Grundrisse: Notebook VII – The Chapter on Capital

### Capital as Fructiferous. Transformation of Surplus Value into Profit

We now come to the

THIRD SECTION. CAPITAL AS FRUCTIFEROUS. INTEREST. PROFIT. (PRODUCTION COSTS ETC.)

##### Rate of profit. – Fall of the rate of profit. – Rate of profit. – Sum of profit. – Atkinson. A. Smith. Ramsay. Ricardo. – Surplus value as profit always expresses a lesser proportion. – Wakefield. Carey. Bastiat

Capital is now posited as the unity of production and circulation; and the surplus value it creates in a given period of time, e.g. in one year, is = ST/(p + c) = ST/R or = S(T/p - T/p × c/(c + p)). Capital is now realized not only as value which reproduces itself and is hence perennial, but also as value which posits value. Through the absorption of living labour time and through the movement of its own circulation (in which the movement of exchange is posited as its own, as the inherent process of objectified labour), it relates to itself as positing new value, as producer of value. It relates as the foundation to surplus value as that which it founded. Its movement consists of relating to itself, while it produces itself, at the same time as the foundation of what it has founded, as value presupposed to itself as surplus value, or to the surplus value as posited by it. In a definite period of time which is posited as the unit measure of its turnovers because it is the natural measure of its reproduction in agriculture, capital produces a definite surplus value, which is determined not only by the surplus value it posits in one production process, but rather by the number of repetitions of the production process, or of its reproductions in a specified period of time. Because of the inclusion of circulation, of its movement outside the immediate production process, within the reproduction process, surplus value appears no longer to be posited by its simple, direct relation to living labour; this relation appears, rather, as merely a moment of its total movement. Proceeding from itself as the active subject, the subject of the process – and, in the turnover, the direct production process indeed appears determined by its movement as capital, independent of its relation to labour – capital relates to itself as self-increasing value; i.e. it relates to surplus value as something posited and founded by it; it relates as well-spring of production, to itself as product; it relates as producing value to itself as produced value. It therefore no longer measures the newly produced value by its real measure, the relation of surplus labour to necessary labour, but rather by itself as its presupposition. A capital of a certain value produces in a certain period of time a certain surplus value. Surplus value thus measured by the value of the presupposed capital, capital thus posited as self-realizing value – is profit; regarded not sub specie aeternitatis, but sub specie – capitalis, the surplus value is profit; and capital as capital, the producing and reproducing value, distinguishes itself within itself from itself as profit, the newly produced value. The product of capital is profit. The magnitude, surplus value, is therefore measured by the value-magnitude of the capital, and the rate of profit is therefore determined by the proportion between its value and the value of capital. A very large part of what belongs here has been developed above. [20] But the anticipated material is to be put here. In so far as the newly posited value, which is of the same nature as the capital, is itself in turn taken up into the production process, itself in turn maintains itself as capital, to that extent the capital itself has grown, and now acts as a capital of greater value. After it has distinguished the profit, as newly reproduced value, from itself as presupposed, self-realizing value, and has posited profit as the measure of its realization, it suspends the separation again, and posits it in its identity to itself as capital which, grown by the amount of the profit, now begins the same process anew in larger dimensions. By describing its circle it expands itself as the subject of the circle and thus describes a self-expanding circle, a spiral.

* The same law expresses itself simply – but this expression to be looked at later in the theory of population – as the relation of the growth of population – namely its labouring part – to the capital already presupposed.

The other way in which this same law also expresses itself, in the relation among many capitals, i.e. in competition, likewise belongs in another section. It can also be formulated as a law of the accumulation of capitals; as e.g. by Fullarton. We shall come to this in the next section. It is important to call attention to the point that this law deals not simply with the development of productive power δυνάμει, but at the same time with the scope in which this productive power acts as capital, and is realized as fixed capital above all in one respect, and as population in the other.

Total product Capital’s shareLabour’s share
1st period1,0001/2 or 5001/2 or 500
2nd1,8001/3 or 6002/3 or 1,200
3rd2,8001/4 or 7003/4 or 2,100
4th4,0001/5 or 8004/5 or 3,200
(p. 130, 131.)

* Some things from Notebook III about the antithesis of Carey and Bastiat can be included at this point. [26]

The same joke is repeated (p. 288) in the form of increasing gross profit with declining rate of profit, but increasing mass of products sold at lower prices, and weighty words are spoken on that occasion about ‘the law of unlimited decline which never reaches zero, a law well known to mathematicians’. (p. 288.) ‘Here we have’ (hawking his wares) ‘an endlessly decreasing multiplier, because the multiplicand is ever growing.’ (p. 288 loc. cit.)

##### Capital and revenue (profit). Production and distribution. Sismondi. – Production costs from capital’s viewpoint. Profit, ditto. – Inequality of profits. Equalization and communal rate of profit. – Transformation of surplus value into profit. – Laws

Back to our topic. The product of capital, then, is profit. By relating to itself as profit, it relates to itself as the source of the production of value, and the rate of profit expresses the proportion to which it has increased its own value. But the capitalist is not merely capital. He has to live, and since he does not live by working he must live from profit, i.e. from the alien labour he appropriates. Thus capital is posited as the source of wealth. Since capital has incorporated productivity into itself as its inherent quality, capital relates to profit as revenue. It can consume a part of it (seemingly all of it, but this will prove to be false) without ceasing to be capital. After consumption of this fruit it can bear new fruit. It can represent consumption wealth without ceasing to represent the general form of wealth, something which money in simple circulation could not possibly do. The latter had to abstain in order to remain the general form of wealth; or, if it exchanged for real wealth, for consumer gratifications, it ceased to be the general form of wealth. Thus profit appears as a form of distribution, like wages. But since capital can grow only through the retransformation of profit into capital – into surplus capital – profit is at the same time a form of production for capital; just exactly as wages are a mere relation of production from the standpoint of capital, a relation of distribution from the worker’s standpoint. This shows that the relations of distribution are themselves produced by the relations of production, and represent the latter themselves from another point of view. It shows further that the relation of production to consumption is posited by production itself. Note the fatuousness of all bourgeois economists, including e.g. J. St. Mill, who considers the bourgeois relations of production as eternal, but their forms of distribution as historical, and thereby shows that he understands neither the one nor the other. As to simple exchange, Sismondi correctly remarks: ‘An exchange always presupposes two values; each may have a different share; but the quality of capital and revenue does not follow from the object exchanged; it attaches to the person who is its owner.’ (Sismondi, VI.) [29] Hence the simple exchange relation provides no basis for the explanation of revenue. The quality of a value obtained in exchange, whether it represents capital or revenue, is determined by relations lying outside simple exchange. Absurd, therefore, to want to reduce these more complex forms to the earlier, simpler exchange relations, as do the harmonic freetraders. From the standpoint of simple exchange, and considering accumulation as the mere accumulation of money (exchange value), capital’s profit and revenue are impossible. ‘If the rich spend the accumulated wealth for luxury products – and they can obtain commodities only through exchange – then their funds would soon be exhausted … But, in the social order, wealth has achieved the quality of reproducing itself through alien labour. Wealth, like labour, and through labour, yields an annual fruit which may be destroyed each year without the rich man thereby becoming poorer. This fruit is the revenue springing from capital.’ (Sismondi, IV.) [30] While profit thus appears in one respect as the result of capital, it appears in the other as the presupposition of capital formation. Thus is posited anew the circular movement in which the result appears as presupposition. ‘Thus a part of the revenue became transformed into capital, into a permanent, self-multiplying value, which did not perish; this value tore itself free from the commodity which created it; like a metaphysical, insubstantial quality it always remained in possession of the same cultivateur’ (capitalist), ‘assuming various forms for him.’ (Sismondi, VI) [31]

When capital is posited as profit-creating, as a source of wealth independently of labour, each part of the capital is thereby assumed to be equally productive. Just as surplus value in the form of profit is measured against the total value of the capital, so does it appear to be created by its different components to an equal degree. Thus its circulating part (the part consisting of raw materials and approvisionnement) brings no more profit than the component which consists of the fixed capital, and, more particularly, profit accrues to these component parts in proportion to their magnitude.

Since the profit of capital is realized only in the price which is paid for it, for the use value created by it, profit is determined by the excess of the price obtained over the price which covers outlays. Since, furthermore, this realization proceeds only through exchange, the individual capital’s profit is not necessarily restricted by its surplus value, by the surplus labour contained in it; but is relative, rather, to the excess of price obtained in exchange. It can exchange more than its equivalent, and then its profit is greater than its surplus value. This can be the case only to the extent that the other party to the exchange does not obtain an equivalent. The total surplus value, as well as the total profit, which is only surplus value itself, computed differently, can neither grow nor decrease through this operation, ever; what is modified thereby is not it, but only its distribution among the different capitals. However, this examination belongs only with that of the many capitals, it does not yet belong here. In relation to profit, the value of the capital presupposed in production appears as advances – production costs which must be replaced in the product. After deduction of the part of the price which replaces them, the excess forms the profit. Since surplus labour – of which profit and interest are, both, only portions – costs capital nothing, hence does not figure as part of the value advanced by it – not as part of the value which it possessed before the production process and the realization of the product – it follows that this surplus labour, which is included in the production costs of the product and forms the source of surplus value and hence of profit as well, does not figure as part of the production costs of capital. The latter are equal only to the values actually advanced by it, not including the surplus value appropriated in production and realized in circulation. The production costs from the standpoint of capital are therefore not the real production costs, precisely because surplus labour does not cost it anything. The excess of the price of the product over the price of the production costs gives it its profit. Thus profit can exist for capital even without the realization of the real production costs – i.e. the whole surplus labour set to work by capital. Profit – the excess over the advances made by capital – may be smaller than surplus value – the surplus of living labour gained in exchange by capital in excess of the objectified labour it has given in exchange for labour capacity. However, through the separation of interest from profit – which we will look at immediately – a part of the surplus value is posited as production cost even for productive capital itself. The confusion of production costs from the standpoint of capital with the amount of labour objectified in capital’s product, surplus labour included, has given rise to statements such as that ‘profit is not included in the natural price’. It is allegedly ‘absurd to call the excess, or profit, a part of the expenditure’. (Torrens, IX, 30.) [32] This then leads to a mass of confusion; either by having profit not realized in, but rather arising from, exchange (which can always be the case only relatively, if one of the parties to the exchange does not obtain his equivalent), or by ascribing to capital some magic power which makes something out of nothing. Since the value posited in the production process realizes its price through exchange, the price of the product appears in fact determined by the sum of money which expresses an equivalent for the total quantity of labour contained in raw material, machinery, wages and in unpaid surplus labour. Thus price still appears here merely as a formal modification of value; as value expressed in money; but the magnitude of this price is presupposed in the production process of capital. Capital thereby appears as a determinant of price, so that price is determined by the advances made by capital + the surplus labour realized by it in the product. We shall see later that price, on the contrary, appears as determining profit. And, while here the total real production costs appear as determining price, price appears later as determining the production costs. So as to impose the inherent laws of capital upon it as external necessity, competition seemingly turns all of them over. Inverts them.

To repeat once more: the profit of capital does not depend on its magnitude; but rather, given an equal magnitude, on the relation between its component parts (the constant and the variable part); and then on the productivity of labour (which is expressed, however, in the above proportion, since, with diminished productivity, the same capital could not work up the same material with the same portion of living labour); on the turnover time, which is determined by the different proportions between fixed and circulating capital, different durability of fixed capital, etc. etc. (see above). The inequality of profit in different branches of industry with capitals of equal magnitudes is the condition and presupposition for their equalization through competition.

In so far as capital obtains raw material, instrument, labour, through exchange, buys them, its elements are themselves already present in the form of prices; already posited as prices; presupposed to it. The comparison of the market price of its product with the prices of its elements then becomes decisive for it. But this belongs only in the chapter on competition.

Thus the surplus value which capital posits in a given turnover period obtains the form of profit in so far as it is measured against the total value of the capital presupposed to production. While surplus value is measured directly by the surplus labour time which capital gains in the exchange with living labour. Profit is nothing but another form of surplus value, a form developed further in the sense of capital. Surplus value no longer regarded here as exchanged for capital itself in the production process; not for labour. Hence capital appears as capital, as presupposed value relating to itself, through the mediation of its own process, as posited, produced value, and the value posited by it is called profit.

The two immediate laws which this transformation of surplus value into the shape of profit yields for us are these: (1) Surplus value expressed as profit always appears as a smaller proportion than surplus value in its immediate reality actually amounts to. For, instead of being measured by a part of the capital, the part exchanged for living labour (a relation which turns out to be that of necessary to surplus labour), it is measured against the whole. Whatever may be the surplus value which a capital A posits, and whatever may be the proportion within A of c and v, the constant and the variable part of the capital, the surplus value s must appear smaller when measured against c + v than when measured against its real measure, v. Profit, or – if it is regarded not as an absolute sum but rather, as is usually done, as a proportion (the rate of profit is profit expressed as the relation in which capital has posited surplus value) – the rate of profit never expresses the real rate at which capital exploits labour, but always a much smaller relation, and the larger the capital, the more false is the relation it expresses. The rate of profit could express the real rate of surplus value only if the entire capital were transformed solely into wages; if the entire capital were exchanged for living labour, i.e. if the approvisionnement alone existed, and if it not only existed not in the form of already produced raw material (which has happened in extractive industry), hence if not only the raw material were = 0, but if the means of production, also, whether in the form of instruments or in the form of developed fixed capital, were = 0. The latter case cannot occur on the basis of the mode of production corresponding to capital. If A = c + v, whatever the numerical value of s, then s/(c + v) < s/v. [33]

(2) The second great law is that the rate of profit declines to the degree that capital has already appropriated living labour in the form of objectified labour, hence to the degree that labour is already capitalized and hence also acts increasingly in the form of fixed capital in the production process, or to the degree that the productive power of labour grows. The growth of the productive power of labour is identical in meaning with (a) the growth of relative surplus value or of the relative surplus labour time which the worker gives to capital; (b) the decline of the labour time necessary for the reproduction of labour capacity; (c) the decline of the part of capital which exchanges at all for living labour relative to the parts of it which participate in the production process as objectified labour and as presupposed value. The profit rate is therefore inversely related to the growth of relative surplus value or of relative surplus labour, to the development of the powers of production, and to the magnitude of the capital employed as [constant] capital within production. In other words, the second law is the tendency of the profit rate to decline with the development of capital, both of its productive power and of the extent in which it has already posited itself as objectified value; of the extent within which labour as well as productive power is capitalized.

Other causes which additionally act upon the rate of profit, which can depress it for longer or shorter periods, do not yet belong here. It is quite correct, as regards the production process as a whole, that the capital acting as material and as fixed capital not only is objectified labour, but must also be reproduced, and continuously reproduced, by new labour. Its presence assumes, therefore – the extent which its presence has attained assumes, therefore, the extent of the labouring population, population on a large scale, which in and for itself is the condition of all productive power – but this reproduction everywhere proceeds on the presupposition of the action of fixed capital and of raw material and of scientific power, both as such, and as appropriated within production and already realized within it. This point is to be developed in more detail only in the examination of accumulation.

It is clear, further, that although the part of capital exchanged for living labour declines in relation to the total capital, the total mass of living labour employed can increase or remain the same if capital grows in the same or a larger relation. Hence a constant growth in the population may accompany a relative decline in necessary labour. If capital A lays out 1/2 in c and 1/2 in v, while capital A′ lays out 3/4 in c and 1/4 in v, then capital A′ could employ 2/4 v for 6/4 c. But if it was originally = 3/4 c + 1/4 v, then it is now = 6/4 c + 2/4 v, or it grew by 4/4; i.e. it doubled. However, this relation also is to be examined more closely only in connection with the theory of accumulation and population. All in all we must not at this point be sidetracked by drawing the consequences which follow from the laws, and by turning them over in the mind from one angle or another.

The rate of profit is determined, then, not only by the relation of surplus labour to necessary labour, or by the relation in which objectified labour is exchanged for living labour, but by the overall relation of living labour employed to objective labour; by the portion of capital exchanged for living labour relative to the part which participates in the production process as objectified labour. This portion, however, declines in the same relation as surplus labour increases in relation to necessary labour.

##### Surplus value = relation of surplus labour to necessary labour

(Since the worker must reproduce the part of the capital which is exchanged for his labour capacity just as much as he must reproduce the other parts of the capital, the relation in which the capitalist gains from the exchange with labour capacity appears as determined by the relation of surplus labour to necessary labour. Originally this appears in such a way that the necessary labour only replaces his outlay. But since he lays out nothing other than labour itself – as is shown in reproduction – the relation can be expressed simply in this way – the relation of surplus value as the relation of surplus labour to necessary labour.)

##### Value of fixed capital and its productive power. Durability of fixed capital, ditto. – The powers of society, division of labour etc. cost capital nothing. – Distinction between this and machinery (capitalist’s economy in the employment of machinery). – Profit and surplus value

<We have still to note in regard to fixed capital – and its durability, as one of its conditions which does not enter in from the outside: To the extent that the instrument of production is itself a value, objectified labour, it does not contribute as a productive force. If a machine which cost 100 working days to make replaced only 100 working days, then it would in no way increase the productive power of labour and in no way decrease the cost of the product. The more durable the machine, the more often can the same quantity of product be created with it, or the more often can the circulating capital be renewed, its reproduction be repeated, and the smaller is the value-share (that required to replace the depreciation, the wear and tear of the machine); i.e. the more is the price of the product and its unit production cost decreased. However, we may not introduce the price relation at this point in the development. The reduction of the price as condition for conquest of the market belongs only to competition. It must therefore be developed in a different way. If capital could obtain the instrument of production at no cost, for 0, what would be the consequence? The same as if the cost of circulation = 0. That is, the labour necessary for the maintenance of labour capacity would be diminished, and thus surplus labour, i.e. surplus value, [increased], without the slightest cost to capital. Such an increase of the force of production, a piece of machinery which costs capital nothing, is the division of labour and the combination of labour within the production process. This assumes, however, work proceeding on a large scale, i.e. development of capital and wage labour. Another productive force which costs it nothing is scientific power. (It goes without saying that it must always pay a certain contribution for parsons, schoolmasters and scholars, whether the scientific power they develop is great or small.) But it can appropriate the latter only through the employment of machinery (and in part through the chemical process). The growth of population is a productive force of this kind, and it costs it nothing. In short, all the social powers developing with the growth of population and with the historic development of society cost it nothing. To the extent, however, that a substratum which itself exists in the form of objectified labour, i.e. is itself produced by labour, is required to employ them within the direct production process, hence to the extent that they are themselves values, it can appropriate them only through equivalents. Well. Fixed capital whose employment required more labour for its production or maintenance than it replaced would be a nuisance. The kind that would cost nothing, but merely needed to be appropriated by capital, would have the maximum value for capital. It follows from the simple proposition that machinery is most valuable for capital when its value = 0, that every reduction of its cost is a gain for capital. While it is the tendency of capital, on one side, to increase the total value of the fixed capital, [so], at the same time, [is its tendency] to decrease the value of each of its fractional parts. To the extent that fixed capital enters into circulation as value, it ceases to act as use value within the production process. Its use value is precisely that it increases the productive power of labour, decreases necessary labour, and increases relative surplus labour and hence surplus value. To the extent that it enters into circulation, its value is merely replaced, not increased. By contrast, the product, the circulating capital, is the vehicle of the surplus value, which is realized only when it steps outside the production process and into circulation. If machinery lasted for ever, if it did not itself consist of transitory material which must be reproduced (quite apart from the invention of more perfect machines which would rob it of the character of being a machine), if it were a perpetuum mobile, then it would most completely correspond to its concept. Its value would not need to be replaced because it would continue to last in an indestructible materiality. Since fixed capital is employed only to the extent that its value is smaller than the value it posits, it follows that, even if it never itself entered into circulation as value, the surplus value realized in the circulating capital would nevertheless soon replace the advances, and it would thus act to posit value after its costs for the capitalist, as well as the cost of the surplus labour he appropriates, were = 0. It would continue to act as a productive power of labour and at the same time be money in the third sense, constant value for-itself. Take a capital of £1,000. Let one-fourth be machinery; the sum of surplus value = 50. The value of the machinery then equal to 200. After 4 turnovers the machinery would be paid for. And, in addition, since the capital would continue to possess, in the machine, objectified labour to the amount of 200, then, beginning with the fifth turnover, it would be the same as if it made 50 on a capital which only costs it 800; hence 6 1/4% instead of 5%. As soon as fixed capital enters into circulation as value, its use value for the capital realization process ceases, or, it enters into it only as soon as the latter ceases. Hence, the more durable, the less it requires repair, total or partial reproduction, the longer its circulation time, the more does it act as productive power of labour, as capital; i.e. as objectified labour, which posits living surplus labour. The durability of fixed capital, which is identical with the circulation time of its value, or with the time required for its reproduction, arises from its concept itself, as its value-moment. (That in and for itself, as regards its material side only, it lies in the concept of the means of production is something which needs no elucidation.) The rate of surplus value is determined simply by the relation of surplus labour to necessary labour; the rate of profit is determined not only by the relation of surplus to necessary labour, but by the relation of the part of capital exchanged for living labour to the total capital entering into production.>

Profit as we still regard it here, i.e. as the profit of capital as such, not of an individual capital at the expense of another, but rather as the profit of the capitalist class, concretely expressed, can never be greater than the sum of the surplus value. As a sum, it is the sum of the surplus value, but it is this same sum of values as a proportion relative to the total value of the capital, instead of to that part of it whose value really grows, i.e. is exchanged for living labour. In its immediate form, profit is nothing but the sum of the surplus value expressed as a proportion of the total value of the capital.

##### Machinery and surplus labour. Recapitulation of the doctrine of surplus value generally

The transformation of surplus value into the form of profit, this method by which capital calculates surplus value, is necessary from the standpoint of capital, regardless of how much it rests on an illusion about the nature of surplus value, or rather veils this nature. *

* It is easy to form the notion that machinery as such posits value, because it acts as a productive power of labour. But if machinery required no labour, then it would be able to increase the use value; but the exchange value which it would create would never be greater than its own costs of production, its own value, the labour objectified in it. It creates value not because it replaces labour; rather, only in so far as it is a means to increase surplus labour, and only the latter itself is both the measure and the substance of the surplus value posited with the aid of the machine; hence of labour generally.

If we look at a single worker’s day, then the decrease of necessary labour relative to surplus labour expresses itself in the appropriation of a larger part of the working day by capital. The living labour employed here remains the same. Suppose that an increase of the force of production, e.g. employment of machinery, made 3 workers superfluous out of 6, each of whom worked 6 days a week. If these 6 workers themselves possessed the machinery, then each of them would thereafter work only half a day. Now, instead, 3 continue to work a whole day every day of the week. If capital were to continue to employ the 6, then each of them would work only half a day, but perform no surplus labour. Suppose that necessary labour amounted to 10 hours previously, the surplus labour to 2 hours per day, then the total surplus labour of the 6 workers was 2 × 6 daily, equal to a whole day, and was equal to 6 days a week = 72 hours. Each one worked one day a week for nothing. Or it would be the same as if the sixth worker had worked the whole week long for nothing. The 5 workers represent necessary labour, and if they could be reduced to 4, and if the one worker worked for nothing as before – then the relative surplus value would have grown. Its relation previously was = 1:6, and would now be 1:5. The previous law, of an increase in the number of hours of surplus labour, thus now obtains the form of a reduction in the number of necessary workers. If it were possible for this same capital to employ the 6 workers at this new rate, then the surplus value would have increased not only relatively, but absolutely as well. Surplus labour time would amount to 14 2/5 hours. 2 2/5 hours [each] performed by 6 workers is of course more than 2 2/5 performed by 5.

If we look at absolute surplus value, it appears determined by the absolute lengthening of the working day above and beyond necessary labour time. Necessary labour time works for mere use value, for subsistence. Surplus labour time is work for exchange value, for wealth. It is the first moment of industrial labour. The natural limit is posited – presupposing that the conditions of labour are on hand, raw material and instrument of labour, or one of them, depending on whether the work is merely extractive or formative, whether it merely isolates the use value from nature or whether it shapes it – the natural limit is posited by the number of simultaneous work days or of living labour capacities, i.e. by the labouring population. At this stage the difference between the production of capital and earlier stages of production is still merely formal. With kidnapping, slavery, the slave trade and forced labour, the increase of these labouring machines, machines producing surplus product, is posited directly by force; with capital, it is mediated through exchange.

Use values grow here in the same simple relation as exchange values, and for that reason this form of surplus labour appears in the slave and serf modes of production etc., where use value is the chief and predominant concern, as well as in the mode of production of capital, which is oriented directly towards exchange value, and only indirectly towards use value. This use value may be purely imaginary, as e.g. with the Egyptian pyramids, in short, with the works of religious ostentation which the mass of the nation in Egypt, India etc. was forced [to undertake]; or may be directed at immediate utility as e.g. with the ancient Etruscans.

In the second form of surplus value, however, as relative surplus value, which appears as the development of the workers’ productive power, as the reduction of necessary labour time relative to the working day, and as the reduction of the necessary labouring population relative to the population (this is the antithetical form), in this form there directly appears the industrial and the distinguishing historic character of the mode of production founded on capital.

The forcible transformation of the greater part of the population into wage labourers, and the discipline which transforms their existence into that of mere labourers, correspond to the first form. Throughout a period of 150 years, e.g. from Henry VII on, the annals of English legislation contain the bloody handwriting of coercive measures employed to transform the mass of the population, after they had become propertyless and free, into free wage labourers. The dissolution of the monastic orders, the confiscation of church lands, the abolition of the guilds and confiscation of their property, the forcible ejection of the population from the land through the transformation of tillage into pasture, enclosures of commons etc., had posited the labourers as mere labour capacities. But they now of course preferred vagabondage, beggary etc. to wage labour, and had still to be accustomed forcibly to the latter. This is repeated in a similar fashion with the introduction of large industry, of factories operating with machines. Cf. Owen. [34]

Only at a certain stage of the development of capital does the exchange of capital and labour become in fact formally free. One can say that wage labour is completely realized in form in England only at the end of the eighteenth century, with the repeal of the law of apprenticeship.

The tendency of capital is, of course, to link up absolute with relative surplus value; hence greatest stretching of the working day with greatest number of simultaneous working days, together with reduction of necessary labour time to the minimum, on one side, and of the number of necessary workers to the minimum, on the other. This contradictory requirement, whose development will show itself in different forms as overproduction, over-population etc., asserts itself in the form of a process in which the contradictory aspects follow closely upon each other in time. A necessary consequence of them is the greatest possible diversification of the use value of labour – or of the branches of production—so that the production of capital constantly and necessarily creates, on one side, the development of the intensity of the productive power of labour, on the other side, the unlimited diversity of the branches of labour, i.e. thus the most universal wealth, in form and content, of production, bringing all sides of nature under its domination.

Capital pays nothing for the increase of the productive force arising by itself, in large-scale production, from division and combination of labour, from savings on certain expenses – conditions for the labour process – which remain the same or diminish when labour is done in common, such as heating etc., industrial buildings etc.; it obtains this increased productive power of labour free of charge. If the force of production increased simultaneously in the production of the different conditions of production, raw material, means of production and means of subsistence, and in the [branches of production] determined [by them], then their growth would bring about no change in the relation between the different component parts of the capital. If e.g. the productive force of labour grows simultaneously in the production of flax and of looms and of weaving itself (by division of labour), then a greater quantity of raw material etc. would correspond to the greater quantity woven in a day. In extractive work, e.g. the mining industry, it is not necessary for raw materials to increase when labour becomes more productive, since no raw material is used. To make harvests more productive, it is not even necessary for the number of instruments to have grown, but rather merely for them to be concentrated and for the work, previously done fragmentarily by hundreds, to be done communally. However, what is required for all forms of surplus labour is growth of population; of the labouring population for the first form; of population generally for the second, since it requires the development of science etc. Population, however, appears here as the basic source of wealth.

##### Relation between the objective conditions of production. Change in the proportion of the component parts of capital

But as we regard capital originally, raw material and instrument appear to come out of circulation, not to be produced by capital itself; just as, in reality, the individual capital obtains the condition of its production from circulation, although they are in turn produced by capital, but by another capital. From this follows, on one side, capital’s necessary tendency to subjugate production to itself on all sides; its tendency to posit the production of labour materials and of raw materials, as well as instruments, as likewise produced by capital, even if it is a different capital; the propagandistic tendency of capital. Secondly, however, it is clear that if the objective conditions of production which it obtains from circulation remain unchanged in value, i.e. if the same amount of labour objectifies itself in the same amount of use value, then a lesser part of the capital can be laid out for living labour, or, there is a change in the proportion of the component parts of capital. If the capital amounts to e.g. 100, raw material 2/5, the instrument 1/5, labour 2/5, and if, owing to a doubling of the productive force (division of labour), the same labour using the same instrument could work up double the raw material, then the capital would have to grow by 40; hence a capital of 140 would have to work; of which 80 in raw material, 20 in instrument, 40 for labour. Labour would now relate 40:140 (previously = 40:100); labour previously related as 4:10; now only as 4:14. Or, of the same capital of 100, now 3/5 would go for raw material, 1/5 for the instrument, and 1/5 for labour. The gain would be 20, as before. But surplus labour would be 60%, whereas it was 50 earlier. It now only takes 20 in labour for 60 in raw material and 20 in instrument. 80/20/100. A capital of 80 gives the capitalist a profit of 20. Now if the capital were to employ all the labour at this stage of production, it would have to grow to 160; namely 80 for raw material, instrument 40, and 40 for labour. This would give a surplus value of 40. At the earlier stage, where the capital of 100 gives a surplus value of only 20, a capital of 160 would give a surplus value of only 32, i.e. 8 less, and the capital would have to grow to 200 in order to produce the same surplus value of 40.

The following distinctions must be drawn: (1) Labour, increasing (or intensity, speed of labour), requires no greater advance in material or instrument of labour. E.g. the same 100 workers with instruments of the same value catch more fish, or till the soil better, or draw more ores from the mines or coal from the pits, or beat more leaf from the same amount of gold as a result of greater skill, better combination and division of labour etc., or waste less raw material, hence get further with the same value of raw materials. In this case then, if we assume either that their products enter into their own consumption, then their necessary labour time diminishes; they perform a greater amount of work at the same maintenance costs. Or, a smaller part of their labour is necessary for the reproduction of labour capacity. The necessary part of labour time diminishes relative to surplus labour time, and, although the value of the product remains the same 100 working days, the part going to capital, the surplus value, increases. If the total surplus worker was = 1/10, i.e. = 10 working days, and if it is now 1/5, then surplus labour time has grown by 10 days. The workers work 80 days for themselves and 20 for the capitalists, whereas in the first case 90 for themselves and only 10 for the capitalist. (This calculation by working days, and labour time as the only substance of value, shows itself in this open way where relations of bondage exist. With capital, covered up by money.) Of the newly created value, a greater portion accrues to capital. But the relations between the various component parts of the invariable capital remain the same, on this presupposition. That is, although the capitalist employs a greater mass of surplus labour, because he pays less wages, he does not employ more capital in raw materials and instruments. He gives a smaller part of objectified labour in exchange for the same amount of living labour, or the same amount of objectified for a greater amount of living labour. This possible only in extractive industry; in manufacturing, only in so far as there is greater economy in use of raw materials; further, where chemical processes increase the material, in agriculture; in the transporting industry.

(2) Productivity increases at the same time not only in the given branch of production, but also in its conditions; in the case, namely, where raw material or instrument or both must be increased along with an increase in the intensity of labour, the increase of the number of products produced by labour in the same time. (The raw material need not cost anything, e.g. reeds for basket-making; free wood etc.) In this case the relation of capital remains the same. That is, with the growing productivity of labour the capital need not lay out a greater value in raw material and instruments.

(3) The increased productivity of labour requires a greater outlay of capital for raw material and instrument. If an unchanged number of workers has become more productive merely through division of labour etc., then the instrument remains the same; the raw material alone must grow; since the same labour time processes a greater amount of it in the same time; and, according to the presupposition, the productivity arose only from greater skill on the part of the workers, division and combination of labour etc. In this case the part of the capital exchanged for living labour not only diminishes (it remains the same if absolute labour time alone increases; decreases, if relative time grows) relative to the other component parts of capital, which remain the same, by an amount equal to its own decline, but likewise by an amount equal to their growth.

If it was

Raw Material:Instrument:Labour:Surplus:
Working days:180908010
411 3/7907020

in the first case: so that out of 90 working days, 10 are surplus working days; surplus labour 12 1/2%. In the second case, the relation of the raw material rose in the same proportion as the relation of surplus labour rose, compared to the first case.

While the growth of the surplus value in all cases presupposes growth of the population, in this case [it presupposes] additionally accumulation, or a greater capital entering into production. (This ultimately comes down to a larger population of workers occupied in the production of raw material.) In the first case the total part of the capital employed for labour forms 1/4 of the total capital, and relates to the constant part of the capital as = 1:3; in the second case capital employed for labour forms less than 1/6 of the total capital, and the total part of the capital employed for labour relates as less than 1:5 to the constant part of the capital. Hence, although the increase of productive power resting on division and combination of labour rests on absolute increase of the labour power employed, it is necessarily linked with a decrease of the latter, relative to the capital which sets it in motion. And while, in the first form, the form of absolute surplus labour, the mass of labour employed must grow in the same relation as the capital employed, in the second case it grows in a lesser relation, and, more precisely, in inverse relation to the growth of the force of production.

If the productivity of the soil doubled owing to employment of the latter method of agricultural labour, if the same amount of labour yielded 1 quarter of wheat instead of 1/2, then necessary labour would fall by 1/2, and capital could employ twice the number for the same wages. (This, if expressed in grain only.) But the capitalist would not need additional workers to work his land. Hence he will employ the same labour with half the previous wages; a part of his capital, the part earlier laid out in money, becomes free; the labour time employed has remained the same relative to the capital employed, but its surplus part has risen relative to the necessary part. If the relation of necessary labour to the total working day was = 3/4 of the working day or 9 hours, before, then it will now be equal to 3/8 or = 4 1/2 hours. In the first case the surplus value was 3 hours; in the second = 7 1/2.

The course of the process is this: With a given population of workers and length of the working day, i.e. length of the working day multiplied by the number of simultaneous working days, surplus labour can be increased only relatively, by means of greater productive power of labour, the possibility of which is already posited in the presupposed growth of the population and [its] training for labour (including thereby also a certain amount of free time for non-labouring, not directly labouring population, hence development of mental capacities etc.; mental appropriation of nature). Given a certain stage of the development of the productive forces, surplus labour can be absolutely increased only through transformation of a greater part of the population into workers, and increase of the number of simultaneous working days. The first process is decrease of the relative working population, although it remains the same in absolute terms; the second is its increase. Both tendencies necessary tendencies of capital. The unity of these contradictory tendencies, hence the living contradiction, only with machinery, which we will discuss in a moment. The first form obviously allows only a small non-labouring population relative to the labouring one. The second, since the quota of living labour required in it increases more slowly than the quota of capital employed, allows a larger non-labouring population relative to the labouring one.

During the formative stages of capital, where it obtains raw material and instrument, the conditions of the product, from circulation, it relates to these component parts and to their relations as given presuppositions. Although this appearance vanishes on closer examination, since all these moments appear as equally the products of capital, and since it would otherwise not have conquered the total conditions of its production, they nevertheless remain always in the same relation for the individual capital. Hence, one part of it can always be regarded as constant value, and only the part laid out in labour varies. These component parts do not develop evenly, but, as will be seen in competition, [it is] the tendency of capital to distribute the force of production evenly.

Since the growing productivity of labour would lead capital to encounter a barrier in the not-growing mass of raw material and machinery, industrial development takes the following course: the introduction of labour on a large scale, as well as the employment of machinery, begins in the branches which are closest to being production of raw materials for industry, raw material both for the material of labour and [for the] instrument, where the material of labour most closely approaches mere raw material. Thus, in spinning before in weaving, in weaving before printing etc. First of all in the production of metals, which are the chief raw material for the instruments of labour themselves. If the actual raw product which makes up the raw material for industry at the lowest stage cannot itself be rapidly increased – then refuge is sought in more rapidly increasable substitutes. (Cotton for linen, wool and silk.) The same happens for the necessaries of life in the substitution of potatoes for grain. The higher productivity in the latter case through production of a worse article containing fewer nourishing substances and hence cheaper organic conditions of the worker’s reproduction. The latter belongs in the examination of wages. In the discussion of the minimum wage, not to forget Rumford. [35]

Now we come to the third case of relative surplus labour as it presents itself in the employment of machinery.

<It has become apparent in the course of our presentation that value, which appeared as an abstraction, is possible only as such an abstraction, as soon as money is posited; this circulation of money in turn leads to capital, hence can be fully developed only on the foundation of capital, just as, generally, only on this foundation can circulation seize hold of all moments of production. This development, therefore, not only makes visible the historic character of forms, such as capital, which belong to a specific epoch of history; but also, [in its course] categories such as value, which appear as purely abstract, show the historic foundation from which they are abstracted, and on whose basis alone they can appear, therefore, in this abstraction; and categories which belong more or less to all epochs, such as e.g. money, show the historic modifications which they undergo. The economic concept of value does not occur in antiquity. Value distinguished only juridically from pretium, against fraud etc. The concept of value is entirely peculiar to the most modern economy, since it is the most abstract expression of capital itself and of the production resting on it. In the concept of value, its secret betrayed.>

What distinguishes surplus labour founded on machinery is the reduction of necessary labour time, which takes the form that fewer simultaneous working days are employed, fewer workers. The second moment, that the increase in productive power must be paid for by capital itself, is not free of charge. The means by which this increase in the force of production is set to work is itself objectified direct labour time, value, and, in order to lay hands upon it, capital must exchange a part of its value for it. It is easy to develop the introduction of machinery out of competition and out of the law of the reduction of production costs which is triggered [36] by competition. We are concerned here with developing it out of the relation of capital to living labour, without reference to other capitals.

If a capitalist annually employed 100 workers at spinning cotton, which annually cost him £2,400, and if he replaced 50 workers with a machine costing £1,200, but in such a way that the machine would likewise be worn out within the year and have to be replaced again at the beginning of the second year, then he would obviously have gained nothing; nor could he sell his product more cheaply. The remaining 50 workers would do the same work as 100 did earlier; each individual worker’s surplus labour would have increased in the same relation as their number had diminished, hence would have remained the same. If previously it was = 200 hours of work daily, i.e. 2 hours for each of the 100 working days, then it would now likewise be = 200 hours of work, i.e. = 4 for each of the 50 working days. Relative to the worker, his surplus time would have increased; for capital the matter would be unchanged, since it would now have to exchange 50 working days (necessary and surplus time together) for the machine. The 50 days of objectified labour which it exchanged for machinery would only give him an equivalent, hence no surplus time, as if it had exchanged 50 days of objectified labour for 50 living ones. This would be replaced, however, by the surplus labour time of the remaining 50 workers. If the form of exchange is stripped off, the matter would be the same as if the capitalist employed 50 workers whose entire working day were necessary labour only, and 50 additional ones whose working day made good this ‘loss’. But posit now that the machine cost only £960, i.e. only 40 working days, and that the remaining workers produce 4 hours of surplus labour time each, as before, i.e. 200 hours or 16 days, 4 hours (16 1/3 days), then the capitalist would have saved £240 on outlays. While he gained only 16 days 4 hours with his previous outlay of 2,400, he would now likewise gain 200 hours of work on an outlay of 960. 200 is to 2,400 as 1:12; while 200:2,160 = 20:216 = 1:10 4/5. Expressed in days of work, in the first case he would gain 16 days 4 hours per 100 working days, in the second, the same amount on 90; in the first, on 1,200 hours of work daily, 200; in the second, on 1,080. 200:1,200 = 1:6, 200:1,080 = 1:5 2/3. In the first case the individual worker’s surplus time = 1/6 working day = 2 hours. In the second case = 2 6/27 hours per worker. Furthermore, with the employment of machinery, the part of the capital which was previously employed in instruments must be deducted from the additional cost caused by the machinery.

##### Money and fixed capital: presupposes certain amount of wealth. (Economist.) – Relation of fixed capital and circulating capital. Cotton-spinner (Economist)

<The money circulating in a country is a certain portion of the capital of the country, absolutely withdrawn from productive purposes, in order to facilitate or increase the productiveness of the remainder. A certain amount of wealth is, therefore, as necessary, in order to adopt gold as a circulating medium, as it is to make a machine, in order to facilitate any other production.’ (Economist, Vol. V, p. 520.)> <’What is the practice? A manufacturer obtains £500 from his banker on Saturday, for wages; he distributes these among his workers. On the same day the majority of money is brought to the shopkeepers, and through them returned to their various bankers.’ (loc. cit. p. 575.)>

<’A cotton spinner, with a capital of £100,000, who laid out £95,000 for his mill and machinery, would soon find he wanted means to buy cotton and pay wages. His trade would be hampered and his finances deranged. And yet men expect that a nation, which has recklessly sunk the bulk of its available means in railways, should nevertheless be able to conduct the infinite operations of manufacture and commerce.’ (loc. cit. p. 1271.)>

##### Slavery and wage labour (Steuart). – Profit upon alienation. Steuart

‘Money … an adequate equivalent for any thing alienable.’ (J. Steuart.) (p. 13) (Vol. I, p. 32, ed. Dublin, 1770.)

<’In the old times to make mankind labour beyond their wants, to make one part of a state work, to maintain the other gratuitously, to be brought about only through slavery … If mankind be not forced to labour, they will only labour for themselves; and if they have few wants, there will be few [who] labour. But when states come to be formed and have occasion for idle hands to defend them against the violence of their enemies, food at any rate must be procured for those who do not labour; and as, by the supposition, the wants of the labourers are small, a method must be found to increase their labour above the proportion of their wants. For this purpose slavery was calculated … Here then was a violent method of making men laborious in raising food; … men were then forced to labour because they were slaves of others; men are now forced to labour because they are slaves to their own wants.’ (Steuart, Vol. I, p. 38–40.) ‘It is the infinite variety of wants, and of the kinds of commodities necessary to their gratification, which alone renders the passion for wealth indefinite and insatiable.’ (Wakefield on A. Smith, p. 64 note.)> [37]

In Custodi’s anthology of the Italian economists, Parte Antica, Tomo III: Montanari (Geminiano), Della moneta, written about 1683, [40] says of the ‘invention’ of money: ‘Intercourse between nations spans the whole globe to such an extent that one may almost say all the world is but a single city in which a permanent fair comprising all commodities is held, so that by means of money all the things produced by the land, the animals and human industry can be acquired and enjoyed by any person in his own home. A wonderful invention!’ (p. 40.) ‘But, since it is another peculiarity of measures that they enter into such a relation with the things measured that in a certain manner the thing measured becomes the measure of the measuring unit, it follows that, just as motion is the measure of time, time may be the measure of the motion itself; hence it occurs that not only are the coins measures of our wants, but also our wants are, reciprocally, the measure of the coins themselves and of value.’ (p. 41, 42.) ‘It is quite clear that the greater the number of coins circulating in commerce within the confines of a given district, in proportion to the marketable goods there are in that place, the more expensive will they be. Can a thing be said to be expensive because it is worth a large quantity of gold in countries where gold is abundant? Should not the gold itself, which is estimated as of the same quantity as another thing which comes to be considered elsewhere as cheap, be rather described as cheap in that case?’ (p. 48.)

‘100 years earlier the chief feature in the commercial policy of nations was the amassing of gold and silver, as a kind of wealth par excellence.’ (p. 67.) (Gouge, Wm. A Short History of Paper Money and Banking in the United States. Philadelphia, 1833.) (Barter in United States (see Gouge Notebook VIII, p. 81 seq.): ‘In Pennsylvania as in the other colonies, significant traffic was carried on by barter … as late as 1723 in Maryland, an act was passed making tobacco a legal tender at one penny a pound, and Indian corn at 20d. a bushel.’ (p. 5.) (Part II.) Soon however, ‘their trade with the West-Indies and a clandestine commerce with the Spanish made silver so plentiful, that in 1652 a mint was established in New England for coining shillings, sixpences and threepenny pieces.’ (p. 5.) (loc. cit.) ‘Virginia in 1645 forbade dealings by barter, and established the Spanish piece of 8 to 6s. as the standard currency of the colony (the Spanish dollar) … The other colonies affixed different denominations to the dollar … The money in account was everywhere nominally the same as in England. The coin of the realm was especially Spanish and Portuguese’ etc. cf. p. 81 Notebook VIII). (p. 6. By an act of Queen Anne an attempt was made to put an end to this confusion.)

##### Wool industry in England since Elizabeth (Tuckett). – Silk-manufacture (Same). Ditto Iron. Cotton

Tuckett: A History of the Past and Present State of the Labouring Population etc., 2 vols., London, 1846.

‘Wool manufactures: During Elizabeth’s time the clothier occupied the place of the mill-owner or manufacturer; he was the capitalist who brought the wool, and delivered it to the weaver, in portions of about 12 pounds, to be made into cloth. At the beginning, manufacture was confined to cities and corporate and market-towns, the inhabitants of the villages making little more than [sufficed] for the use of their families. Later, in non-corporate towns favoured by local advantages, and also in country places by farmers, graziers and husbandmen, who commenced making cloth for sale, as well as for domestic use.’ (The cruder sorts.) ‘In 1551 a statute was passed, restricting the number of looms and apprentices which might be held by clothiers and weavers residing out of cities; and that no country weaver should have a tucking mill, nor any tucker a loom. By a law of the same year, all weavers of broad cloth had to undergo an apprenticeship of 7 years. Nevertheless, village manufacture, as an object of mercantile profit, took firm root. 5 and 6 Edward VI, c. 22, a statute, prohibits the use of machinery … The Flemish and Dutch thus maintained superiority in this manufacture until the end of the seventeenth century … In 1668 the Dutch loom was introduced from Holland.’ (p. 138–41.) ‘Owing to the introduction of machinery, in 1800 one person could do as much work as 45 in the year 1785. In the year 1800 the capital invested in mills, machinery etc. appropriate for the woollen trade was not less than 6 million pounds sterling and the total number of persons of all ages occupied in England in this branch was 1,500,000.’ (p. 142–3.) Thus the productive power of labour grew 4,600%. But, firstly, this number only about 1/6 of the fixed capital alone; relative to the total capital (raw material etc.) perhaps only 1/20. ‘Hardly any manufacture had such an advantage from the improvements in science as the art of dyeing cloth through the application of the laws of chemistry.’ (loc. cit. p. 144.)

Silk manufacture. Until the beginning of the eighteenth century, ‘the art of silk throwing most successful in Italy, where machinery of a particular description adopted to this purpose. In 1715 John Lombe, one of three brothers who had a business as throwers and silk-merchants, travelled to Italy and was able to obtain a model in one of the mills … A silk mill, with the improved machinery, erected in 1719 in Derby by Lombe and his brothers. This mill contained 26,586 wheels, all turned by one water wheel … Parliament gave him £14,000 for throwing open the secret to the trade. This mill came nearer to the idea of a modern factory than any previous establishment of the kind. The machine had 97,746 wheels, movements, and individual parts working day and night, all of which were moved by one large water wheel and were governed by one regulator: and it employed 300 persons to attend and supply it with work.’ (133–4.) (No spirit of invention showed itself in the English silk trade; first introduced by the weavers of Antwerp, who fled after the sacking of the town by the Duke of Parma; then different branches by the French refugees 1685–92.)

In 1740, 1,700 tons of iron were produced by 59 high furnaces; 1827: 690,000 by 284. Furnaces thus increased = 1:4 48/49; less than quintupled; the tons = 1:405 15/17. (Comp. on the relation over a series of years loc. cit. Notebook p. 12.) [41]

Glass manufacturing, among other things, best shows how dependent [is] the progress of science on manufactures. On the other side e.g. the invention of quadrants arose from the needs of navigation, parliament offered a prize for inventions.

8 cotton machines, which cost £5,000 in 1825, were sold in 1833 for £300. (On cotton spinning, see loc. cit. p. 13, Notebook.) [42]

‘A first rate cotton spinning factory cannot be built, filled with machinery, and fitted with gas work and steam engine, under £100,000. A steam engine of one hundred horse power will turn 50,000 spindles, which will produce 62,500 miles of fine cotton-thread per day. In such a factory, 1,000 persons will spin as much thread as 250,000 persons could without machinery. McCulloch estimates the number in Britain at 130,000.’ (p. 218, loc. cit.)

##### Origin of free wage labour. Vagabondage. Tuckett

‘Where there are no regular roads, there can hardly be said to be a community; the people could have nothing in common.’ (p. 270. Tuckett loc. cit.)

‘Of the produce of the earth, useful to men, 99/100 are the produce of men.’ (loc. cit. p. 348.)

‘When slavery or life-apprenticeship was abolished, the labourer became his own master and was left to his own resources. But if without sufficient employment etc., men will not starve whilst they can beg or steal; consequently the first character the poor assumed was that of thieves and mendicants.’ (p. 637 note, Vol. II, loc. cit.) ‘One remarkable distinction of the present state of society, since Elizabeth, is that her poor law was especially a law for the enforcement of industry, intended to meet the mass of vagrancy that grew out of the suppression of the monasteries and the transition from slavery to free labour. As example, the 5th act of Elizabeth, directing households using half a plough of land in tillage, to require any person they might find unemployed, to become their apprentice in husbandry, or in any art or mystery; and, if unwilling, to bring him before a justice, who was almost compelled to commit him to ward until he consented to be bound. Under Elizabeth, out of every 100 people, 85 were required for the production of food. At present, not a lack of industry, but a profitable employment … The great difficulty then was to overcome the propensity of idleness and vagabondage, not to procure them remunerative occupation. During this reign there were several acts of the legislature to enforce the idle to labour.’ (p. 643, 644. Vol. II, loc. cit.)

‘Fixed capital, when once formed, ceases to affect the demand for labour, but during its formation it gives employment to just as many hands as an equal amount would employ, either of circulating capital, or of revenue.’ (p. 56. John Barton, Observations on the Circumstances which Influence the Condition of the Labouring Classes of Society, London, 1817.)

##### Blake on accumulation and rate of profit. (Shows that prices etc. not indifferent because a class of mere consumers does not at the same time consume and reproduce.) – Dormant capital

‘The community consists of two classes of persons, one, which consumes and reproduces, the other, which consumes without reproduction. If the entire society consisted of producers, then of little consequence at what price they exchanged their commodities among one another; but those who are only consumers form too numerous a class to be overlooked. Their power of demanding arises from seats, mortgages, annuities, professions and services of various descriptions rendered to the community. The higher the price at which the class of consumers can be made to buy, the greater will be the profit of the producers upon the mass of commodities which they sell to them. Among these purely consuming classes, the government takes up the most prominent station.’ (W. Blake, Observations on the Effects Produced by the Expenditure of Government during the Restriction of Cash Payments, London, 1823, p. 42, 43.) In order to show that the capital lent to the state is not necessarily such as was previously employed productively – and we are concerned here only with the admission that a part of capital is always dormant – Blake says: ‘The error lies in the supposition (1) that the whole capital of the country is fully employed; (2) that there is immediate employment for successive accumulations of capital as it accrues from saving. I believe there are at all times some portions of capital devoted to undertakings that yield very slow returns and slender profits, and some portions lying wholly dormant in the form of goods, for which there is no sufficient demand … Now, if these dormant portions and savings could be transferred into the hands of government in exchange for its annuities, they would become sources of new demand, without encroaching upon existing capital.’ (p. 54, 55 loc. cit.) ‘Whatever amount of produce is withdrawn from market by the demand of the saving capitalist, is poured back again, with addition, in the goods that he reproduces. The government, by contrast, takes it away from consumption without reproduction … Where savings are made from revenue, it is clear that the person entitled to enjoy the portion saved is satisfied without consuming it. It proves that the industry of the country is capable of raising more produce than the wants of the community require. If the quantity saved is employed as capital in reproducing a value equivalent to itself, together with a profit, this new creation, when added to the general fund, can be drawn out by that person alone who made the savings, i.e. by the very person who has already shown his disinclination to consume … If everyone consumes what he has a right to consume, there must of necessity be a market. Whoever saves from his revenues, foregoes this right, and his share remains undisposed of. Should this spirit of economy be general, the market is necessarily overstocked, and it must depend on the degree, to which this surplus accumulates, whether it can find new employments as capital.’ (56, 57.) (Cf. this work generally in the section on accumulation.) (Cf. Notebook p. 68 and p. 70, where it is shown that the rate of profits and wages rose owing to prices, caused by war demand, without any respect ‘to the quantity of land taken last into cultivation’.) ‘During the revolutionary war the market rate of interest rose to 7, 8, 9 and even 10%, although during the whole time lands of the lowest quality were cultivated.’ (loc. cit. p. 64–6.) ‘The rise of interest to 6, 8, 10 and even 12% proves the rise of profit. The depreciation of money, supposing it to exist, could not change the relation of capital and interest. If £200 are worth only £100; £10 interest worth only £5, whatever affected the value of the principal would equally affect the value of profits. It could not alter the relation between the two.’ (p. 73.) ‘Ricardo’s reasoning, that the price of wages cannot make the prices of commodities rise, does not apply to a society where a large class are not producers.’ (loc. cit.) ‘More than the just share is obtained by the producers at the expense of that portion, which of right belongs to the class who are only consumers.’ (74.) This of course important, since capital exchanges not only for capital, but also for revenue, and each capital can itself be eaten up as revenue. Still, this does not affect the determination of profit in general. Under the various forms of profit, interest, rent, pensions, taxes etc., it may be distributed (like a part of wages even) under different titles among different classes of the population. They can never divide up among them more than the total surplus value of the total surplus product. The ratio in which they distribute it is of course economically important; [but] does not affect the question before us.

‘If the circulation of commodities of 400 million required a currency of 40 million, and this proportion of 1/10 were the due level, then, if the value of the commodities to be circulated grows to 450 million, from natural causes, the currency, in order to continue at its level, would have to grow to 45 million, or the 40 million must be made to circulate with such increased rapidity, by banking or other improvements, as to perform the functions of 45 million … such an augmentation, or such rapidity, the consequence and not the cause of the increase of prices.’ (W. Blake. loc. cit., p. 80 seq. cf. Notebook p. 70.)

‘The upper and middle class of Rome gained great wealth by Asiatic conquest, but not being created by commerce or manufactures, it resembled that obtained by Spain from her American colonies.’ (p. 66 Vol. I, Mackinnon, History of Civilisation, London, 1846, Vol. I.)

##### Domestic agriculture at the beginning of the sixteenth century. Tuckett

‘In the fifteenth century, Harrison asserts’ (see also Eden), [43] ‘that the farmers are barely able to pay their rents without selling a cow, or a horse, or some of their produce, although they paid at the most £4 for a farm … The farmer in these times consumed the chief part of the produce to be raised, his servants taking their seats with him at his table … The principal materials for clothing were not bought, but were obtained by the industry of each family. The instruments of husbandry were so simple that many of them were made, or at least kept in repair, by the farmer himself. Every yeoman was expected to know how to make yokes or bows, and plough gear; such work employed their winter evenings.’ (p. 324, 325 loc. cit. Tuckett, Vol. II.)

##### Profit. Interest. Influence of machinery on the wage fund. Westminster Review

Interest and Profit: ‘Where an individual employs his own savings productively, the remuneration of his time and skill – agency for superintendence (profit further includes the risk to which his capital may have been exposed in his particular business); and the remuneration for the productive employment of his savings, Interest. The whole of this remuneration, Gross Profit; where an individual employs the savings of another, he obtains the agency only. Where one individual lends his savings to another, only the interest or the net profit.’ (Westminster Review, January 1826, p. 107, 108.) Thus here interest = net profit = remuneration for the productive employments of savings; the actual profit the remuneration for the agency for superintendence during his productive employment. The same philistine says: ‘Every improvement in the arts of production, that does not disturb the proportion between the portions devoted to capital and not devoted to the payment for wages, is attended with an increase of employment to the labouring classes: every fresh application of machinery and horse labour is attended with an increase of produce and consequently of capital; to whatever extent it may diminish the ratio which that part of the national capital forming the fund for the payment of wages bears to that which is otherwise employed, its tendency is not to diminish but to increase the absolute amount of that fund and hence to increase the quantity of employment.’ (loc. cit. p. 123.)

##### [Money as measure of values and yardstick of prices. Critique of theories of the standard measure of money.]

The role of money as measure, as well as, secondly, the fundamental law that the mass of the circulating medium, at a definite velocity of circulation, is determined by the prices of the commodities and by the mass of commodities circulating at definite prices, or by the total price, the aggregate amount of commodities, which is itself in turn determined by two circumstances: (1) the level of the commodity price; (2) the mass of circulating commodities at definite prices; further, (3) the law that money as medium of circulation becomes coin, mere vanishing moment, mere symbol of the values it exchanges – all this leads to more particular aspects which we shall develop only when and in so far as they coincide with more complicated economic relations, credit circulation, exchange rate etc. It is necessary to avoid all detail, and where detail must be brought in, it is to be brought in only at the point where it loses the elementary character.

First of all, money circulation, as the most superficial (in the sense of: driven out onto the surface) and the most abstract form of the entire production process, is in itself quite without content, except in so far as its own formal distinctions, precisely the simple aspects developed in section II, make up its content. It is clear that simple money circulation, regarded in itself, is not bent back into itself, [but] consists of an infinite number of indifferent and accidentally adjacent movements. The coin, e.g., may be regarded as the point of departure of money circulation, but there is no law of any reflux back to the coin except for depreciation through wear and tear, which necessitates melting-down and new issue of coins. This concerns only the material side and does not at all form a moment of circulation itself. Within circulation itself, the point of return may be different from the point of departure; in so far as it bends back into itself, money circulation appears as the mere appearance of a circulation going on behind it and determining it, e.g. when we look at the money circulation between manufacturer, worker, shopkeeper and banker. Furthermore, the factors which affect the mass of commodities thrown into circulation, the rise and fall of prices, the velocity of circulation, the amount of simultaneous payments etc., are all circumstances which lie outside simple money circulation itself. They are relations which express themselves in it; it provides the names for them, as it were; but they are not to be explained by its own differentiation. Different metals serve as money, and they have a different and changing value relation to one another. Thus the question of the double standard etc. enters, which takes on world-historical forms. But it takes them on, and the double standard itself enters, only through external trade, hence, to be usefully examined, supposes the development of much higher relations than that of the simple money relation.

Money as the measure of value is not expressed in amounts of bullion, but rather in accounting money, arbitrary names for fractional parts of a specific amount of the money-substance. These names can be changed, the relation of the coin to its metallic substance can be changed, while the name remains the same. Hence counterfeiting, which plays a great role in the history of states. Further, the different kinds of money in various countries. This question [is of] interest only in exchange rate. [44]

Money is a measure only because it is labour time materialized in a specific substance, hence itself value, and, more particularly, because this specific materiality counts as its general objective one [allgemeingegenständliche], as the materiality of labour time as such, as distinct from its merely particular incarnations; hence because it is an equivalent. But since, in its function as measure, money is only an imagined point of comparison, only needs to exist ideally – only the ideal transposition of commodities into their general value-presence takes place –; since, further, in this quality as measure it figures first as accounting coin, and I say a commodity is worth so many shillings, francs etc., when I transpose it into money; this has given rise to the confused notion of an ideal measure, developed by Steuart and refurbished at various periods, even recently, in England, as a profound discovery. Namely in this sense, that the names, pound, shillings, guinea, dollar etc., which count as accounting units are not specific names for specific quantities of gold, silver etc., but merely arbitrary points of comparison which do not themselves express value, no definite quantity of objectified labour time. Hence the whole nonsense about fixing the price of gold and silver – price understood here as the name by which fractional parts are called. An ounce of gold now divided into £3 17s. 10d. This is called fixing the price; it is, as Locke correctly remarks, only fixing the name of fractional parts of gold and silver etc. Expressed in itself, gold, silver is naturally equal to itself. An ounce is an ounce, whether I call it £3 or £20. In short, this ideal measure in Steuart’s sense means this: if I say commodity A is worth £12, commodity B 6, commodity C 3, then their relation to one another = 12:6:3. Prices express only the relations in which they are exchanged for one another. 2B are exchanged for 1A and 1 1/2B for 3C. Now, instead of expressing the relation of A, B, C in real money, money which itself has value, is value, could I not, instead of the £ which expresses a specific mass of gold, just as well take any name you like, without content (this means, here, ideally), e.g. mackerels? A = 12 mackerels; B = 6M, C = 3M. This word M is here only a name, without any relation to a content belonging to itself. Steuart’s example with a degree, line, second, proves nothing; for although degree, line, second have changing magnitudes, they are not merely names, but rather always express the fractional part of a specific magnitude of space or of time. They thus have in fact a substance. The fact that money in the role of measure functions only as something imagined is here transformed into it supposedly being any imagined thing you like, a mere name, namely a name for the numerical value-relation. In that case, however, it would be correct to express no names at all, but merely a numerical relation, for the whole affair comes down to this: I obtain 6B for 12A, 3C for 6B; this relation can also be expressed in this way, A = 12x, B = 6x, C = 3x, where the x is itself only a name for the relation of A:B and B:C. The mere, unnamed numerical relation would not do. For A:B = 12:6 = 2:1, and B:C = 6:3 = 2:1. Hence C = 1/2. Hence B = 1/2, hence B = C. Hence A = 2 and B = 2; hence A = B.

Let me take any price list, e.g. potash, 35s. the ton; cocoa, lb., 60s.; iron (bars) (p. ton) 145s. etc. In order to have the relation of these commodities to one another, not only can I forget the silver in the shilling; the numbers alone, 35, 60, 145 suffice to define the reciprocal value relations of potash, cocoa, iron bars. Undenominated numbers now suffice; and not only can I give their unit, 1, any name, regardless of any value; I need not give it any name at all. Steuart insists that I must give it one or another name, but that this name then, as mere arbitrary name of the unit, as mere marking of proportion itself, cannot be fixed to any portion of the quantity of gold, silver or any other commodity.

With every measure, as soon as it serves as point of comparison, i.e. as soon as the different entities to be compared are put into a numerical relation to the measure as unit, and are now related to one another, the nature of the measure becomes irrelevant and vanishes in the act of comparison itself; the unit of measure has become a mere unit of numbers; the quality of this unit has vanished, e.g. that it is itself a specific magnitude of length or of time or of an angle. But is it only when the different entities are already presupposed as measured that the unit of measure marks only proportion between them, thus e.g. in our case the proportion of their values. The accounting unit not only has different names in different countries; but is the name for different fractional parts of an ounce of gold, e.g. But the exchange rate reduces all of them to the same unit of weight of gold or silver. Thus if I presuppose the various magnitudes of commodities, e.g. as above, = 35s., 60s., 145s., then, to compare them, since the 1 is presupposed as equal in all of them, since they have been made commensurable, it is wholly superfluous to bring in the observation that s. is a specific quantity of silver, the name for a specific amount of silver. But, as mere numerical magnitudes, as amounts of any unit of the same name, they only become comparable to one another, and only express proportions towards one another, when each individual commodity is measured with the one which serves as unit, as measure. But I can only measure them against one another, only make them commensurable, if they have a unit – the latter is the labour time contained in both. The measuring unit must therefore [be] a certain quantity of a commodity in which a quantity of labour is objectified. Since the same quantity of labour is not always expressed in the same quantity of e.g. gold, it follows that the value of this measuring unit itself variable. But, in so far as money is regarded only as measure, this variability is no obstacle. Even in barter, to the extent that it is somewhat developed as barter, i.e. is a repeated, normal operation, not merely an isolated act of exchange, some other commodity appears as measuring unit, e.g. cattle with Homer. Among the savage Papuans of the coast, who, in order ‘to obtain a foreign article, barter 1 or 2 of their children, and if they are not to hand, borrow those of their neighbours, promising to give their own in exchange, when they come to hand, this request being rarely refused’, there exists no measure for exchange. The only side of exchange which exists for the Papuan is that he can obtain the alien thing only by dispossessing himself of something he possesses. This dispossession [Entäusserung] itself is regulated for him by nothing but his fancy on one side, and the scope of his movable possessions on the other. In the Economist of 13 March 1858, we read, in a letter addressed to the editor: ‘As the substitution in France of gold for silver in the coinage (which has been the principal means hitherto of absorbing the new discoveries of gold) must be approaching its completion, particularly as less coinage will be wanted for a stagnant trade and reduced prices, we may expect ere long that our fixed price of £3 17s. 10 1/2d. an ounce will attract the gold here.’ [45] Now what does this, our ‘fixed price of an ounce’ of gold, mean? Nothing other than that a certain aliquot part of an ounce is called pence, a certain multiple of this penny-weight of gold a shilling, and a certain multiple of this shilling-weight of gold a pound? Does the gentleman imagine that in other countries the golden Guilder, the Louis d’or etc. do not likewise signify a specific quantity of gold, i.e. that a specific quantity has a fixed name? and that this is an English privilege? or a speciality? That, in England, a monetary coin expressed in gold is more than a monetary coin, and in other countries, less? It would be interesting to know what this noble spirit imagines the exchange rate to be.

What leads Steuart astray is this: the prices of commodities express nothing but the relations in which they are exchangeable for one another, the proportions in which they exchange for one another. These proportions given, I can call the unit any name whatever, because the undenominated abstract number would suffice, and instead of saying that this commodity = 6 stivers, the other = 3 etc., I could say this one = 6 ones, the other = 3; I would not have to give the unit any name at all. Since the numerical relation is all that matters at that point, I can give it any name whatever. But it is already presupposed here that these proportions are given, that the commodities have previously become commensurable magnitudes. As soon as magnitudes have once been posited as commensurable, their relations become simple numerical relations. Money appears as measure, and a specific quantity of the commodity in which it represents itself appears as measuring unit, precisely in order to find the proportions, and to articulate and to handle commodities as commensurable ones. This real unit is the labour time relatively objectified in them. However, it is labour time itself posited as general. The process by which values within the money system are determined by labour time does not belong in the examination of money itself, and falls outside circulation; proceeds behind it as its effective base and presupposition. The question here could only be this: instead of saying this commodity is = to one ounce of gold, why does one not say directly it is = to x labour time, objectified in the ounce of gold? Why is labour time, the substance and measure of value, not at the same time the measure of prices, or, in other words, why are price and value different at all? Proudhon’s school believe it a great deed to demand that this identity be posited and that the price of commodities be expressed in labour time. The coincidence of price and value presupposes the equality of demand and supply, exchange solely of equivalents (hence not of capital for labour) etc.; in short, formulated economically, it reveals at once that this demand is the negation of the entire foundation of the relations of production based on exchange value. But if we suppose this basis suspended, then on the other side the problem disappears again, which exists only of it and with it. That the commodity in its unmediated presence as use value is not value, is not the adequate form of value = that it is [the adequate form of value] as an objective other, or that it is this as equated to another object; or, that value possesses its adequate form in a specific object as distinct from another. Commodities, as values, are objectified labour; the adequate value must therefore itself appear in the form of a specific thing, as a specific form of objectified labour.

What do we do in fact when we compare £1 of the fifteenth century with £1 of the eighteenth? Both are the same mass of metal (each = 20s.), but of a different value; since the metal was then worth 4 times as much as now. We say therefore that, compared with today, the livre was = 4 times the mass of metal it contains today. And one could imagine that the livre had remained unchanged, but had been = 4 real livres of gold then, only = 1 today. The matter would be correctly comparable not in regard to the quantity of metal contained in a livre, but rather in regard to its value; this value, however, in turn expresses itself quantitatively in such a way that 1/4 livre gold, then, = 1 livre gold today. Well; the livre identical, but at that time = 4 real livres of gold (by today’s value) and now only = 1. If gold falls in value, and its relative fall or rise as regards other articles is expressed in their price, then, instead of saying that an object which cost £1 of gold before now costs 2, it could be said that it still costs 1 pound, but 1 pound is now worth 2 real livres of gold etc.; i.e. 1 livre of 2 real gold livres etc. Instead of saying: I sold this commodity yesterday at £1, today I sell it at £4, I might say that I sell it at £1, but yesterday at 1 pound of 1 real pound, today at 1 pound of 4 real pounds. The remaining prices all follow by themselves as soon as the relation of the real bar to the imaginary one is established; but this simply the comparison between the past value of the bar and its present one. The same as if we calculated everything in the £ of the fifteenth century for instance. This Berber or Negro does the same thing that every historian must do who pursues one kind of coin, one accounting name for a coin of the same metallic content, from one century to the next; if he computes it in contemporary money, he must equate it to more or less gold depending on its changing value in different centuries. [49] It is semi-civilized man’s effort to establish an unchanging value for the unit of money, for the mass of metal which counts as measure; to fix this value, also, as a constant measure. But at the same time, the cleverness to know that the bar has changed its real value. With the small number of commodities which this Berber has to measure, and with the vigour of tradition among the uncivilized, this complicated method of calculating is not as difficult as it looks.

1 ounce is = £3 17s. 10 1/2d., i.e. not quite = £4. But for convenience’s sake let us assume it to be exactly = £4. Then 1/4 of an ounce of gold therefore obtains the name pound, and serves under this name as accounting coin. But this pound changes its value, partly relative to the value of other commodities which change their value, partly in so far as it is itself the product of more or less labour time. The only firm thing about it is the name, and the quantity, the fractional part of the ounce, of the weight-unit of gold, whose baptismal name it is; which is contained, thus, in one piece of money, called one pound.

The savage wants to hold it constant as unchangeable value, and thus the quantity of metal it contains changes for him. If the value of gold falls by 100%, then the pound is the measure of value for him as before; but a pound of 2/4 ounces of gold etc. The pound for him always equals a mass of gold (iron) which has the same value. But since this value changes, it sometimes equals a greater, sometimes a smaller quantity of real gold or iron, depending on whether more or less of them must be given in exchange for other commodities. He compares the contemporary value with the past value, which latter counts as standard for him, and survives only in his imagination. Thus, instead of calculating in 1/4 ounce of gold, whose value changes, he calculates in the value which 1/4 ounce of gold previously had, hence in an imaginary unchanged 1/4 ounce-value, which expresses itself, however, in varying quantities. On one side the effort to establish a fixed value for the value-standard; on the other side, the cleverness of nevertheless avoiding trouble by making a detour. But it is altogether absurd to take this accidental displacement, this way in which semi-savages have assimilated the measurement of values in money, forced on them from the outside, by first displacing it and then getting themselves straight again in the displacement, and to regard this as an organic historical form, or even to erect it as a higher form compared to more developed relations. These savages also take a quantity, the iron bar, as point of departure; but they hold fast to the value which this traditionally had, as accounting unit etc.

This question achieved significance in the modern economy chiefly owing to two circumstances: (1) It has been experienced at various times, e.g. in England during the Revolutionary War [50] that the price of raw gold rose above the price of minted gold. This historic phenomenon thus seemed irrefutably to prove that the names which are given to certain fractional weight-parts of gold (precious metal), pound, shilling, pence etc., by some inexplicable process act in an independent way towards the substance of which they are the name. How else could an ounce of gold be worth more than the same ounce of gold minted in £3 17s. 10 1/2d.? Or how could an ounce of gold be worth more than 4 livres of gold, if livre is merely the name for 1/4 ounce? On closer inspection it was found, however, that the coins which circulated under the name pound in fact no longer contained the normal metallic content, so that, for instance, 5 circulating pounds in fact weighed only 1 ounce of gold (of the same refinement). Since a coin which allegedly represented 1/4 ounce of gold (thereabouts) in fact represented only 1/5, it was very simple that the ounce = 5 of this kind of circulating £; hence that the value of the bullion price rose above the mint price, in that in fact no longer 1/4 but merely 1/5 of an ounce of gold was called pound, represented money, had that name; was merely the name, now, for 1/5 of an ounce. The same phenomenon took place when, although the metal content of the circulating coins had not fallen below their normal measure, they circulated at the same time as depreciated paper money, while to melt them down and to export them was prohibited. In that case, the 1/4 ounce of gold circulating in the form of £ shared in the depreciation of the notes; a fate from which gold in bars was exempt. * The fact was again the same; the accounting name, pound, had ceased to be the name for 1/4 ounce, became the name for a lesser amount. Thus the ounce equalled e.g. 5 of such pounds. This means, then, that the bullion price rose above the mint price. These or analogous historical phenomena, all capable of equally simple solution and all belonging to the same series, led therefore to the notion of the ideal measure, or, that money as measure was only a point of comparison, not a specific quantity. Hundreds of volumes have been written about this case in England in the past 150 years.

* The mint price can also be raised above the bullion price within a country by the mintage.

That a specific sort of coin should rise above its bullion content is not in itself something strange, since new labour (to give it form) is added to the coin. But regardless of that, it happens that the value of a specific sort of coin rises above its bullion content. This is of no economic interest whatever, and has as yet led to no economic studies. It means nothing more than that, for certain purposes, gold and silver was requisite in precisely this form, say of British pounds or of Spanish dollars. The directors of the Bank had, of course, a particular interest in proving that the value of notes had not fallen, but rather that of gold had risen. As to the last question, this can be treated only later.