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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.

I. General Remarks.

WE have seen in the first part of this volume, that the rate of profit expresses the rate of surplus-value always lower than it actually is. We have now seen, that even a rising rate of surplus-value has a tendency to express itself in a falling rate of profit. The rate of profit would be equal to the rate of surplus-value only if c = O, that is, if the entire invested capital were paid out in wages. A falling rate of profit does not express a falling rate of surplus-value, unless the proportion of the value of the constant capital to the quantity of labor-power set in motion by it remains unchanged, or the amount of labor-power has increased relatively over the value of the constant capital.

Ricardo, under pretense of analysing the rate of profit, actually analyses only the rate of surplus-value, and he does so on the assumption that the working day is intensively and extensively a constant magnitude.

A fall in the rate of profit and a hastening of accumulation are in so far only different expressions of the same process as both of them indicate the development of the productive power. Accumulation in its turn hastens the fall of the rate of profit, inasmuch as it implies the concentration of labor on a large scale and thereby a higher composition of capital. On the other hand, a fall in the rate of profit hastens the concentration of capital and its centralisation through the expropriation of the smaller capitalists, the expropriation of the last survivers of the direct producers who still have anything to give up. This accelerates on one hand the accumulation, so far as mass is concerned, although the rate of accumulation falls with the rate of profit.

On the other hand, so far as the rate of self-expansion of the total capital, the rate of profit, is the incentive of capitalist production (just as this self-expansion of capital is its only purpose, its fall checks the formation of new independent capitals and thus seems to threaten the development of the process of capitalist production. It promotes overproduction, speculation, crises, surplus-capital along with surplus-population. Those economists who, like Ricardo, regard the capitalist mode of production as absolute, feel nevertheless, that this mode of production creates its own limits, and therefore they attribute this limit, not to production, but to nature (in their theory of rent). But the main point in their horror over the falling rate of profit is the feeling, that capitalist production meets in the development of productive forces a barrier, which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the finiteness and the historical, merely transitory character of capitalist production. It demonstrates that this is not an absolute mode for the production of wealth, but rather comes in conflict with the further development of wealth at a certain stage.

It is true that Ricardo and his school considered only the industrial profit, which includes interest. But the rate of ground-rent has likewise a tendency to fall, although its absolute mass increases, and it may also increase proportionately more than the industrial profit. (See Ed. West, who developed the law of ground-rent before Ricardo.) If we consider the total social capital C, and use p'' to indicate the industrial profit remaining after the deduction of interest and ground rent, i to indicate interest, and r to indicate ground-rent then s/C=p/C=(p''+i+r)/C=p''/C+i/C+r/C. We have seen that, while s, the total amount of surplus-value, is continually increasing in the course of capitalist development, nevertheless s/C is just as steadily declining, because C grows still more rapidly than s. Therefore it is no contradiction, that p'', i, and r, should be steadily increasing, each by itself, while s/C=p/C as well as p''/C, i/C, and r/C, each by itself, should ever decline, or that p'' should increase relatively more than i, or r more than p'', or, perhaps, more than p'' and i. With a rise in the total surplus-value or profit s = p, but a simultaneous fall in the rate of profit s/C=p/C, the proportional magnitude of the parts p'', i, and r, which make up s = p, may change at will within the limits set by the total amount of s, without thereby affecting the magnitude of s or s/C.

The mutual variation of p'', i and r is but a varying distribution of s among different classes. Consequently p''/C, i/C, and r/C, the rate of industrial profit, the rate of interest, and the rate of ground-rent to the total capital, may rise relatively to one another, while s/C, the average rate of profit, is falling. The only condition is that the sum of all three cannot exceed s/C. If the rate of profit falls from 50% to 25%, because the composition of a certain capital with a rate of surplus-value of 100% has changed from 50 c + 50 v to 75 c + 25 v, then a capital of 1,000 will yield a profit of 500 in the first case, and a capital of 4,000 will yield a profit of 1,000 in the second case. We see that s or p have doubled, while p' has fallen by one-half. And if that 50% was formerly divided into 20 profit, 10 interest, 20 rent, then p''/C = 20%, i/C = 10%, and r/C = 20%. If conditions remained the same after the change from 50% to 25%, then p'/C would be 10%, i/C would be 5%, and r/C = 10%. If, however, p'/C should fall to 3% and i/C to 4%, then r/C would rise to 13%. The proportional magnitude of r would have risen as against p'' and i, but nevertheless p', the rate of profit, would have remained the same. Under both assumptions, the sum of p'', i, and r would have increased, because it would have been produced by a capital of four times the size of the former. By the way, Ricardo's assumption that the industrial profit (plus interest) originally pockets the entire profit, is historically and logically false. It is rather the progress of capitalist production which, 1), places the whole profit at first hand at the disposal of the industrial and commercial capitalists for further distribution, and, 2), reduces rent to the excess over the profit. On this capitalist basis, rent further increases, so far as it is a portion of profit (that is, of the surplus-value produced by the total capital), while the specific portion of the product, which the capitalist pockets, does not.

The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the laboring population, when the rate of surplus-value, that is, the intensity of exploitation, is given; and no other limit but the intensity of exploitation, when the laboring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-product, which is that aliquot portion of the produced commodities, in which unpaid labor is materialised. It must never be forgotten, that the production of this surplus-value—and the reconversion of a portion of it into capital, or accumulation, forms an indispensable part of this production of surplus-value—is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoyment for capitalists. This would be overlooking the specific character of capitalist production, which reveals itself in its innermost essence.

The creation of this surplus-value is the object of the direct process of production, and this process has no other limits but those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplus-value has been produced. But this production of surplus-value is but the first act of the capitalist process of production, it merely terminates the act of direct production. Capital has absorbed so much unpaid labor. With the development of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. Now comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are below the prices of production, the laborer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital. The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power nor by the absolute consuming power, but by the consuming power based on antagonistic conditions of distribution, which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus-value on an enlarged scale. This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This internal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the condition of consumption rest. On this self contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.

If a certain rate of profit is given, the mass of profit depends on the magnitude of the advanced capital. Accumulation is then determined by that portion of this mass, which is reconverted into capital. This portion, in its turn, being equal to the profit minus the revenue consumed by the capitalists, will depend not merely on the value of this mass, but also on the cheapness of the commodities which the capitalist can buy with it, commodities which pass partly into his individual consumption, partly into his constant capital. (Wages are here assumed to be a given quantity.)

The mass of capital which the laborer sets in motion, whose value he preserves by his labor and reproduces in his product, is quite different from the value which he adds to it. If the mass of the capital equals 1,000, and the added labor 100, then the reproduced capital equals 1,100. If the mass equals 100 and the added labor 20, then the reproduced capital equals 120. In the first case the rate of profit is 10%, in the second 20%. And yet more can be accumulated out of 100 than out of 20. And thus the river of capital rolls on (aside from its depreciation by an increase of the productive power), or its accumulation does, not in proportion to the level of the rate of profit, but in proportion to the impetus which it already has. A high rate of profit, so far as it is based on a high rate of surplus-value, is possible when the working day is very long, although labor may not be highly productive. This is possible, because the wants of the laborers are very insignificant, and therefore the average wages very low, although labor itself unproductive. The low level of wages will have for its counterpart a lack of energy among laborers. Capital then accumulates slowly, in spite of the high rate of profits. Population stagnates and the working time, which the product costs, is long, while the wages paid to the laborer are small.

The rate of profit sinks, not because the laborer is less exploited, but, because less labor is employed in proportion to the employed capital in general.

If a falling rate of profit goes hand in hand with an increase in the mass of profits, as we have shown, then a larger portion of the annual product of labor is appropriated by the capitalist under the name of capital (as a substitute for consumed capital) and a relatively smaller portion under the name of profit. Hence the phantastic idea of the priest Chalmers, that the capitalists pocket so much more profits, the smaller the quantity of the annual product expended by them as capital. The state church then comes to their assistance in order to help them to consume the greater part of the surplus-product instead of capitalising it. The preacher confounds cause with effect. By the way, the mass of profits increases also at a small rate with the magnitude of the invested capital. However, this requires at the same time a concentration of capital, since the conditions of production then demand the employment of capital on a large scale. It likewise requires its centralisation, that is, a devouring of small capitalists by the great capitalists and decapitalisation of the former. It is but a second instance of separating the producers from their requirements of production, for these small capitalists still belong to the producers, since their own labor plays a role in this problem. Generally speaking, the labor of a capitalist stands in an inverse proportion to the size of his capital, that is, to his degree as a capitalist. This divorce of requirements of production here, and producers there, is inseparable from the nature of capital. It begins with the inauguration of primitive accumulation. (Vol. I, chap. XXVI), becomes a permanent process in the accumulation and concentration of capital, and expresses itself finally as a centralisation of already existing capitals in a few hands and a decapitalisation of many (a change in the method of expropriation). This process would soon bring about the collapse of capitalist production, if it were not for counteracting tendencies, which continually have a decentralising effect by the side of the centripetal ones.