Front Page Titles (by Subject) V. Foreign Trade. - Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole
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V. Foreign Trade. - Karl Marx, Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole 
Capital: A Critique of Political Economy. Volume III: The Process of Capitalist Production as a Whole, by Karl Marx. Ed. Federick Engels. Trans. from the 1st German edition by Ernest Untermann (Chicago: Charles H. Kerr and Co. Cooperative, 1909).
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V. Foreign Trade.
To the extent that foreign trade cheapens partly the elements of constant capital, partly the necessities of life for which the variable capital is exchanged, it tends to raise the rate of profit by raising the rate of surplus-value and lowering the value of the constant capital. It exerts itself generally in this direction by permitting an expansion of the scale of production. But by this means it hastens on one hand the process of accumulation, on the other the reduction of the variable as compared to the constant capital, and thus a fall in the rate of profit. In the same way the expansion of foreign trade, which is the basis of the capitalist mode of production in its stages of infancy, has become its own product in the further progress of capitalist development through its innate necessities, through its need of an ever expanding market. Here we see once more the dual nature of these effects. (Ricardo entirely overlooked this side of foreign trade.)
Another question, which by its special nature is really beyond the scope of our analysis, is the following: Is the average rate of profit raised by the higher rate of profit, which capital invested in foreign, and particularly in colonial trade, realises?
Capitals invested in foreign trade are in a position to yield a higher rate of profit, because, in the first place, they come in competition with commodities produced in other countries with lesser facilities of production, so that an advanced country is enabled to sell its goods above their value even when it sells them cheaper than the competing countries. To the extent that the labor of the advanced countries is here exploited as a labor of a higher specific weight, the rate of profit rises, because labor which has not been paid as being of a higher quality is sold as much. The same condition may obtain in the relations with a certain country, into which commodities are exported and from which commodities are imported. This country may offer more materialised labor in goods than it receives, and yet it may receive in return commodities cheaper than it could produce them. In the same way a manufacturer, who exploits a new invention before it has become general, undersells his competitors and yet sells his commodities above their individual values, that is to say, he exploits the specifically higher productive power of the labor employed by him as surplus-value. By this means he secures a surplus-profit. On the other hand, capitals invested in colonies, etc., may yield a higher rate of profit for the simple reason that the rate of profit is higher there on account of the backward development, and for the added reason, that slaves, coolies, etc., permit a better exploitation of labor. We see no reason, why these higher rates of profit realised by capitals invested in certain lines and sent home by them should not enter as elements into the average rate of profit and tend to keep it up to that extent.36 We see so much less reason for the contrary opinion, when it is assumed that such favored lines of investment are subject to the laws of free competition. What Ricardo has in mind as objections, is mainly this: With the higher prices realised in foreign trade, commodities are bought abroad and sent home. These commodities are sold on the home market, and this can constitute at best but a temporary advantage of the favored spheres of production over others. This aspect of the matter is changed, when we no longer look upon it from the point of view of money. The favored country recovers more labor in exchange for less labor, although this difference, this surplus, is pocketed by a certain class, as it is in any exchange between labor and capital. So far as the rate of profit is higher, because it is generally higher in the colonial country, it may go hand in hand with a low level of prices, if the natural conditions are favorable. It is true that a compensation takes place, but it is not a compensation on the old level, as Ricardo thinks.
However, this same foreign trade develops the capitalist mode of production in the home country. And this implies the relative decrease of the variable as compared to the constant capital, while it produces, on the other hand, an overproduction for the foreign market, so that it has once more the opposite effect in its further course.
And so we have seen in a general way, that the same causes, which produce a falling tendency in the rate of profit, also call forth counter-effects, which check and partly paralyse this fall. This law is not suspended, but its effect is weakened. Otherwise it would not be the fall of the average rate of profit, which would be unintelligible, but rather the relative slowness of this fall. The law therefore shows itself only as a tendency, whose effects become clearly marked only under certain conditions and in the course of long periods.
Before passing on to something new, we will, for the sake of preventing misunderstanding, repeat two statements, which we have substantiated at different times.
1) The same process, which brings about a cheapening of commodities in the course of development of the capitalist mode of production, also causes a change in the organic composition of the social capital invested in the production of commodities, and thereby lowers the rate of profit. We must be careful, then, not to confound the reduction in the relative cost of an individual commodity, including that portion of its cost which represents wear and tear of machinery, with the relative rise in the value of the constant as compared to the variable capital, although vice versa every reduction in the relative cost of the constant capital, whose material elements retain the same volume or increase in volume, tends to raise the rate of profit, in other words, tends to reduce the value of the constant capital to that extent as compared with the shrinking proportions of the employed variable capital.
2) The fact that the additional living labor contained in the individual commodities, which together make up the product of capital, stands in a decreasing proportion to the materials and instruments of labor consumed by them; the fact, that an ever decreasing quantity of additional living labor is materialised in them, because their production requires less labor to the extent that the productive power of society is developed,—this fact does not touch the proportion, according to which the living labor contained in the commodities is divided into paid and unpaid labor. On the other hand, although the total quantity of additional living labor contained in them decreases, the unpaid portion increases over the paid portion, either by an absolute, or by a proportional reduction of the paid portion; for the same mode of production, which reduces the total quantity of the additional living labor in the commodities, is accompanied by a rise of the absolute and relative surplus-value. The falling tendency of the rate of profit is accompanied by a rising tendency of the rate of surplus-value, that is, in the rate of exploitation. Nothing is more absurd, for this reason, than to explain a fall in the rate of profit by a rise in the rate of wages, although there may be exceptional cases where this may apply. Statistics do not become available for actual analyses of the rates of wages in different epochs and countries, until the conditions, which shape the rate of profit, are thoroughly understood. The rate of profit does not fall, because labor becomes less productive, but because it becomes more productive. Both phenomena, the rise in the rate of surplus-value and the fall in the rate of profit, are but specific forms through which the productivity of labor seeks a capitalistic expression,
[36.] Adam Smith was right in this respect, contrary to Ricardo, who said: "They contend the equality of profits will be brought about by the general rise of profits; and I am of opinion that the profits of the favoured trade will speedily submit to the general level. (Works, MacCulloch ed., p. 73.)