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CHAPTER XLIX.: A CONTRIBUTION TO THE ANALYSIS OF THE PROCESS OF PRODUCTION. - 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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A CONTRIBUTION TO THE ANALYSIS OF THE PROCESS OF PRODUCTION.
FOR the purposes of the following analysis we may leave out of consideration the distinction between the price of production and the value, since this distinction falls altogether to the ground, when, as is the case here, the value of the total annual product of labor is under discussion, in other words, the value of the product of the total social capital.
Profit (profit of enterprise plus interest) and rent are nothing but peculiar forms assumed by particular parts of the surplus-value of commodities. The magnitude of the surplus-value is the limit of the sum of parts, into which it may be divided. The average profit plus the rent are, therefore, equal to the surplus-value. It is possible that a part of the surplus labor contained in the commodities, and thus of the surplus-value, does not take part directly in the equalization tending toward an average rate of profit, so that a part of the value of commodities is not expressed at all in their price. But in the first place, this is balanced either by the fact that the rate of profit increases, when the commodities sold below their value form an element of the constant capital, or by the fact that profit and rent are represented by a larger product, when the commodities sold below their value pass over into that portion of the value which is consumed as revenue in the shape of articles for individual consumption. In the second place, the average movement strikes the balance. At any rate, even if a portion of the surplus-value is not expressed in the price and is lost so far as the formation of prices is concerned, the sum of average profit plus rent in their normal form can never be larger than the total surplus-value, although it may be smaller. Their normal form is conditioned upon wages corresponding to the value of labor-power. Even monopoly rent, to the extent that it is not a deduction from wages, and does not constitute a special category, must be indirectly always a part of the surplus-value. If it is not a part of the surplus price above the cost of production of the commodity itself, of which it is a constituent part, as in the case of differential rent, or a spare portion of the surplus-value of the commodity itself, of which it is a constituent part, above that portion of its own surplus-value which is measured by the average profit (as in the case of absolute rent), it is at least a part of the surplus-value of other commodities, that is, of commodities which are exchanged for this commodity, which has a monopoly price.
The sum of average profit plus ground-rent can never be greater than the magnitude of which they are the parts and which exists before they are so partitioned. It is, therefore, immaterial for our discussion, whether the entire surplus-value of the commodities, that is, all the surplus labor materialized in the commodities, is realized in their price or not. The surplus labor is not entirely realized for the simple reason that, owing to the continual change in the amount of socially necessary labor for the production of a certain commodity, a change arising out of the continual change in the productive power of labor, one portion of the commodities is always produced under abnormal conditions and must, therefore, be sold below its individual value. At any rate, profit plus rent equal the total realized surplus-value (surplus-labor), and for the purposes of the present discussion the realized surplus-value may be assumed as equal to all surplus-value; for profit and rent are realized surplus-value, or generally speaking the surplus-value which passes into the prices of commodities, which is practically all the surplus-value forming a constituent part of this price.
On the other hand, the wages, which are the third significant form of revenue, are always equal to the variable portion of capital, which is the portion invested, not in means of production, but in the purchase of living labor-power, in the payment of laborers. (The labor paid in the expenditure of revenue is itself paid in wages, profit, or rent, and therefore does not form any portion of the value of commodities by which it is paid. Hence it is not considered in the analysis of the value of commodities and of the component parts into which it is divided.) Wages are the materialization of that portion of the total working day of the laborer, in which the value of the variable capital and thus the price of labor is reproduced. It is that portion of the value of commodities, in which the laborer reproduces the value of his own labor-power, or the price of his labor. The total working day of the laborer is divided into two parts. One portion is that in which he performs the amount of labor necessary to reproduce the value of his own means of subsistence. It is the paid portion of his total labor, that portion which is necessary for his own maintenance and reproduction. The entire remaining portion of the working day, the entire surplus quantity of labor performed above the value of the labor realized in his wages, is surplus labor, unpaid labor, represented by the surplus-value of his entire product in commodities (and thus by a surplus quantity of commodities), surplus-value, which in its turn is divided into differently named parts, into profit (profit of enterprise plus interest) and rent.
The entire portion of the value of commodities, then, in which the total labor of the laborers added during one day, or one year, is realized, is divided into the value of wages, into profit and into rent. For this total labor is divided into necessary labor, by which the laborer creates that portion of the value of his product, with which he is himself paid, that is, his wages, and into unpaid surplus labor, by which he creates that portion of the value of the product, which represents surplus-value and which is later divided into profit and rent. Aside from this labor the laborer does not perform any labor, and he does not create any value outside of the total value of the product, which assumes the forms of wages, profit and rent. The value of the annual product, in which the new labor added by the laborer during the year is incorporated, is equal to the wages, or the value of the variable capital, plus the surplus-value, which in its turn is divided into profit and rent.
The entire portion of the value of the annual product, then, which the laborer creates in the course of the year, is expressed in the annual sum of the values of the three revenues, the values of wages, profit, and rent. Evidently, therefore, the value of the constant portion of capital is not reproduced in the value of the annually created product, for the wages are only equal to the value of the variable portion of capital advanced in production, and rent and profit are only equal to the surplus-value, the produced excess of value above the total value of the advanced capital, which is equal to the value of the constant plus the value of the variable capital.
It is immaterial for the difficulty to be solved here that a portion of the surplus-value converted into the form of profit and rent is not consumed as revenue, but is accumulated. That portion, which is saved up as a fund for accumulation, serves for the formation of new, additional, capital, but not for the reproduction of the old capital, neither of that portion of the old capital which is invested in wages nor of that which is invested in means of production. We may, therefore, assume here for the sake of simplicity that the revenues pass wholly into individual consumption. The difficulty has a twofold aspect. On the one hand, the value of the annual product, in which these revenues, wages, profit and rent, are consumed, contains a portion of value, which is equal to the portion of value of the constant part of capital used up in it. It contains this portion of value in addition to the other portion, which resolves itself into wages and that which resolves itself into profit and rent. Its value is therefore equal to wages plus profit plus rent plus C (its constant portion of value). How can an annually produced value, which equals only wages plus profit plus rent, buy a product which has a value of wages plus profit plus rent plus C?
How can the annually produced value buy a product, which has a higher value than its own?
On the other hand, if we leave aside that portion of the constant capital which did not pass over into the product, and which, therefore, continues to exist after the annual production of commodities as it did before it; in other words, if we leave aside the employed, but not consumed fixed capital, we find that the constant portion of the advanced capital has been wholly transferred to the new product in the shape of raw and auxiliary materials, whereas a part of the instruments of labor has been wholly consumed and another part of them only partially, so that only a part of its value has been consumed in production. This entire portion of the constant capital, which has been consumed in production, must be reproduced in its natural form. Assuming all other circumstances, particularly the productive power of labor, to remain unchanged, this portion requires for its reproduction the same amount of labor as before, that is, it must be replaced by its equivalent in value. If it is not, then reproduction itself cannot take place on the old scale. But who is going to perform this labor, and who performs it?
In the first question, to-wit, Who is going to pay for the constant portion of value, and with what? it is assumed that the value of the constant capital consumed in production reappears as a part of the value of the product. This does not contradict the assumptions of the second difficulty. For we have demonstrated already in Volume I, Chapter VII (The Labor Process and the Process of Producing Surplus-Value), that the mere addition of new labor, although it does not reproduce the old value, but creates merely an addition to it, creates only additional value, still preserves at the same time the old value in the product; that this is done, however, by labor, not to the extent that it is a labor producing value, labor in general, but in its function as a definite productive labor. Therefore no additional labor was necessary for the purpose of preserving the value of the constant portion in the product, in which the revenue, that is, the entire value created during the year, is expended. On the other hand, it requires new additional labor to replace the value and use-value of the constant capital consumed during the past year, for unless this is replaced no reproduction is possible at all.
All newly added labor is represented in the value newly created during the year, and this is divided into the three revenues, that is, into wages, profit and rent. On the one hand, then, no spare social labor remains for the reproduction of the consumed constant capital, which must partially be replaced in its natural form and its value, and partially merely in its value (for the mere wear and tear of fixed capital). On the other hand, the value annually created by labor, divided into wages, profit and rent, and to be spent in these forms, does not suffice to pay for, or buy, the constant portion of capital, which must be contained in the annual product outside of itself.
We see, then, that the problem presented here has already been solved in the discussion of the reproduction of the total social capital, Volume II, Part III. We return to it here, in the first place, for the reason that the surplus-value had not been developed in that volume into its revenue forms, profit (profit of enterprise plus interest) and rent and, therefore, could not be treated in these forms; in the second place, because the formula of wages, profit and rent is connected with an incredible aberration of the analysis, which pervades the entire political economy since Adam Smith.
In Volume II we divided all capital into two great classes: Class I, producing means of production, and Class II, producing articles of individual consumption. The fact that certain products may serve as well for personal consumption as for means of production (a horse, cereals, etc.), does not invalidate the absolute correctness of this division in any way. It is, in fact, no hypothesis, but merely the expression of a fact.
Take the annual product of a certain country. One portion of the product, whatever may be its ability to serve as means of production, passes over into individual consumption. It is the product for which wages, profit and rent are spent. This product is the product of a definite section of the social capital. It is possible that this same capital may also produce products belonging to Class I. To the extent that it does that, it is not the portion of capital consumed in the shape of the product of Class II, a product belonging actually to individual consumption, which supplies the productively consumed products passing into Class I. This entire product II, which passes into individual consumption, and for which the revenue is spent, is the material form of the capital consumed in it plus the produced surplus. It is also the product of a capital invested in the mere production of articles of consumption. And in the same way section I of the annual product, which serves as means of reproduction and consists of raw materials and instruments of labor, is the product of a capital invested in the mere production of means of production. By far the greater part of the products forming the constant capital exists also materially in a form, in which it cannot pass into individual consumption. To the extent that it might be so used, for instance, to the extent that a farmer might eat his seed corn, butcher his teaming cattle, etc., the economic barrier puts him into the same position in which he would be if this portion did not have a consumable form.
We have already said that we leave out of consideration, in both classes, the fixed part of the constant capital, which continues to exist so far as its material substance and value are concerned, independently of the annual product of both classes.
In Class II, consisting of products for which wages, profit and rent are spent and the revenues thus consumed, the product consists of three parts, so far as its value is concerned. One part is equal to the value of the constant portion of capital consumed in production; a second part is equal to the value of the variable capital invested in wages; finally, a third part is equal to the value of the produced surplus-value, that is, equal to profit plus rent. The first part of the product of Class II, the value of the constant portion of capital, cannot be consumed either by the capitalists of Class II, or by the laborers of this class, or by the landlords. It does not form any part of their revenues, but must be replaced in its natural form, and must be sold in order that this may be done. On the other hand, the other two parts of this product are equal to the value of the revenues created in this class, equal to wages plus profit plus rent.
In Class I the product consists of the same parts, so far as its form is concerned. But that part, which here forms revenue, wages plus profit plus rent, in short, the variable portion of capital plus the surplus-value, is not consumed here in the natural form of the products of this Class I, but in products of the Class II. The value of the revenues of Class I must, therefore, be consumed in the shape of that portion of the products of Class II, which forms the constant capital of II, that must be reproduced. That portion of the product of Class II, which must reproduce its constant capital, is consumed in its natural form by the laborers, the capitalists and the landlords of Class I. They spend their revenues for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant capital it replaces in its natural form. Finally, the consumed constant portion of the capital of Class I is replaced out of the products of this class itself, which consist of instruments of labor, raw and auxiliary materials, either by an exchange of the capitalists of I among themselves, or in such a way that a portion of these capitalists can use their own product once more as means of production.
Let us take the diagram used in Volume II, Chapter XX, II, for simple reproduction:
I. 4000 c + 1000 v + 1000 s = 6000
According to this, the producers and landlords of II consume 500 v + 500 s = 1,000 as revenue; 2,000 c remain to be reproduced. This is consumed by the laborers, capitalists and rent owners of I, whose income is 1,000 v + 1,000 s = 2,000. The consumed product of II is consumed as a revenue by I, and that portion of the revenue of I, which represents an unconsumable product, is consumed as a constant capital by II. It remains to account for the 4,000 c of I. This is replaced out of the product of I itself, which is 6,000, or rather 6,000 minus 2,000, for these last 2,000 have already been converted into constant capital of II. It should be noted that these numbers have been chosen at random, and so the proportion between the value of the revenues of I and the value of the constant capital of II also appears arbitrary. But it is evident that so far as the process of reproduction is normal and takes place under otherwise unchanged circumstances, leaving aside the question of accumulation, the sum of the values of wages, profit and rent in Class I must be equal to the value of the constant portion of the capital of Class II. Otherwise Class II will not be able to reproduce its constant capital, or Class I will not be able to convert its revenue from unconsumable into consumable articles.
The value of the annual product in commodities, just like the value of the commodities produced by some particular investment of capital, and like the value of any individual commodity, resolves itself into two parts: Part A, which replaces the value of the advanced constant capital, and Part B, which presents itself in the form of wages, profit and rent. This last part of value, B, stands in opposition to the Part A to the extent that this Part A, under otherwise equal circumstances, in the first place never assumes the form of revenue, and in the second place always flows back in the form of capital, and of constant capital at that. The other portion, B, however, carries within itself an antagonism. Profit and rent have this in common with wages that all three of them are forms of revenue. Nevertheless they differ essentially from each other in that profit and rent are surplus-value, unpaid labor, whereas wages are paid labor. That portion of the value of the product, which represents spent wages and reproduces wages, and must be reconverted into wages under the conditions assumed by us, flows back first in the shape of variable capital, as a portion of the capital that once more must be advanced for the purposes of reproduction. This portion has a double function. It exists first in the form of capital and is exchanged as such for labor-power. In the hands of the laborer it is converted into revenue, which he draws out of the sale of his labor-power, and as revenue it is spent for means of subsistence and consumed. This double process is revealed through the intervention of money circulation. The variable capital is advanced in money, paid out as wages. This is its first function as capital. It is converted into labor-power and transformed into the expression of labor-power, into labor. This is the capitalist's side of the process. In the second place, the laborers buy with this money a part of the commodities produced by them, which part is measured by this money, and is consumed by them as revenue. If we imagine the circulation of money to be eliminated, then a part of the product of the laborer is in the hands of the capitalist in the form of existing capital. He advances this part as capital, hands it over to the laborer for new labor-power, while the laborer consumes it directly or indirectly by means of exchange for other commodities, as his revenue. That portion of the value of the product, then, which is destined in the course of reproduction to be converted into wages, into revenue for the laborers, flows back at first into the hands of the capitalist in the form of capital, more accurately of variable capital. That it should flow back in this form is an essential requirement, in order that labor as wage labor, the means of production as capital, and the process of production itself as a capitalist process may always be reproduced.
In order to avoid useless difficulties, it is necessary to distinguish the gross output and the net output from the gross income and the net income.
The gross output, or the gross product, is the total reproduced product. With the exception of the employed but not consumed portion of the fixed capital, the value of the gross output, or of the gross product, is equal to the value of the capital advanced and consumed in production, that is, the constant and variable capital plus the surplus-value, which resolves itself into profit and rent. Or, if we consider the product of the total social capital instead of that of some individual capital, the gross output is equal to the material elements forming the constant plus variable capital, plus the material elements of the surplus product, in which profit and rent are materialized.
The gross income is that portion of value and that portion of the gross product measured by it, which remains after deducting that portion of value and that portion of the total product measured by it, which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to the wages (or to that portion of the product which is to become once more the income of the laborer) plus the profit plus the rent. On the other hand, the net income is the surplus-value, and thus the surplus product, which remains after the deduction of the wages, and which, in fact, represents the surplus-value realized by capital and to be divided with the landlords, and the surplus product measured by it.
Now we have seen that the value of each individual commodity and the value of the total commodities produced by each individual capital is divided into two parts, one of which replaces only constant capital, and the other of which, although a part of it flows back as variable capital, that is, also in the form of capital, nevertheless is destined to be wholly transformed into a gross income, and to assume the form of wages, profit and rent, the sum of which makes up the gross income. We have also seen that the same is true of the value of the annual total product of a certain society. There is only this difference between the product of the individual capitalist and that of society: From the point of view of the individual capitalist the net income differs from the gross income, for this last includes the wages, whereas the first excludes them. Viewing the income of the whole society, the national income consists of wages plus profit plus rent, that is, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, places itself upon the capitalist standpoint and considers only the income divided into profit and rent as the net income.
On the other hand, the dream of men like Say, to the effect that the entire output, the entire gross output, resolves itself into the net income of the nation and cannot be distinguished from it, so that this distinction disappears from the national point of view, is but the necessary and ultimate expression of the absurd dogma pervading political economy since Adam Smith, that the value of commodities resolves itself in the last analysis into an income, into wages, profit and rent.147
Of course, it is very easy to understand, in the case of each individual capitalist, that a portion of his product must be reconverted into capital (even aside from an expansion of reproduction, or accumulation), not only into variable capital, which is destined to become in its turn an income for the laborers, a form of revenue, but also into constant capital, which can never be converted into revenue. The simplest observation of the process of production shows this clearly. The difficulty does not begin, until the process of production is studied as a whole. The fact has to be faced that the value of the entire portion of the product, which is consumed in the form of wages, profit and rent (immaterial whether the consumption is individual or productive), resolves itself under analysis wholly into a sum of values formed by wages plus profit plus rent, that is, into the total value of the three revenues, although the value of this portion of the product quite as well as that which does not pass over into the revenues contains a portion of value, equal to C, equal to the value of the constant capital contained in it, which on its very face cannot be limited by the value of the revenue. On the one hand we have the practically irrefutable fact, on the other hand the equally undeniable theoretical contradiction. This difficulty is most easily circumvented by the assertion that the value of commodities contains another portion of value, differing only seemingly, from the one existing in the form of revenue only from the point of view of the individual capitalist. The phrase that a thing is revenue for one man and capital for another saves all further thought. But then it remains an insoluble riddle, how the old capital is to be replaced, when the value of the entire product can be consumed as revenue; and how it is that the value of the product of each individual capital can be equal to the sum of the values of the three revenues plus C, the constant capital, whereas the sum of the values of the products of all capitals can be equal to the sum of the values of the three revenues plus zero. And the riddle must be solved by declaring that any analysis is incapable of finding out the simple elements of price, and must be satisfied with the faulty cycle and the progress into infinity. So that the thing which appears as constant capital may be resolved into wages, profit and rent, whereas the values of the commodities, in which wages, profit and rent are materialized, are determined in their turn by wages, profit and rent, and so forth to infinity.148
The entirely false dogma to the effect that the value of commodities resolves itself in the last analysis into wages plus profits plus rent expresses itself in the assertion that the consumer must ultimately pay for the total value of the total product, or that the money circulation between producers and consumers must ultimately be equal to the money circulation between the producers themselves (Tooke). All these assertions are as false as the axiom upon which they are founded.
The difficulties, which lead to this false and prima facie absurd analysis, are briefly the following:
1) The first difficulty is that the fundamental relationship of constant and variable capital, hence also the nature of surplus-value, and with them the entire basis of the capitalist mode of production, are not understood. The value of each portion of any product of capital contains a certain portion of value equal to the constant capital, another portion of value equal to the variable capital (converted into wages for the laborer), and another portion of value equal to surplus-value (which later on becomes profit and rent). How is it possible that the laborer with his wages, the capitalist with his profit, the landlord with his rent, should be able to buy commodities, each one of which contains not only one of these elements, but all three of them, and how is it possible that the sum of the values of wages, profit and rent, that is, of the three sources of revenue together, should be able to buy the commodities passing over into the total consumption of the recipients of these incomes, since these commodities contain another portion of value, namely constant capital, outside of the other portions of value? How can they buy a value of four with a value of three?149
We have given our analysis in Volume II, Part III.
2) The second difficulty is that the way, in which labor, by adding a new value, preserves old value in a new form without producing this old value anew, is not understood.
3) The third difficulty is that the connections of the process of reproduction are not understood, as it presents itself, not from the point of view of individual capital, but from that of the total capital. The difficulty is to explain how it is that the product, in which wages and surplus-value, in short the entire value produced by all the labor newly added during the current year, can be converted into money, can reproduce the constant part of its value and yet at the same time resolve itself into a value confined within the limits of the revenues; and how it is that the constant capital consumed in production can be replaced by the substance and value of new capital, although the total sum of the newly added labor is realized only in wages and surplus-value, and is fully represented by the sum of the values of both. It it here where the main difficulty lies, in the analysis of reproduction and of the proportions of its various component parts, both as concerns their material substance and the proportions of their value.
4) To these difficulties is added another one, which is intensified still more as soon as the various component parts of the surplus-value appear in the form of revenues independent of each other. This is the difficulty that the fixed marks of revenue and capital are interchanged and occupy different places, so that they seem to be merely relative determinations from the point of view of the individual capitalist and to disappear as soon as the total process of production is viewed as a whole. For instance, the revenue of the laborers and capitalists of Class I, which produces constant capital, replaces the value and the substance of the constant capital of the capitalists of Class II, which produces articles of consumption. One may, therefore, get around the difficulty by means of the conception that the thing which is revenue for one is capital for another. This promotes the idea that these functions have nothing to do with the actual peculiarities of the component parts of value in the commodities. Furthermore: Commodities which are ultimately intended for the purpose of forming the substantial elements in the expenditure of revenue, in other words, articles of consumption, pass through various stages during the year, such as woolen yarn, cloth. In the one stage they form a portion of the constant capital, in the other they are consumed individually, and thus pass wholly into the revenue. One may, therefore, imagine with Adam Smith that the constant capital is but seemingly an element of the value of commodities, which disappears in the total interrelation. Furthermore, a similar exchange takes place between variable capital and revenue. The laborer buys with his wages that portion of the commodities which form his revenue. In this way he creates at the same time for the capitalist the money form of the variable capital. Finally: One portion of the products, which form constant capital, is replaced in its natural form or by means of exchange by the producers of the constant capital themselves. The consumers have nothing to do with this process. When this is overlooked the impression is created that the revenue of the consumers replaced the entire product, even the constant portion of its value.
5) Aside from the confusion created by the transformation of the values into prices of production, another confusion is due to the transformation of surplus-value into different, separate, independent forms of revenue traced back to different elements of production, into profit and rent. It is forgotten that the values of commodities are the basis, and that the division of the values of commodities into separate portions, and the further development of these portions of value into forms of revenue, their transmutation into relations of the various owners of the different agencies in production to these parts of value, their distribution among these owners according to definite categories and titles, does not alter anything in the determination of value or in its law. Neither is the law of value changed by the fact that the equalization of profit, that is, the distribution of the total value among the various capitals, and the obstacles, which private land to some extent puts in the way of this equalization (in absolute rent), makes the regulating average prices different from the individual values of the commodities. This again affects merely the addition of the surplus-value to the different prices of commodities, but does not abolish the surplus-value itself, nor the total value of commodities in its capacity as the source of these different constituents of value.
This is the confusion, which we shall consider in our next chapter, and which is necessarily connected with the illusion that the value arises out of its own component parts. First the various component parts of value receive independent forms in the revenues, and in their capacity as revenues they are referred back to the particular substantial elements of production as their alleged sources instead of to the values of commodities, which are their real source. They are actually referred back to those sources, not as components of value, but as revenues, as components of value falling to the share of definite classes of agents in production, the laborer, the capitalist and the landlord. But one might imagine that these parts of value, instead of arising out of the distribution of the value of commodities, rather form it by their composition, and this leads to that nice and faulty circle, which makes the value of commodities arise out of the sum of the values of wages, profit, rent, and the value of wages, profit and rent, in their turn, is to be determined by the value of commodities, etc.150
Considering reproduction in its normal condition, only a part of the newly added labor is employed for production and thus for the reproduction of the constant capital. This is precisely the portion which replaces the constant capital used up in the production of articles of consumption, of substantial parts of the revenue. This is balanced by the fact that this constant portion does not require any additional labor on the part of Class II. Looking upon the total process of reproduction as a whole, in which this equalising exchange between Classes I and II is included, this constant capital is not a product of newly added labor, although the product of this labor could not be created without that capital. This constant capital, looking upon it from the point of view of substance, is exposed to certain accidents and dangers in the process of reproduction. (Furthermore, considering it from the point of view of value, it may be depreciated through a change in the productive power of labor; but this refers only to the individual capitalist.) Accordingly a portion of the profit, of surplus-value and of the surplus-product, in which only newly added labor is represented, so far as its value is concerned, serves as an insurance fund. In this case it does not matter, whether this insurance fund is managed by separate insurance companies or not. This is the only part of the revenue which is neither consumed as such nor serves necessarily as a fund for accumulation. Whether it actually serves in the accumulation, or covers merely a shortage in reproduction, depends upon accident. This is also the only portion of the surplus-value and surplus-product, and thus of surplus-labor, which would continue to exist, outside of that portion which serves for accumulation and for the expansion of the process of reproduction, even after the abolition of the capitalist system. This, of course, is conditioned upon the premise that the portion regularly consumed by the direct producers does not remain limited to its present minimum. Outside of the surplus-labor for those, who on account of age can not yet or no longer take part in production, all surplus labor for non-workers would disappear. If we transport ourselves back to the beginnings of society, we find no produced means of production, hence no constant capital, the value of which could pass into the product, and which would have to be replaced in its natural form out of the product in reproduction on the same scale, and to a degree measured by its value. But nature there supplies immediately the means of subsistence, which do not have to be produced. For this reason nature gives to the savage having but few wants the time, not to use non-existing means of production in new production, but to transform, outside of the labor required for the appropriation of naturally existing means of production, other products of nature into means of production, bows, stone knives, boats, etc. This process among savages, considered merely from the side of its substance, corresponds to the reconversion of surplus-labor into new capital. In the process of accumulation, this conversion of the product of surplus labor into capital takes place continually; and the fact that all new capital arises out of profit, rent, or other forms of revenue, that is, out of surplus labor, leads to the mistaken idea that all value of commodities arises from some revenue. On the other hand, this reconversion of profit into capital rather shows on closer analysis, that the additional labor, which is always represented in the form of revenue, does not serve for the conservation, or reproduction, of the old capital, but for the creation of new surplus capital to the extent that it is not consumed as revenue.
The whole difficulty arises from the fact that all newly added labor, to the extent that the value created by it is not dissolved into wages, appears as profit, that is, as a value which does not cost the capitalist anything and therefore cannot make good some capital advanced by him. This value rather exists in the form of available additional wealth, or, from the point of view of the individual capitalist, in the form of his revenue. But this newly created value can just as well be consumed productively as individually, equally well as capital and as revenue. In view of its natural form, some of it must be productively consumed. It is, therefore, evident that the annually added labor creates capital as well as revenue; this becomes evident in the process of accumulation. That portion of the labor-power, which is employed in the creation of new capital (analagous to that portion of the working day of a savage employed, not for the appropriation of subsistence, but for the manufacture of tools by which to appropriate subsistence), becomes evident in the fact that the entire product of surplus labor presents itself at first in the shape of profit; this use of it has indeed nothing to do with this surplus-product itself, but refers merely to the private relation of the capitalist to the surplus-value pocketed by him. In fact, the surplus-value created by the capitalist is divided into revenue and capital, that is, into articles of consumption and additional means of production. But the old constant capital, which was handed over from last year (outside of the portion that was injured and to that extent destroyed, in short, the old constant capital that does not have to be reproduced, and so far as there is any break in the process of reproduction, the insurance covers that), so far as its value is concerned, is not reproduced by the newly added labor.
We see, furthermore, that a portion of the newly added labor is continually absorbed in the reproduction and replacement of consumed constant capital, although this newly added labor resolves itself altogether in revenues, in wages, profit and rent. But it is always overlooked, 1) that one portion of the value of this new labor is not a product of this new labor, but previously existing and consumed constant capital; that the portion of the product, in which this part of value presents itself, cannot be converted into revenue, but replaces the means of production of this constant capital in their natural form. 2) It is overlooked that the portion of value, in which this newly added labor is actually represented, is not consumed as revenue in its natural form, but replaces the constant capital in another sphere, where it is moulded into a natural form, in which it may be consumed as revenue, but which in its turn is not wholly a product of newly added labor.
To the extent that reproduction takes place on the same scale, every consumed element of the constant capital must be replaced by a new natural specimen of the same kind, if not in quantity and form, then at least in natural effectiveness. If the productive power of labor remains the same, then this natural replacement implies the reproduction of the same value, which the constant capital had in its old form. But if the productive power of labor is increased, so that the same substantial elements may be reproduced with less labor, then a smaller portion of value of this product can completely replace the constant part in its natural shape. The surplus may then be employed in the formation of additional capital, or a larger portion of the product may be given the form of articles of consumption, or the surplus labor may be reduced. On the other hand, if the productive power of labor decreases, then a larger portion of the product must be used for the replacement of the old capital; the surplus product decreases.
The reconversion of profit, or of any form of surplus-value, into capital shows—without considering the historically defined economic form and looking upon it merely as a simple formation of new means of production—that the condition still continues, in which the laborer performs surplus labor for the purpose of producing means of production, outside of the labor by which he acquires his means of subsistence. Transformation of profit into capital signifies merely the employment of a portion of the surplus labor in the formation of new, additional, means of production. That this takes place in the shape of a conversion of profit into capital, signifies merely that not the laborer, but the capitalist has control of the surplus labor. That this surplus labor must first pass though a stage, in which it appears as revenue (whereas in the case of a savage it appears as surplus labor aiming directly at the manufacture of means of production), means simply that this labor, or its product, is appropriated by the non-laborer. But what is actually converted into capital, is not the profit as such. Transformation of surplus-value into capital signifies merely that the surplus-value and the surplus-product are not consumed individually as revenue of the capitalist. What is actually so converted is the value, the materialized labor, that is, the product in which this value directly presents itself, or for which it is exchanged after having been converted into money. Even when the profit is reconverted into capital, it is not this definite form of surplus-value, not the profit, which is the source of the new capital. The surplus-value is merely changed from one form into another. But it is not this change of form which gives it the character of capital. It is the commodity and its value, which now perform the function of capital. But that the value of the commodity is not paid for—and only by this means does it become surplus-value—is quite immaterial for the materialization of labor, for value itself.
The misunderstanding expresses itself in various forms. For instance, it is said that the commodities, of which the constant capital consists, also contain elements of wages, profit and rent. Or, that the thing, which is revenue for the one, is capital for some one else, and that these are but subjective relations. Thus the yarn of the spinner contains a portion of value representing profit for him. If the weaver buys the yarn, he realizes the profit of the spinner, but for himself this yarn is merely a part of his constant capital.
Aside from the remarks made on this score concerning the relations between revenue and capital, we add the following observations: The value which passes with the yarn as a constituting element into the capital of the weaver, is the value of the yarn. In what manner the parts of this value have resolved themselves for the spinner into capital and revenue, or, in other words, into paid and unpaid labor, is immaterial for the determination of the value of the commodity itself (aside from modifications by the average profit). Back of this lurks the idea that the profit, or the surplus-value in general, is a surplus above the value of the commodity, which can be made only by raising the price, by mutual cheating, by making a gain through sale. When the price of production is paid, or the value of the commodity, this pays, naturally, also for those portions of the value of commodities, which present themselves to the seller in the shape of revenue. Of course, we are not speaking of monopoly prices here.
In the second place, it is quite correct to say that the component parts of a commodity which make up the constant capital, like any other value of commodities, may be reduced to parts of value, which resolve themselves for the producers and the owners of the means of production into wages, profit and rent. This is merely a capitalist form of expression for the fact that all value of commodities is but the measure of the socially necessary labor contained in the commodities. But we have already shown in Volume I, that this does not prevent a separation of the produced commodities of any capital into separate parts, of which the one represents exclusively the constant portion of capital, another the variable portion of capital, and a third one only surplus-value.
Storch expresses the opinion of many others, when he says: "The salable products, which make up the national revenue, must be considered in political economy in two ways. They must be considered in their relations to individuals as values and in their relations to the nation as goods. For the revenue of a nation is not appreciated like that of an individual, by its value, but by its utility or by the wants which it can satisfy." (Considerations sur le revenu national, p. 19.)
In the first place, it is a false abstraction to regard a nation, whose mode of production is based upon value and otherwise capitalistically organized, as an aggregate body working merely for the satisfaction of the national wants.
In the second place, after the abolition of the capitalist mode of production, but with social production still in vogue, the determination of value continues to prevail in such a way that the regulation of the labor time and the distribution of the social labor among the various groups of production, also the keeping of accounts in connection with this, become more essential than ever
[147.] Ricardo makes the following very apt comment on thoughtless Say: "Of net produce and gross produce, Mr. Say speaks as follows: 'The whole value produced is the gross produce; this value, after deducting from it the cost of production, is the net produce. (Vol. II, p. 491.) There can, then, be no net produce, because the cost of production, according to Mr. Say consists of rent, wages and profits. In page 508 he says: 'The value of a product, the value of productive service, the value of the cost of production, are all, then, similar values, whenever things are left to their natural course.' Take a whole from a whole and nothing remains." (Ricardo, Principles, Chapter XXII, p. 512, Note.)—By the way, we shall see later that Ricardo nowhere refuted the false analysis made by Smith of the price of commodities, its reduction to the sum of the values of the revenues. He does not take notice of it, and assumes it to be correct to such an extent that he "abstracts" from the constant portion of the value of commodities. He also falls back now and then into the same conception.
[148.] "In every society the price of every commodity finally resolves itself into some one or the other, or all of those three parts (viz. wages, profits, rent)....A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer or for compensating the wear and tear of his laboring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer, who advances both the rent of his land and the wages of his labour. Though the price of corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, labour (meaning wages) and profit." (Adam Smith.)—We shall show later on, that Adam Smith himself felt the inconsistency and insufficiency of this subterfuge, for it is nothing but a subterfuge on his part to send us from Pontius to Pilate while he nowhere indicates the real investment of capital, in the case of which the price of the product resolves itself ultimately into these three parts, without any remainder and any further progression.
[149.] Proudhon, incapable of grasping this, exposes his incapableness in the formula: The laborer cannot buy back his own product, because the interest is contained in it, which is added to the purchase price. But how does Mr. Eugene Forcade teach him to know better? "If Proudhon's objection were true, it would strike not only the profits of capital, but would annihilate the possibility of all industry. If the laborer is compelled to pay 100 for each article for which he has received only 80, if his wages can buy back only the value which he has put into it, it would be as well to say that the laborer cannot buy back anything, that wages cannot pay for anything. In fact, there is always something more than the wages of the laborer contained in the purchase price, and always more than the profits of enterprise in the selling price, for instance, the price of the raw materials, which often goes to foreign countries....Proudhon forgot about the continual increase of the national capital; he forgot that this increase refers to all laborers, the enterprising industrials as well as the hand laborers." (Revue des deux Mondes, 1848, tome, 24, p. 99.) Here we have the optimism of bourgeois thoughtlessness in the form of wisdom corresponding to it. First Mr. Forcade believes that the laborer could not live, if he did not receive a higher value than that which he produces, whereas the capitalist mode of production, on the contrary, could not exist, if he received all the value which he really produces. In the second place he correctly generalizes the difficulty, which Proudhon expressed only under a more narrow point of view. The price of the commodities contains not only more than the wages, but also more than the profit, namely the constant portion of value. According to Proudhon's reasoning then, the capitalist could not buy back the commodities with his profit. And how does Forcade solve this riddle? By means of a meaningless phrase: The increase of capital. The continual increase of capital is supposed to manifest itself, among other things, also in the fact that the analysis of the price of commodities, which is impossible for the political economist in the case of a capital of 100, becomes superfluous in the case of a capital of 10,000. What would he say of a chemist, who, on being asked: How is it that the product of the soil contains more carbon than the soil? would answer: It comes from the continual increase of the product of the soil. The well-meaning good will to discover in the bourgeois world the best of all worlds takes the place, in vulgar economy, of any necessity to cultivate love of truth and scientific methods of research.
[150.] "The circulating capital invested in materials, raw products and machinery is itself composed of merchandise, the necessary price of which is formed of the same elements; so that, viewing the total merchandise in a certain country, it would mean using the same thing twice to count this portion of the circulating capital among the elements of the necessary price." (Storch, Cours d'Economie Politique, II, page 140.)—By these elements of circulating capital Storch means the constant capital (the fixed capital is for him merely a different form of the circulating). "It is true that the wages of the laborer, the same as that portion of the profits of enterprise which stands for wages, provided we consider them as a part of the means of subsistence, also consist of merchandise bought at current prices and comprise likewise wages, interest on capital ground rent and profit of enterprise....But this observation merely proves that it is impossible to resolve the necessary price into its simplest elements." (Ibidem note.)—In his Considerations sur la nature du revenu national (Paris, 1824). Storch realizes in his controversy with Say to what absurdity the false analysis of the value of commodities leads, when it resolves value into mere revenues. He points out the folly of such results, not from the point of view of the individual capitalist, but from that of a nation, but he does not go a step further himself in his analysis of the "prix nécessaire," saying in his "Cours" that it is impossible to resolve it into its simplest elements and tracing it back into an endless progression. "It is evident that the value of the annual product is distributed partly among capital and partly among profits, and that each one of these parts of the value of the annual product buys regularly the products needed by a nation, as much for the purpose of preserving its capital as for the purpose of renewing its consumable fund (pages 134, 135)....Can a self-employing peasant's family live in its barns or its stables, eat its seed and forage, clothe itself with its laboring cattle, dispense with its agricultural implements? According to the thesis of Mr. Say all these questions would have to be answered in the affirmative (pages 135, 136)...If it is admitted that the revenue of a nation is equal to its gross product, that is, if no capital has to be deducted from it, then it must also be admitted that a nation can spend the entire value of its annual product unproductively without impairing its future income in the least (147). The products which constitute the capital of a nation cannot be consumed." (p. 150.)