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• Preface By Frederick Engels
• Volume III. the Process of Capitalist Production As a Whole.
• Part I.: The Conversion of Surplus-value Into Profit and of the Rate of Surplus-value Into the Rate of Profit.
• Chapter I.: Cost Price and Profit.
• Chapter II.: The Rate of Profit.
• Chapter III.: The Relation of the Rate of Profit to the Rate of Surplus-value.
• Chapter IV.: The Effect of the Turn-over On the Rate of Profit.
• Chapter V.: Economies In the Employment of Constant Capital.
• I. General Economies.
• II. Economies In the Conditions of Labor At the Expense of the Laborers.
• III. Economies In the Generation of Power, Transmission of Power, and Buildings.
• IV. Utilisation of the Excrements of Production.
• V. Economies Due to Inventions.
• Chapter VI.: The Effect of Fluctuations In Price.
• I. Fluctuations In the Price of Raw Materials, and Their Direct Effects On the Rate of Profit.
• II. Appreciation, Depreciation, Release, and Tie-up of Capital.
• III. General Illustration. the Cotton Crisis of 1861-1865.
• Chapter VII.: Additional Remarks.
• Part II.: Conversion of Profit Into Average Profit.
• Chapter VIII.: Different Composition of Capitals In Different Lines of Production and Resulting Differences In the Rates of Profit.
• Chapter IX.: Formation of a General Rate of Profit (average Rate of Profit) and Transformation of the Values of Commodities Into Prices of Production
• Chapter X.: Compensation of the Average Rate of Profit By Competition. Market Prices and Market Values. Surplus-profit.
• Chapter XI.: Effects of General Fluctuations of Wages On Prices of Production.
• Chapter XII.: Some After Remarks.
• I. Causes Implying a Variation of the Price of Production.
• II. Price of Production of Commodities of Average Composition.
• III. Fluctuations For Which the Capitalist Makes Allowance.
• Part III.: The Law of the Falling Tendency of the Rate of Profit.
• Chapter XIII.: The Theory of the Law.
• Chapter XIV.: Counteracting Causes.
• I. Raising the Intensity of Exploitation.
• II. Depression of Wages Below Their Value.
• III. Cheapening of the Elements of Constant Capital.
• IV. Relative Overpopulation.
• V. Foreign Trade.
• VI. the Increase of Stock Capital.
• Chapter XV.: Unraveling the Internal Contradictions of the Law.
• I. General Remarks.
• II. Conflict Between the Expansion of Production and the Creation of Values.
• III. Surplus of Capital and Surplus of Population.
• IV. Supplementary Remarks.
• Part IV.: Transformation of Commodity-capital and Money-capital Into Commercial Capital and Financial Capital (merchant's Capital).
• Chapter XVI.: Commercial Capital.
• Chapter XVII.: Commercial Profit.
• Chapter XVIII.: The Turn-over of Merchant's Capital. the Prices.
• Chapter XIX.: Financial Capital.
• Chapter XX.: Historical Data Concerning Merchants' Capital.
• Part V.: Division of Profit Into Interest and Profits of Enterprise. the Interest-bearing Capital.
• Chapter XXI.: The Interest-bearing Capital.
• Chapter XXII.: Division of Profit. Rate of Interest. Natural Rate of Interest.
• Chapter XXIII.: Interest and Profit of Enterprise.
• Chapter XXIV.: Externalisation of the Relations of Capital In the Form of Interest-bearing Capital.
• Chapter XXV.: Credit and Fictitious Capital.
• Chapter XXVI.: Accumulation of Money-capital. Its Influence On the Rate of Interest.
• Chapter XXVII.: The Role of Credit In Capitalist Production.
• Chapter XXVIII.: The Medium of Circulation (currency) and Capital. Tooke's and Fullarton's Conception.
• I. Confounding the Definite Distinctions.
• II. Introducing the Question of the Quantity of Money Circulating Together In Both Functions.
• III. Introduction of the Question of the Relative Proportions of the Quantities of Currency Circulating In Both Functions and Thus In Both Spheres of the Process of Reproduction.
• Chapter XXIX.: The Composition of Banking Capital.
• Chapter XXX.: Money-capital and Actual Capital, I.
• Chapter XXXI.: Money-capital and Actual Capital. II. (continued.)
• 1. Conversion of Money Into Loan Capital.
• Conversion of Capital Or Revenue Into Money That Is Transformed Into Loan Capital.
• Chapter XXXII.: Money-capital and Actual Capital. III. (concluded.)
• Chapter XXXIII.: The Currency Under the Credit System.
• Chapter XXXIV.: The Currency Principle and the English Bank Laws of 1844.
• Chapter XXXV.: Precious Metals and Rates of Exchange.
• I. the Movements of the Gold Reserve.
• II. the Rate of Exchange.
• III. Rate of Exchange With Asia.
• IV. England's Balance of Trade.
• Chapter XXXVI.: Precapitalist Conditions.
• Interest In the Middle Ages.
• Part VI.: Transformation of Surplus Profit Into Ground-rent.
• Chapter XXXVII.: Preliminaries.
• Chapter XXXVIII.: Differential Rent. General Remarks.
• Chapter XXXIX.: The First Form of Differential Rent. ( Differential Rent I. )
• Chapter Xl.: the Second Form of Differential Rent. ( Differential Rent II. )
• Chapter Xli.: Differential Rent II.—FIRST Case: Constant Price of Production.
• Chapter Xlii.: Differential Rent II.—SECOND Case: Falling Price of Production.
• I. the Productivity of the Additional Investment of Capital Remains the Same.
• II. the Rate of Productivity of the Additional Capitals Decreases.
• III. the Rate of Productivity of the Additional Capitals Increases.
• Chapter Xliii.: Differential Rent No. II.—THIRD Case:  rising Price of Production.
• Chapter Xliv.: Differential Rent Even Upon the Worst Soil Under Cultivation.
• Chapter Xlv.: Absolute Ground-rent.
• Chapter Xlvi.: Building Lot Rent. Mining Rent. Price of Land.
• Chapter Xlvii.: Genesis of Capitalist Ground-rent.
• I. Introductory Remarks.
• II. Labor Rent.
• III. Rent In Kind.
• IV. Money Rent.
• V. Share Farming (metairie System) and Small Peasants' Property.
• Part VII.: The Revenues and Their Sources.
• Chapter Xlviii.: the Trinitarian Formula.
• Chapter Xlix.: a Contribution to the Analysis of the Process of Production.
• Chapter L.: the Semblance of Competition.
• Chapter Li.: Conditions of Distribution and Production.
• Chapter Lii.: the Classes.

II. Appreciation, Depreciation, Release, and Tie-up of Capital.

The phenomena analysed in this chapter require for their full development the credit-system and competition on the world-market, the latter being the basis and vital element of capitalist production. These more concrete forms of capitalist production can be comprehensively presented only after the general nature of capital is understood. Moreover, such a presentation lies outside of the scope of this work and belongs in its eventual continuation. Nevertheless, the phenomena mentioned in the title of this chapter may be discussed at this stage in a general way. They are interrelated among themselves, and at the same time touch upon the rate and mass of profits. They are entitled to consideration right here for the further reason that they create the impression that not only the rate, but also the mass of profit—which is actually identical with the mass of surplus-value—could increase or decrease independently of the movements of surplus-value, whether it be its mass or its rate.

Are we to consider the release and tie-up of capital on one side, its appreciation or depreciation on the other, as different phenomena?

The question is first: What do we mean by the release and tie-up of capital? Appreciation and depreciation explain themselves. They do not signify anything but that a certain given capital grows or declines in value as a result of general economic conditions of some sort, for we do not discuss any particular fate of some individual capital. They indicate, in short, that the value of the capital invested in production rises or falls, aside from the question of its self-expansion by means of the surplus-labor employed by it.

By the tie-up of capital we mean that a certain portion of the total value of the product must be reconverted into the elements of constant and variable capital, if production is to proceed on the same scale. By the release of capital we mean that a portion of that part of the total value of the product which had to be reconverted into constant or variable capital up to a certain time becomes disposable and superfluous, provided production is to continue on the same scale. This release or tie-up of capital is different from the release or tie-up of revenue. If the annual surplus-value of a certain capital C is equal to x, then a reduction in the price of commodities consumed by the capitalists would suffice to procure the same enjoyments as before by means of x - a. In other words, a portion of the revenue equal to a is released, and may serve either for the extension of consumption or the reconversion into capital (for the purpose of accumulation). Vice versa, if x + a is needed in order to continue the same scale of living, then this scale must either be reduced or a portion of revenue equal to a and previously accumulated must be drawn upon as revenue.

The appreciation or depreciation may strike either the constant, or the variable capital, or both. In the case of the constant capital it may affect either the fixed, or the circulating portion, or both.

In the case of the constant capital we have to consider the raw materials and auxiliary substances, including half-wrought articles, all of which we comprise here under the term raw materials, furthermore, machinery and other fixed capital.

We referred in the preceding analysis especially to variations in the price, or the value, of raw materials, and to their influence on the rate of profit. And we announced the general law that, other circumstances remaining the same, the rate or profit is inversely proportioned to the value of the raw materials. This is unconditionally true of a capital newly invested in any business enterprise, where the investment of capital, that is to say the conversion of money into productive capital, is just taking place.

But aside from this capital in process of new investment, a large portion of the already functioning capital is engaged in the sphere of circulation, while another portion is busy in the sphere of production. One portion exists on the market in the shape of commodities waiting to be converted into money; another exists in the shape of money of some kind waiting to be reconverted into elements of production, finally, a third portion exists in the sphere of production, either in the primitive form of means of production (raw materials, auxiliary substances, half-wrought articles purchased on the market, machinery and other fixed capital), or as products in process of manufacture. The effect of appreciation or depreciation of any of these depends in a large measure on the relative proportions of these things. Let us leave aside, for the sake of simplicity, all fixed capital, and let us consider only that portion of constant capital which consists of raw materials, auxiliary substances, partly wrought articles, and commodities in the making or in a finished state.

If the price of raw material, for instance of cotton, rises, then the price of those cotton goods which were made while cotton was cheaper—both half-wrought articles like yarn, and finished goods like cotton fabric—rises along with that of the rest. So does the value of the cotton held in stock and waiting to be worked up and that of the cotton in process of being worked. This last-named cotton then represents by indirection more labor-time than was incorporated in it, and consequently it adds more value than its own original one to the product which it goes to make up, and more than the capitalist paid for it.

If, then, a rise in the price of raw materials finds on the market a considerable quantity of finished commodities, whatever may be the state of their perfection, the value of these commodities rises, and consequently the value of the existing capital is enhanced. The same is true for the supply of raw materials in the hands of the producers. This appreciation of value may indemnify the individual capitalist, or even an entire sphere of capitalist production, for the loss caused by a fall in the rate of profit incidental to a rise in the price of raw materials, or it may even more than make good that loss. Without entering into the details of the effects of competition, we may state for the sake of completeness that, in the first place, when the supplies of raw material held in stock are considerable, they tend to oppose a rise in the price of raw materials at the place where they are produced; and in the second place, when the half-wrought articles and finished goods press very heavily upon the market, they prevent the price of these things from rising in proportion to the price of their raw materials.

The reverse takes place when there is a fall in the price of raw materials. Other circumstances remaining the same, it increases the rate of profit. The commodities on the market, the articles in the making, and the supplies of raw material depreciate in value and thereby counteract the accompanying rise in the rate of profit.

The effect of a variation in prices of raw materials becomes so much more marked, the smaller a quantity of supplies exists in the sphere of production and on the market, for instance at the close of a business year, when great masses of raw materials are delivered anew, as happens in agriculture after the harvest.

We start in this entire analysis from the supposition that a rise or a fall in prices are the expressions of actual variations in value. But since we are here concerned in the effects of such variations in price on the rate of profit, it matters little what is at the bottom of them. The present statements apply just as well in the case that prices rise or fall, not on account of variations in value, but of the influence of the credit-system, competition, etc.

Seeing that the rate of profit is the expression of the excess of the value of the product over the value of the total capital advanced, a rise of the rate of profit due to a depreciation of the advanced capital would be accompanied by a loss in the value of capital. And a lowering of the rate of profit due to an appreciation of the advanced capital might be accompanied by gains.

As for the other portion of constant capital, such as machinery, and fixed capital in general, the appreciation of values taking place in them, and referring mainly to buildings, real estate, etc., they cannot be discussed without an understanding of the theory of ground rent, and do not belong in this chapter, for this reason. But they have a general importance for the question of depreciation.

There are, in the first place, constant improvements which lower relatively the use-value, and therefore the exchange-value, of existing machinery, factory equipments, etc. This process has a dire effect especially during the first epoch of newly introduced machinery, before it has reached a certain stage of maturity, when it becomes continually antiquated before it has had time to reproduce its own value. This is one of the reasons for the irrational prolongation of the working time customary at such periods, of working with day and night shifts, in order that the value of the machinery may be reproduced in a shorter time without having to place the figures for wear and tear too high. On the other hand, if a short period of effectiveness of machinery (its short term of life compared to anticipated improvements) is not compensated in this way, then it yields too much of its value to the product by moral wear, so that it cannot compete even against hand-labor.15

When machinery, equipment of buildings, and fixed capital in general have reached a certain maturity, so that they remain unaltered in their basic construction, at least for an ordinary length of time, then a similar depreciation takes place in consequence of improvements in the methods of reproduction of this fixed capital. The value of machinery, etc., falls in that case, not because this machinery is rapidly crowded out and depreciated to a certain degree by new and more productive machinery, etc., but because it can be reproduced more cheaply. This is one of the reasons why large enterprises frequently do not flourish until they pass into the second hand, after their first proprietors have been bankrupted, so that their successors, who buy them cheaply, are enabled to begin with a smaller investment of capital at the very outset.

In the case of agriculture it is evident that the same causes which raise the price of the product or lower it must also raise or lower the value of capital, since this capital consists to a large degree of this product, such as grain, cattle, etc.

There still remains the variable capital for our consideration.

To the extent that the value of labor-power rises on account of a rise in the price of the means of existence required for its reproduction, or falls on account of a reduction of the value of these means of existence—and a rise or fall in the value of variable capital are but expressions of these two cases—a rise in surplus-value corresponds to such depreciation and a fall in surplus-value to such appreciation, assuming the length of the working-day to remain the same. But other circumstances—a release or tie-up of capital—may accompany such cases, and as we did not analyse them so far, we may briefly mention them now.

If wages fall in consequence of a depreciation of the value of labor-power (which may be accompanied even by a rise in the actual price of labor), then a portion of the capital hitherto invested in wages, is released. Variable capital is set free. For new investments of capital, this signifies a working with a higher rate of surplus-value. It takes less money than before to set in motion the same amount of labor, and in this way the unpaid portion of labor increases at the expense of the paid portion. But in the case of already invested capital not only the rate of surplus-value is raised, but a portion of the capital previously invested in wages is also released. It had been tied up until this time and formed a regular portion which had to be deducted from the proceeds of the product and advanced for wages, in order to perform the functions of variable capital, provided the business was to continue on its former scale. Now this portion becomes disposable and may be used for a new investment, either in the extension of the same business, or to perform a function in some other sphere of production.

Let us assume, for instance, that 500 p.st. were required at first to employ 500 laborers per week, and that now only 400 p.st. are needed for the same purpose. If the mass of value produced in either case was 1,000 p.st., then the mass of surplus-value produced per week in the first case was 500 p.st., and the rate of surplus-value 500/500, or 100%. But after the reduction of wages the mass of surplus-value will be 1,000-400, or 600 p.st., and its rate 600/400, or 150%. And this raising of the rate of profit is the only effect produced for any one who starts a new enterprise in this sphere of production with a variable capital of 400 p.st. and a corresponding constant capital. But in a business already existing when this takes place, the depreciation of the variable capital does not only increase the rate of surplus-value from 500 to 600 p.st., and the rate of surplus-value from 100 to 150%, but 100 p.st. of the variable capital are released and enabled to exploit more labor. The same amount of labor is then not alone advantageously exploited, but the release of 100 p.st. makes it possible to exploit more laborers with those 500 p.st. at the increased rate.

Now take the opposite case. Take it that the original proportion of division, with 500 laborers, was 400 v + 600 s, making 1,000, so that the rate of surplus-value was 150%. The laborer, in that case, received 4/5 p.st., or 16 shillings per week. Now, if in consequence of an appreciation of variable capital 500 laborers cost 500 p.st. per week, then each one of them will receive 1 p.st. per week, and 400 p.st. can employ only 400 laborers. If the same number of laborers as before is to be employed, then we must have 500 v + 500 s, or 1,000. The rate of surplus-value would have fallen from 150 to 100%, which is by one-third. If some new capital were now to be invested, the only effect felt by it would be this lower rate of surplus-value. Other circumstances remaining the same, the rate of profit would also have fallen, although not to the same extent. For instance, if c equals 2,000, we should have in the one case 2,000 c + 400 v + 600 s = 3,000. The rate of surplus-value would be 150%, the rate of profit 600/2400, or 25%. In the second case we should have 2,000 c + 500 v + 500 s = 3,000. The rate of surplus-value would be 100%, the rate of profit 500/2500, or 20%. However, for a capital already invested there would be a twofold effect. Only 400 laborers could be employed with 400 p.st., at a rate of surplus-value amounting to 100%. They would then produce only 400 p.st. of surplus-value. Furthermore, since a constant capital of 2,000 p.st. requires 500 laborers for its operation, 400 laborers could operate only a constant capital of 1,600 p.st. If production is to continue on the same scale as before and one-third of the machinery prevented from remaining idle, then the variable capital must be increased by 100 p.st., in order that 500 laborers may still be employed. And this can be accomplished only by tying up a hitherto disposable capital, so that a portion of the accumulation intended for an extension of production serves then merely for stopping a gap, or a portion reserved for revenue is added to the old capital. A variable capital increased by 100 p.st. produces then 100 p.st. less of surplus-value. More capital is required to employ the same number of laborers, and the surplus-value yielded up by each laborer is at the same time reduced.

The advantages resulting from a release, and the disadvantages resulting from a tie-up of variable capital, affect only capital already engaged and reproducing itself under certain determined conditions. So far as newly invested capital is concerned, the advantage on the one, or the disadvantage on the other side, are limited to a raising or lowering of the rate of surplus-value and a variation of the rate of profit accordingly, if not always in the same proportion.

The release and tie-up of variable capital, analysed in the foregoing, is the result of a depreciation or appreciation of the elements of variable capital, that is to say, of the cost of reproduction of labor-power. However, variable capital might also be released, if the development of the productivity, with the rate of wages unchanged, results in the possibility of getting along with fewer laborers for the operation of the same amount of constant capital. Vice versa, additional variable capital may be formed, if the productive power declines and more laborers are needed to operate the same mass of constant capital. On the other hand, if a portion of capital formerly employed in the capacity of variable capital is transferred to the constant capital, so that there is merely a different distribution between the components of the same capital, this has its influence on the rate of surplus-value and of profit, but does not belong in this discussion of the release and tie-up of capital.

We have already seen that constant capital may be released or tied up by a depreciation or appreciation of its component elements. Aside from this, it can be tied up only in the case that the productive power of labor increases (not to mention the case in which a portion of the variable is transferred to the constant capital), so that the same amount of labor creates a greater product and therefore operates a larger constant capital. The same may occur under certain circumstances when the productive power decreases, for instance in agriculture, so that the same quantity of labor requires more means of production, such as seeds, manure, drainage, etc., in order to produce the same output. Constant capital may be released without depreciation, when improvements, the harnessing of natural powers, etc., enable a constant capital of smaller value to perform the same technical services as those formerly performed by a constant capital of greater value.

We have seen in volume II that once that the commodities have been converted into money, sold, a certain portion of this money must be reconverted into the material elements of constant capital, and this in proportion to the technical nature of any given sphere of production. In this respect, the most important element in all lines—aside from wages, or variable capital—is the raw material, including the auxiliary substances, which are particularly important, in all lines of production that do not use any raw materials in the strict meaning of the term, for instance in mining and extractive industries in general. That portion of the price which has to make good the wear and tear of machinery plays mainly an ideal role in calculation, so long as the machine is at all in workable condition. It does not matter greatly whether it is paid and replaced by money to-day or to-morrow, or in any other section of the period of turn-over of the capital. It is different with the raw material. If the price of raw material rises, it may be impossible to make it good fully out of the price of the commodities after deducting the wages. Violent fluctuations of price therefore cause interruptions, great collisions, or even catastrophies in the process of reproduction. It is especially the products of agriculture, raw materials taken from organic nature, which are subject to such fluctuations of value in consequence of changing yields, etc., leaving aside altogether the question of the credit-system, for the present. The same quantity of labor may, in consequence of uncontrollable natural conditions, the favor or disfavor of seasons, etc., be incorporated in very different quantities of use-values, and a definite quantity of these use-values may have very different prices. If the value x is represented by 100 lbs. of the commodity a, then the price of one lb. of a equals x/100. If it is represented by 1,000 lbs., the price of one lb. is x/1000, etc. This is one of the elements in the fluctuations of the price of raw materials. A second element, which is mentioned at this point only for the sake of completeness, since competition and the credit-system are still outside of the scope of our analysis, is this: It is in the nature of the thing that vegetable and animal substances, which are dependent on certain laws of time for their growth and production, cannot be suddenly augmented in the same degree as, for instance, machines and other fixed capital, or coal, ore, etc., whose augmentation, assuming the natural requirements to be present, can be accomplished in a very short time in an industrial country. It is therefore impossible, and under a developed system of capitalist production even inevitable, that the production and augmentation of that portion of the constant capital which consists of fixed capital, machinery, etc., should run ahead of that portion which consists of organic raw materials, so that the demand for these last materials grows more rapidly than their supply, and their price rises in consequence. This rising of prices carries with it the following results: 1) A shipping of raw materials from great distances, seeing that the rising price covers greater freight rates; 2) an increase in their production, which, however, for natural reasons, will not be felt until the following year; 3) a using up of various hitherto unused accessories, and a better economising of waste. If this rise of prices begins to exert a marked influence on production and supply, the turning point has generally arrived at which the demand lets up on account of the protracted rise of the raw material and of all commodities made up of it, so that a reaction in the price of raw material takes place. Aside from convulsions due to the depreciation of capital in various forms, this reaction is also accompanied by other circumstances which will be mentioned immediately.

So much is evident from the foregoing: To the extent that capitalist production is developed, and with it the means of suddenly and permanently increasing that portion of the constant capital which consists of machinery, etc., and to the extent that accumulation is accelerated (as it is particularly in times of prosperity), to that extent does the relative over-production of machinery and other fixed capital increase, the relative underproduction of vegetable and animal raw materials become more frequent, the above described rise of their prices and the subsequent reaction more marked. And the revulsions increase correspondingly in frequency, so far as they are due to this violent fluctuation of one of the main elements of the process of reproduction.

Now, if these high prices collapse, because their rise had caused partly a falling off in the demand, partly an extension of production here, an importation of goods from remote and hitherto little noted or neglected regions of production in another place, and with them an excess of the supply over the demand, especially if this excess comes in with the old prices, then we have a result which offers various points of view. The sudden collapse of the price of raw materials checks their reproduction, and consequently the monopoly of the original producing countries, which are favored by the best conditions, is restored. It may be restored with certain limitations but still it is restored. The reproduction of the raw materials proceeds indeed, after the first impulse has been given, on an enlarged scale, especially in countries which have more or less of a monopoly of this production. But the basis on which production takes place after the extension of machinery, etc., and which, after some fluctuations, has to serve as the new point of departure, is very much enlarged by the occurrences of the last cycle of turn-over. At the same time the barely increased reproduction has been considerably checked in the secondary countries of supply. For instance, it can be easily shown by a reference to the export tables that, during the last thirty years (up to 1865) the production of cotton grows in India, whenever there has been a falling off in the American, and that there is after awhile a sudden drop and falling off in the Indian. During the period in which raw materials are high, the industrial capitalists get together in associations for the purpose of regulating production. So they did, for instance, after the rise of cotton prices in 1848, in Manchester, and a similar move was made in the production of flax in Ireland. But as soon as the immediate impulse has worn off, and the principle of competition reigns once more supreme, according to which one must "buy in the cheapest market" (instead of stimulating production in the most favored countries, as those associations attempt to do, without regard to the monetary price at which those countries may just happen to supply their product), the regulation of the supply is left once more to "prices." All thought of a common, far-reaching, circumspect control of the production of raw materials gives way once more to the belief that demand and supply will mutually regulate one another. And it must be admitted that such a control is on the whole irreconcilable with the laws of capitalist production, and remains for ever a platonic desire, or is limited to exceptional co-operation in times of great stress and helplessness.16 The superstition of the capitalists in this respect is so crude that even the factory inspectors lift their hands in surprise, in their reports. The variation of good and bad years, of course, leads at times to the production of cheaper raw materials. Aside from the direct effect of this on the extension of the demand, an added stimulant is found in the previously mentioned influence on the rate of profit. Thereupon the aforesaid process of a gradual overtaking of the production of raw materials by that of machinery, etc., is repeated on a larger scale. An actual improvement of raw materials in such a way that not only their quantity, but also their quality would come up to expectations, for instance supplying cotton of American quality from Indian fields, would necessitate a long continued, progressively growing, and steady European demand (quite aside from the economic conditions under which the Indian producer labors in his country). As it is, the sphere of production of raw materials is extended only convulsively, being now suddenly enlarged, and then violently contracted. All this, and the spirit of capitalist production in general, may be very well studied in the cotton crisis of 1861-65, which was further aggravated by the fact that raw materials were at times entirely missing which are one of the principal factors of reproduction. The price may also rise while there is an abundant supply, namely in the case that this abundance takes place under difficult conditions. Or, there may be an actual shortage of raw material. It was the last condition which originally prevailed in the cotton crisis.

The closer we approach in the history of production to our own times, so much more regularly do we find, especially in the essential lines of industry, the ever recurring fluctuation between a relative appreciation and the resulting depreciation of raw materials purloined from organic nature. The preceding statements will be verified by the following illustrations from reports of factory inspectors.

The moral of this story, which may also be deduced from other observations in agriculture, is that the capitalist system works against a rational agriculture, or that a rational agriculture is irreconcilable with the capitalist system, although technical improvements in agriculture are promoted by capitalism. But under this system, agriculture needs either the hands of the self-employing small farmer, or the control of associated producers.

We present now the following illustrations from the English factory reports.

According to R. Baker, factory reports for October, 1858, pages 56-61, the condition of business was then better. But the cycle of good and bad times was shortened with the increase of machinery, and to the extent that the demand for raw materials increases, the fluctuation in the conditions of business occur more frequently. For the time being confidence had been restored after the panic of 1857, and the panic itself seemed almost forgotten. Whether this improvement would be lasting, depended, in Baker's opinion, to a large extent on the price of raw materials. He saw indications that the maximum had already been reached, beyond which manufacture becomes less and less profitable, and finally ceases altogether to yield any profits. Taking the prosperous years in the worsted business, 1849 and 1850, it will be seen that the price of English carded wool was 13 d., and of Australian, 14 to 17 d. per lb., and that the average price of English wool, for the decade from 1841 to 1850, never exceeded 14 d., nor that of Australian 17 d. But at the beginning of the disastrous year 1857, Australian wool was quoted at 23 d. It fell in December, at the time of the worst panic, to 18 d., but rose once more in the course of the year 1858 to 21 d. English wool likewise began in 1857 with 20 d., rose in April and September to 21 d., fell in January, 1858 to 14 d., and rose subsequently to 17 d., so that it stood 3 d. per lb. higher than the average of the aforementioned 10 years. This shows, in Mr. Baker's opinion, that either the failures of 1857, which were due to similar prices, have been forgotten, or that barely enough wool is produced to keep the existing spindles running. Or the prices of fabrics may experience a lasting rise. But he has seen in his experience that spindles and frames multiplied in an incredibly short time, not only in numbers, but also in speed; that the English wool export to France rose at almost the same rate, while the average age of sheep in England and other countries was steadily reduced, since the population was rapidly increasing and breeders were trying to turn their stock into money as quickly as possible. He often was seriously alarmed, when he saw people, ignorant of these facts, invest their ability and their capital in enterprises whose success depended on the supply of a product which can be increased only according to certain organic laws. The conditions of supply and demand of all raw materials seems to explain to Mr. Baker many fluctuations in the cotton business as well as the condition of the English wool market in the fall of 1857 and the subsequent commercial crisis.17

The most flourishing time of the worsted industry of the West-Riding of Yorkshire was from 1849 to 50. This industry employed 29,246 persons in 1838, 37,000 persons in 1843, 48,097 in 1845, 74,891 in 1850. (Factory Reports, 1850, page 60.) This prosperity of the carded wool industry began to excite certain forebodings in October, 1850. In his report for April, 1851, sub-inspector Baker says in regard to Leeds and Bradford that the condition of business is very unsatisfactory. The carded wool spinners are rapidly losing the profits of 1850, and the majority of the weavers do not make much progress. He believes that more wool machinery is momentarily standing idle than ever before, and the flax spinners are likewise discharging laborers and stopping machinery. The cycles of the textile industry are very uncertain, and he thinks that people will soon realise that no proportion is observed between the productivity of the spindles, the quantity of raw materials, and the increase of population. (Page 52.)

The same is true of the cotton industry. In the same report for October, 1858, we read that, since the fixing of the hours of labor in factories, the amounts of raw material consumed, of production, and of wages in all textile industries have been reduced to a simple rule of three. The inspector quotes from a recent lecture by Mr. Payns, who was then mayor of Blackburn, on the cotton industry, in which the industrial statistics of that region were very accurately compiled. The mayor said in substance that every actual horse-power operates 450 self-actor spindles with preparatory spinning machinery, or 200 throstle spindles, or 15 looms for cloth 40 inches wide, with machinery for reeling, warping and smoothing. Every horse-power employs two and a half laborers in spinning, or 10 in weaving. Their average wages are fully 10½ shillings per capita per week. The worked up average numbers are Nos. 30-32 for the warp and Nos. 34-36 for the woof. Assuming the product of one week's spinning to be 13 ounces per spindle, the weekly output of yarn would be 824,700 lbs., which imply a consumption of 970,000 lbs., or 2,300 bales of cotton valued at 28,300 p.st. In a circle of five miles around Blackburn the weekly consumption of cotton amounted to 1,530,000 lbs., or 3,650 bales, at a cost-price of 44,625 p.st. This is one-eighteenth of the entire cotton spun in the United Kingdom, and one-sixteenth of the entire mechanical weaving.

The inspector says that according to the calculations of Mr. Payns the total number of cotton spindles in the United Kingdom would be 28,800,000, and it would require 1,432,080,000 lbs. of cotton to keep them going at full speed. But the cotton imports, after deducting the exports, amounted in 1856 and 1857 only to 1,022,576,832 lbs. so that there must have been a shortage of 409,503,168 lbs. Mr. Payns, who had the kindness to discuss this point with the inspector, held that a computation of the annual consumption of cotton, based on the consumption of the Blackburn district, would total up too high, on account of the difference, not only of the numbers spun, but also of the excellence of the machinery. He estimated the total consumption of cotton per year in the United Kingdom at 1,000 million lbs. But if he is correct, and there is actually a surplus-import of 22½ million lbs., then the inspector thinks that demand and supply are nearly balanced, without taking into account the additional spindles and looms which are about to be erected in Mr. Payns' own district, according to him, and the same applies probably to other districts as well. (Pages 59, 60.)

[15.][15] For illustrations see Babbage, among others. The usual expedient, a reduction of wages, is employed also in this instance, and so this continual depreciation works out quite contrary to the dreams of the harmonious brain of Mr. Carey.

[16.][16] Since the above was written (1865), competition on the world-market has been considerably intensified by the rapid development of industry in all civilized countries, especially in America and Germany. The fact that the rapidly and enormously growing productive forces grow beyond the control of the laws of the capitalist mode of exchanging commodities, inside of which they are supposed to move, this fact impresses itself nowadays more and more even on the minds of the capitalists. This is shown especially by two symptoms. First, by the new and general mania for a protective tariff, which differs from the old protectionism especially by the fact that now the articles which are capable of being exported are the best protected. In the second place it is shown by the trusts of manufacturers of whole spheres of production for the regulation of production, and thus of prices and profits. It goes without saying that these experiments are practicable only so long as the economic weather is relatively favorable. The first storm must upset them and prove, that, although production assuredly needs regulation, it is certainly not the capitalist class which is fitted for that task. Meanwhile the trusts have no other mission but to see to it that the little fish are swallowed by the big fish still more rapidly than before.—F. E.

[17.][17] It goes without saying that we do not, with Mr. Baker, explain the wool crisis of 1857 out of the disproportion between the raw material and the product. This disproportion was itself but a symptom, and the crisis was general.—F. E.