o%ld, i! possible, take it %pon itsel! to assign eac piece o! its domain its task and make e8ery piece contrib%te to t e prosperity o! all ot ers0 A%t t e existence o! s%c a @ill 000 @o%ld be incompatible @it t e di8ision o! t e land into pri8ate plots I and @it t e a%t ority g%aranteed eac o@ner to dispose o! is property in an almost absol%te manner0 /K5raitF de la propriFtF,L 5ome &, ,aris, 1832, p0 <<80 I Ed01 Po nston, ;omte, and ot ers, only a8e in mind t e necessity o! tilling t e land o! a certain co%ntry as a @ ole, @ en t ey speak o! a contradiction bet@een property and a rational system o! agronomy0 A%t t e dependence o! t e c%lti8ation o! partic%lar agric%lt%ral prod%cts %pon t e !l%ct%ations o! market-prices, and t e contin%al c anges in t is c%lti8ation @it t ese price !l%ct%ations I t e @ ole spirit o! capitalist prod%ction, @ ic is directed to@ard t e immediate gain o! money are in contradiction to agric%lt%re, @ ic as to minister to t e entire range o! permanent necessities o! li!e reD%ired by t e c ain o! s%ccessi8e generations0 ? striking ill%stration o! t is is !%rnis ed by t e !orests, @ ic are only rarely managed in a @ay more or less corresponding to t e interests o! society as a @ ole, i0e0, @ en t ey are not pri8ate property, b%t s%bHect to t e control o! t e state0 xxx8ii Misjre de la , ilosop ie, p016+0 5 ere & a8e made a distinction bet@een terre-matijre and terre-capital0 K5 e mere application o! !%rt er o%tlays o! capital to land already trans!ormed into means o! prod%ction increases land as capital @it o%t adding anyt ing to land as matter, t at is, to t e extent o! t e land0000 'and as capital is no more eternal t an any ot er capital000 'and as capital is !ixed capital# b%t !ixed capital gets %sed %p H%st as m%c as circ%lating capital0L xxx8iii & say KcanL beca%se %nder certain circ%mstances t is interest is reg%lated by t e la@ o! gro%nd-rent and, t ere!ore, can disappear, as in t e case o! competition bet@een 8irgin lands o! great nat%ral !ertility0 xxxix $ee Pames ?nderson /? ;alm &n8estigation o! t e ;irc%mstances t at a8e led to t e ,resent $carcity o! :rain in Aritain, 'ondon, 18=1, pp03+-36, 380 I Ed01 and ;arey, 5 e ,ast, t e ,resent, and t e F%t%re, , iladelp ia, 1828, pp0 1<*-310 I Ed0

xl

$ee t e ?nti-;orn 'a@ ,riEe-Essays0 6o@e8er, t e ;orn 'a@s al@ays kept prices at an arti!icially ig er le8el0 For t e better placed tenants t is @as !a8o%rable0 5 ey pro!ited !rom t e passi8ity in @ ic t e protecti8e d%ties kept t e great mass o! tenants @ o relied, @it or @it o%t good reason, on t e exceptional a8erage price0 xli Po n ;0 Morton, 5 e Forces (sed in ?gric%lt%re0 'ect%re in t e 'ondon $ociety o! ?rts, 186=, based %pon a%t entic doc%ments collected !rom abo%t 1== tenants in 1< $cottis and 3+ Englis co%nties0 xlii ;oncerning extra pro!it, see t e &nD%iry /into t ose ,rinciples, )especting t e -at%re o! 7emand and t e -ecessity o! ;ons%mption, lately ad8ocated by Mr0 Malt %s, 'ondon, 18<10 I Ed01 Bagainst Malt %sC0 xliii /&t is precisely t e rapidly gro@ing c%lti8ation o! s%c prairie or steppe regions @ ic o! late t%rns t e reno@ned statement o! Malt %s, t at Kt e pop%lation is a b%rden %pon t e means o! s%bsistence,L into ridic%le, and prod%ced in its stead t e agrarian lament t at agric%lt%re, and @it it :ermany, @ill be r%ined, %nless t e means o! s%bsistence @ ic are a b%rden %pon t e pop%lation are !orcibly kept a@ay !rom t em0 5 e c%lti8ation o! t ese steppes, prairies, pampas, ilanos, etc0, is ne8ert eless only in its beginning# its re8ol%tionising e!!ect on E%ropean agric%lt%re @ill, t ere!ore, make itsel! !elt in t e !%t%re e8en more so t an it erto0 I F0 E01 xli8 5 e abo8e tables &4a to &4d ad to be recalc%lated d%e to an error in comp%tation @ ic ran t ro%g all o! t em0 W ile t is did not a!!ect t e t eoretical concl%sions dra@n !rom t ese tables, it introd%ced, in part, D%ite monstro%s n%merical 8al%es !or prod%ction per acre0 E8en t ese are not obHectionable in principle0 For all relie! and topograp ical maps it is c%stomary to c oose a m%c larger scale !or t e 8ertical t an !or t e oriEontal0 -e8ert eless, s o%ld anyone !eel t at is agrarian !eelings a8e been inH%red t ereby, e is at liberty to m%ltiply t e n%mber o! acres by any n%merical 8al%e t at @ill satis!y im0 3ne mig t also c oose 1=, 1<, 12, 16 b%s els B8 b%s els R 1 D%arterC per acre in 5able 1 instead o! 1, <, 3, 2 D%arters, and t e deri8ed n%merical 8al%es in t e ot er tables @o%ld remain @it in t e limits o! probability# it @ill be !o%nd t at t e res%lt, i0e0, t e ratio o! rent increase to capital increase, is exactly t e same0 5 is as been done in t e tables incl%ded by t e editor in t e next c apter0 I F0 E0 xl8 Wake!ield, England and ?merica, 'ondon, 18330 ;ompare also 7as Kapital, A%c &, Kap0 JJ4 /Englis edition: ; 0 JJJ&&&0 I Ed010 xl8i $ee 7ombasle /?nnales agricoles de )o8ille, o% MFlanges dGagric%lt%re, dGFconomie r%rale et de lFgislation agricole, ,aris, 18<2-3>0 I Ed01 and )0 Pones /?n Essay on t e 7istrib%tion o! Wealt , and on t e $o%rces o! 5axation, ,art &, )ent, 'ondon, 1831, p0 <<>0 I Ed010 J'4-1=18 xl8ii )icardo deals @it t is 8ery s%per!icially0 $ee t e passage directed against ?dam $mit concerning !orest rent in -or@ay, at t e 8ery beginning o! ; apter 11, in ,rinciples0 xl8iii 'aing /-ational 7istress# its ;a%ses and )emedies, 'ondon, 18220 I Ed01, -e@man /'ect%res on ,olitical Economy, 'ondon, 18+>0 I Ed010 xlix ;ro@lington $trike0 Engels, 'age der arbeitenden Klasse in England, $0 3=>0 l K5 e pa8ing o! t e streets o! 'ondon as enabled t e o@ners o! some barren rocks on t e coast o! $cotland to dra@ a rent !rom @ at ne8er a!!orded any be!ore0L ?dam $mit /?n &nD%iry into t e -at%re and ;a%ses o! t e Wealt o! -ations,1 Aook 1, ; apter J&, <0 li &t is one o! t e merits o! )odbert%s @ ose important @ork on rent /$ociale Arie!e an 8on Kirc mann, 7ritter Arie!: Widerleg%ng der )icardo"sc en 'e re 8on der :r%ndrente %nd Aegrend%ng einer ne%en )entent eorie, Aerlin, 18+10 I Ed01 @e s all disc%ss in Aook &4 /i0e0, 5 eorien eber den Me r@ert0 K0 Marx0 Engels, Werke, Aand <6, <0 5eil, $0 >1=<, 13*-+10 I Ed01 to a8e de8eloped t is point0 6e commits t e one error, o@e8er, o! ass%ming, in t e !irst place, t at as regards capital an increase in pro!it is al@ays expressed by an increase in capital, so t at t e ratio remains t e same @ en t e mass o! pro!it increases0 A%t t is is erroneo%s, since t e rate o! pro!it may increase, gi8en a c anged composition o! capital, e8en i! t e exploitation o! labo%r remains t e same, precisely beca%se t e proportional 8al%e o! t e constant portion o! capital compared @it its 8ariable portion !alls0 $econdly, e commits t e mistake o! dealing @it t e ratio o! money-rent to a D%antitati8ely de!inite piece o! land, e0g0, an acre, as t o%g it ad been t e general premise o! classical economics in its analysis o! t e rise or !all o! rent0 5 is, again, is erroneo%s0 ;lassical economics al@ays treats t e rate o! rent, in so !ar as it considers rent in its nat%ral !orm, @it re!erence to t e prod%ct, and in so !ar as it considers rent as money-rent, @it re!erence to t e ad8anced capital, beca%se t ese are in !act t e rational expressions0 lii ;oncerning t e act%al !all in t e price o! land @ en rent rises, see ,assy0 /60 ,assy, 9ente du sol0 &n: 7ictionnaire de lGFconomie politiD%e, 5ome &&01 liii ?dam $mit emp asises o@, in is time Band t is applies also to t e plantations in tropical and s%btropical co%ntries in o%r o@n dayC, rent and pro!it @ere not yet di8orced !rom one anot er /$mit , ?n &nD%iry into t e -at%re

and ;a%ses o! t e Wealt o! -ations, ?berdeen, 'ondon, 1828, p0 220 I Ed01, !or t e landlord @as sim%ltaneo%sly a capitalist, H%st as ;ato, !or instance, @as on is estates0 A%t t is separation is precisely t e prereD%isite !or t e capitalist mode o! prod%ction, to @ ose conception t e basis o! sla8ery moreo8er stands in direct contradiction0 li8 6err Mommsen, in is K)oman 6istory,L by no means %ses t e term capitalist in t e sense employed by modern economics and modern society, b%t rat er in t e manner o! pop%lar conception, s%c as still contin%es to t ri8e, t o%g not in England or ?merica, b%t ne8ert eless on t e E%ropean continent, as an ancient tradition re!lecting bygone conditions0 l8 Follo@ing t e conD%est o! a co%ntry, t e immediate aim o! a conD%eror @as also to con8ert its people to is o@n %se0 ;!0 'ing%et /5 Forie des loi ci8iles, o% ,rincipes !ondamenta%x de la sociFtF, 5omes &-&&, 'ondres, 1>6>0 I Ed010 $ee also Mdser /3snabrekisc e :esc ic te, 10 5 eil, Aerlin %nd $tettin, $0 1>80 I Ed010 l8i ;! A%8et /;o%rs dGFconomie politiD%e, Ar%xelles, 182<0 I Ed01 5ocD%e8ille /'Gancien rFgime et la rF8ol%tion, ,aris, 18+60 I Ed01, $ismondi /-o%8ea%x principes dGFconomie politiD%e0 I $econde Fdition, 5ome &, ,aris, 18<>0 I Ed01 l8ii $ee t e speec !rom t e t rone o! t e King o! France in 5ooke0 /-e@-marc , ? 6istory o! ,rices, and o! t e $tate o! t e ;irc%lation, d%ring t e nine years 1828-+6, 4ol0 4&, 'ondon0 18+>, pp0 <*-3=0 I Ed01 l8iii $ee Mo%nier /7e lGagric%lt%re en France, ,aris, 18260 I Ed01 and )%bic on /7% mFc anisme de la sociFtF en France et en ?ngleterre, ,aris0 183>0 I Ed010 lix 7r0 60 Maron BExtensi8 oder &ntensi8QC /no !%rt er in!ormation gi8en abo%t t is pamp let1 starts !rom t e !alse ass%mption o! t e ad8ersaries e opposes0 6e ass%mes t at capital in8ested in t e p%rc ase o! land is Kin8estment capital,L and t en engages in a contro8ersy abo%t t e respecti8e de!initions o! in8estment capital and @orking capital, t at is, !ixed and circ%lating capital0 6is @ olly amate%ris conceptions o! capital in general, @ ic may be exc%sed incidentally in one @ o is not an economist in 8ie@ o! t e state o! :erman political economy, conceal !rom im t at t is capital is neit er in8estment nor @orking capital, any more t an t e capital @ ic someone in8ests at t e $tock Exc ange in p%rc asing stocks or go8ernment sec%rities, and @ ic , !or im, represents a personal in8estment o! capital, is Kin8estedL in any branc o! prod%ction0 lx 5 e !ollo@ing t ree !ragments @ere !o%nd in di!!erent parts o! t e man%script !or ,art 4&0 I F0 E0 lxi Aeginning o! ; apter J'4&&& according to t e man%script0 I F0 E0 lxii Wages, pro!it, and rent are t e t ree original so%rces o! all re8en%e, as @ell as o! all exc angeable 8al%e B?0 $mit C /?n &nD%iry into t e -at%re and ;a%ses o! t e Wealt o! -ations, ?berdeen, 'ondon, 1828, $0 230 I Ed01 I &t is t %s t at t e ca%ses o! material prod%ction are at t e same time t e so%rces o! t e original re8en%es @ ic exist0 B$torc /;o%rs dGFconomie politiD%e, $t0-,Ftersbo%rg, 181+0 I Ed01, &, p0 <+*0 I Ed0C lxiii )icardo makes t e !ollo@ing 8ery apt comment on t o%g tless $ay: K3! net prod%ce and gross prod%ce, M0 $ay speaks as !ollo@s: f5 e @ ole 8al%e prod%ced is t e gross prod%ce# t is 8al%e, a!ter ded%cting !rom it t e cost o! prod%ction, is t e net prod%ce0G B4ol0 &&, p0 2*10C 5 ere can, t en, be no net prod%ce, beca%se t e cost o! prod%ction, according to M0 $ay, consists o! rent, @ages and pro!its0 3n page +=8 e says: f5 e 8al%e o! a prod%ct, t e 8al%e o! a prod%cti8e ser8ice, t e 8al%e o! t e cost o! prod%ction, are all, t en, similar 8al%es, @ ene8er t ings are le!t to t eir nat%ral co%rse0G 5ake a @ ole !rom a @ ole, and not ing remains0L B)icardo, ,rinciples, ; apter JJ&&, p0+1<, -ote0C I Ay t e @ay @e s all see later t at )icardo no@ re!%ted $mit Gs !alse analysis o! commodity-price, its red%ction to t e s%m o! t e 8al%es o! t e re8en%es0 6e does not bot er @it it, and accepts its correctness so !ar in is analysis t at e KabstractsL !rom t e constant portion o! t e 8al%e o! commodities0 6e also !alls back into t e same @ay o! looking at t ings !rom time to time0 lxi8 K&n e8ery society t e price o! e8ery commodity !inally resol8es itsel! into some one or ot er, or all o! t ose t ree parts /8iE0, @ages, pro!its, rent1 000 ? !o%rt part, it may per aps be t o%g t, is necessary !or replacing t e stock o! t e !armer or !or compensating t e @ear and tear o! is labo%ring cattle, and ot er instr%ments o! %sbandry0 A%t it m%st be considered t at t e price o! any instr%ment o! %sbandry, s%c as a labo%ring orse, is itsel! made %p o! t e same t ree parts: t e rent o! t e land %pon @ ic e is reared, t e labo%r o! tending and rearing im, and t e pro!its o! t e !armer, @ o ad8ances bot t e rent o! is land and t e @ages o! is labo%r0 5 o%g t e price o! t e corn, t ere!ore, may pay t e price as @ell as t e maintenance o! t e orse, t e @ ole price still resol8es itsel! eit er immediately or %ltimately into t e same t ree parts o! rent, labo%r /meaning @ages1 and pro!it0L B?dam $mit 0C I We s all s o@ later on o@ ?dam $mit imsel! !eels t e inconsistency and ins%!!iciency o! t is s%bter!%ge, !or it is not ing b%t a s%bter!%ge on is part to send %s !rom ,onti%s to ,ilate @ ile no@ ere does e indicate t e real in8estment o! capital, in @ ic case t e price o! t e prod%ct resol8es itsel! %ltimately into t ese t ree parts, @it o%t any !%rt er progress%s0

lx8

,ro%d on exposes is inability to grasp t is in t e ignorant !orm%lation: 'Go%8rier ne pe%t pas rac eter son propre prod%it Bt e labo%rer cannot b%y back is o@n prod%ctC, beca%se t e interest @ ic is added to t e prix-de-re8ient Bcost-priceC is contained in t e prod%ct0 A%t o@ does M0 E%gjne Forcade teac im to kno@ betterQ K&! ,ro%d onGs obHection @ere correct, it @o%ld strike not only t e pro!its o! capital, b%t @o%ld eliminate t e possibility e8en o! ind%stry0 &! t e labo%rer is compelled to pay 1== !or eac article !or @ ic e as recei8ed only 8=, i! is @ages can b%y back only t e 8al%e @ ic e as p%t into a prod%ct, it co%ld be said t at t e labo%rer cannot b%y back anyt ing, t at @ages cannot pay !or anyt ing0 &n !act, t ere is al@ays somet ing more t an t e @ages o! t e labo%rer contained in t e cost-price, and al@ays more t an t e pro!its o! enterprise in t e selling price, !or instance, t e price o! ra@ materials, o!ten paid to !oreign co%ntries0 000 ,ro%d on as !orgotten abo%t t e contin%al gro@t o! national capital# e as !orgotten t at t is gro@t re!ers to all labo%rers, @ et er in an enterprise or in andicra!ts0L B)e8%e des de%x Mondes, 1828, 5ome <2, p0 **80C 6ere @e a8e t e optimism o! bo%rgeois t o%g tlessness in t e !orm o! sagacity t at most corresponds to it0 M0 Forcade !irst belie8es t at t e labo%rer co%ld not li8e did e not recei8e a ig er 8al%e t an t at @ ic e prod%ces, @ ereas con8ersely t e capitalist mode o! prod%ction co%ld not exist @ere e really to recei8e all t e 8al%e @ ic e prod%ces0 $econdly, e correctly generalises t e di!!ic%lty, @ ic ,ro%d on expressed only !rom a narro@ 8ie@point0 5 e price o! commodities contains not only an excess o8er @ages, b%t also o8er pro!it, namely, t e constant portion o! 8al%e0 ?ccording to ,ro%d onGs reasoning, t en, t e capitalist too co%ld not b%y back t e commodities @it is pro!it0 ?nd o@ does Forcade sol8e t is riddleQ Ay means o! a meaningless p rase: t e gro@t o! capital0 5 %s t e contin%al gro@t o! capital is also s%pposed to be s%bstantiated, among ot er t ings, in t at t e analysis o! commodity-prices, @ ic is impossible !or t e political economist as regards a capital o! 1==, becomes s%per!l%o%s in t e case o! a capital o! 1=,===0 W at @o%ld be said o! a c emist, @ o, on being asked, 6o@ is it t at t e prod%ct o! t e soil contains more carbon t an t e soilQ @o%ld ans@er: &t comes !rom t e contin%al increase in agric%lt%ral prod%ction0 5 e @ell-meaning desire to disco8er in t e bo%rgeois @orld t e best o! all possible @orlds replaces in 8%lgar economy all need !or lo8e o! tr%t and inclination !or scienti!ic in8estigation0 lx8i K5 e circ%lating capital in8ested in materials, ra@ materials and !inis ed goods is itsel! composed o! goods, t e necessary price o! @ ic is !ormed o! t e same elements# so t at, 8ie@ing t e total goods in one co%ntry, it @o%ld mean d%plication to co%nt t is portion o! circ%lating capital among t e elements o! t e necessary price0L B$torc , ;o%rs dGFconomie politiD%e, &&, p0 12=0C I Ay t ese elements o! circ%lating capital $torc means t e 8al%e o! constant capital B!ixed capital is merely circ%lating in a di!!erent !orm0 K&t is tr%e t at t e @ages o! t e labo%rer, like t at portion o! pro!it o! enterprise @ ic consists o! @ages, i! @e consider t em as a part o! t e means o! s%bsistence, also consist o! goods bo%g t at c%rrent prices and @ ic like@ise comprise @ages, interest on capital, gro%nd-rent and pro!it o! enterprise0000 5 is obser8ation merely ser8es to pro8e t at it is impossible to resol8e t e necessary price into its simplest elements0G, Bibid, -ote0C I &n is ;onsidFrations s%r la nat%re d% re8en% national B,aris, 18<2C, $torc indeed realises in is contro8ersy @it $ay to @ at abs%rdity t e erroneo%s analysis o! commodity-8al%e leads I @ en it resol8es 8al%e into mere re8en%es0 6e correctly points o%t t e !olly o! s%c res%lts I not !rom t e 8ie@point o! t e indi8id%al capitalist, b%t !rom t at o! a nation I b%t imsel! goes no step !%rt er in is analysis o! t e prix nFcessaire !rom t at presented in is ;o%rs, t at it is impossible to resol8e it into its act%al elements, @it o%t resol8ing it into a sp%rio%s ad8ance ad in!init%m0 K&t is e8ident t at t e 8al%e o!G t e ann%al prod%ct is di8ided partly into capitals and partly into pro!its, and t at eac one o! t ese portions o! 8al%e o! t e ann%al prod%ct reg%larly goes to b%y t e prod%cts needed by t e nation, as m%c to preser8e its capital as to rene@ its cons%mption !%nd Bpp0 132, 13+C0000 ;an itL Ba sel!-employed peasant !amilyC Kli8e in its barns or stables, eat its seed and !orage, clot e itsel! @it its dra%g t cattle, dispense @it its agric%lt%ral implementsQ ?ccording to t e t esis o! M0 $ay one m%st ans@er all t ese D%estions in t e a!!irmati8e Bpp0 13+, 136C 0000 &! it is admitted t at t e re8en%e o! a nation is eD%al to its gross prod%ct, i0e0, i! no capital as to be ded%cted !rom it, t en it m%st also be admitted t at a nation can spend t e entire 8al%e o! its ann%al prod%ct %nprod%cti8ely @it o%t impairing its !%t%re income in t e least B12>C0 5 e prod%cts @ ic constit%te t e capital o! a nation are not cons%mableL Bp01+=C0 lx8ii &n breaking do@n t e 8al%e added to t e constant portion o! capital into @ages, pro!it and gro%nd-rent, it goes @it o%t saying t at t ese are portions o! 8al%e0 3ne may, indeed, concei8e o! t em as existing in t e direct prod%ct in @ ic t is 8al%e appears, i0e0, in t e direct prod%ct prod%ced by labo%rers and capitalists in some partic%lar sp ere o! prod%ction I !or instance, yarn prod%ced in t e spinning ind%stry0 A%t in !act t ey do not materialise in t is prod%ct any more or any less t an in any ot er commodity, in any ot er component o! t e material @ealt a8ing t e same 8al%e0 ?nd in practice @ages are indeed paid in money, t at is, in t e p%re expression o! 8al%e, like@ise interest and rent0 For t e capitalist, t e trans!ormation o! is prod%ct into t e p%re expression o! 8al%e is indeed 8ery important# in t e distrib%tion itsel! t is trans!ormation is already ass%med0 W et er t ese 8al%es are recon8erted into t e same prod%ct, t e same commodity, o%t o! @ ose prod%ction t ey arose, @ et er t e labo%rer b%ys back a part o! t e prod%ct directly prod%ced by imsel! or b%ys t e prod%ct o! some ot er labo%r o! a di!!erent kind, as not ing to do

@it t e matter itsel!0 6err )odbert%s D%ite %nnecessarily !lies into a passion abo%t t is0 lx8iii K&t @ill be s%!!icient to remark t at t e same general r%le @ ic reg%lates t e 8al%e o! ra@ prod%ce and man%!act%red commodities is applicable also to t e metals# t eir 8al%e depending not on t e rate o! pro!its, nor on t e rate o! @ages, nor on t e rent paid !or mines, b%t on t e total D%antity o! labo%r necessary to obtain t e metal and to bring it to market0L B)icardo, ,rinciples, ; 0 &&&, p0 >>0C lxix P0 $t%art Mill, $ome (nsettled M%estions in ,olitical Economy, 'ondon, 18220 lxx $ee t e @ork on ;ompetition and ;o-operation B183<QC0 lxxi F0 'ist remarks correctly: K5 e pre8alence o! a sel!-s%!!icient economy on large estates demonstrates solely t e lack o! ci8ilisation, means o! comm%nication, domestic trades and @ealt y cities0 &t is to be enco%ntered, t ere!ore, t ro%g o%t )%ssia, ,oland, 6%ngary and Mecklenb%rg0 Formerly, it @as also pre8alent in England# @it t e ad8ance o! trades and commerce, o@e8er, t is @as replaced by t e breaking %p into middle estates and t e leasing o! land0L B7ie ?cker8er!ass%ng, die 9@erg@irtsc a!t %nd die ?%s@ander%ng, 182<, p01=0C