The third volume of Marx’s Capital Rereading is ready to be distributed among the workers.

Introduction

The third volume of Marx’s Capital Rereading is ready to be distributed among the workers. What will they do with Marx’s valuable and instructive achievements, with the incomplete and defective effort made to transmit those teachings or Marx’s understanding of capitalism? The answer is difficult, although in today’s world conditions the horizon of expectation is unfortunately dark and limited. In the meantime, one thing is unambiguous. The Marxian anatomy of capitalism is a bright and vital torch on the path of the class struggle of the working masses. Marx, in contrast to the Marxists who claimed to understand his words as the capital of theorizing, Marxology, capitalism!! He began to criticize political economy so that, as a worker, he could actively participate with the awakened consciousness of a worker in the inevitable struggle of his class. A struggle that, by its nature and history, also had the capacity to liberate man, can be done to the extent possible by a conscious and thoughtful worker so that this movement becomes more awake, more mature, more powerful, and more solidly built to fight against capital, and advances towards the liberation of man. Contrary to some beliefs, Capital cannot be defined as a “revolutionary work” because no literary work is revolutionary!! Marx’s goal was not revolution in the sphere of thought. Because the sphere of thought is not the field of revolution, he did not formulate Capital with the banner of revolution of methods of cognition, because mere change of cognition is not the driving force of revolution. Marx had made a clear settlement of accounts with these romantic ecstatic ideas before writing Grundrisse and Capital. Revolution was not in the universe of beliefs and ways of cognition of people, but in the life of workers on earth, he did not write Capital to make a revolution!!, he wrote it to become a lamp in the hands of workers, a weapon in their campaign against wage slavery. He was a seer and a visionary of the working masses, he recognized the class struggle as the driving force of history, he saw the present era as the era of class struggle of workers. In this class and its class struggle, he found the potential for human liberation, the core of Marx’s turmoil and efforts was to make the labour movement, the daily and ongoing class struggle of the workers of the world, and not their thoughts, beliefs, attitudes, culture, ideology, and profession, a living, growing, conscious movement against wage labour. The workers, their class, and their daily movement see capital, in all its economic, political, legal, civil, cultural, and ideological manifestations, as it really is, not as fetishist and magical, so that wherever they can recognize it, they can use this living, praxis-like, dynamic recognition to illuminate the path of their daily struggle in the various realms of livelihood, welfare, human rights, social freedoms, anti-discrimination, the environment, and every other field. To avoid falling into the terrible errors of capitalist refinement and reform, to explore with a class-conscious mind what the commodity economy in general and the capitalist mode of production in particular do to labour, the products of labour, life, consciousness, knowledge, will, freedom, rights, and, worst of all, their class struggle, to further develop this knowledge, to make it the brain, the thought, the strategy, the solution, the weapon of struggle. Marx pursued this goal from the writing of Capital. What has been prepared and organized in these three years under the name of rereading has also aimed to encourage workers to this reading of Capital, regardless of its effectiveness or lack of effectiveness. Does the meaning of these phrases mean that workers are unable to advance the struggle against wage slavery without reading Capital?! In fact, they can be Marx incarnate in their time without this work. The opposite is true, however. Capital outside the dynamic process of the campaign against wage labour will not be Marx’s Capital. In the “rereading” of volumes one and two, the basic principle was that the summaries should not prevent the transmission of any part of Marx’s dissection of Capital. In this volume, under the pressure of being caught on one hand, believing in the possibility of some omissions without impairing the transmission of all the basic discussions, the rereading of chapters 34-35-43-44-45-49-50-52 was omitted.

Nasser Paydar

Volume Three

Part One: The Conversion of Surplus Value into Profit and the Rate of Surplus Value into the Rate of Profit

Chapter 1: Cost-Price and Profit

The value of any commodity is composed of the fixed (c) and variable (v) capital used in its production, plus surplus value (m), or a share of the unpaid labour of workers, added to it. (c+v+m), if we remove the surplus value, what remains is the cost of producing that commodity, or in other words, the cost price of the commodity. The cost price of a commodity for the capitalist and the actual cost of producing a commodity are fundamentally different. Value is something different from price. Part of the value of a commodity is surplus value, the production of which does not cost the capitalist anything. This component is the unpaid labour of the worker. The work that the worker has done but has not received any riyals in return. The key point is that in capitalist production, the worker himself is the only component that produces capital, the capitalist considers him as his capital, and on this basis, he considers himself a producer of goods!! And he also considers the cost price of the commodity as the actual cost of the commodity.!! An idea and a fantasy that is a complete distortion of reality. If we specify the cost price with (k), then the formula: the value of the commodity (c+v+m) will give way to the formula (k+m).

The term cost price of a commodity with the formula (c + v) is characteristic of capitalist production. In this formula, the cost of a commodity is calculated on the basis of the abstract capital, but the actual and real cost of the commodity can only be calculated on the basis of the labour expended or the labour consumed. On this basis, the cost price is completely different from the value of the commodity or the actual cost of its production. The former is much lower than the latter. Cost price, at the same time, is not a mere accounting term. It is a part of the value of the commodity that is transformed from the form of a commodity in the flow of circulation into productive capital in the flow of production and necessitates the continuous purchase of the elements consumed in its production.

The category of cost price does not give us any precise information about the value of a commodity and the process of capital appreciation. If we know that out of the 600 liras of the value of a commodity, 500 liras are allocated to c+v and 100 liras (sterling) is surplus value, this knowledge does not help us to determine how the c+v or surplus value contained in the commodity is produced. One thing is the method. In political economy, cost price is a completely false category of the process of value production. Let us consider the following example.

Let us suppose that 6 shillings is equivalent to a worker’s 10-hour day’s work. In this case, a capital of 500 pounds sterling (10,000 shillings) and the combination of 400c + 100v represent 1,666.66 days’ work, of which 1,333.33 is constant capital and 333.33 is variable capital. Assuming a rate of surplus value of 100% v + m, we have a total of 200 pounds sterling, which is equivalent to 666.66 days’ work.

The total value of the product, which is 600 pounds sterling, is made up of two different components with two completely different origins. The fixed component of 400 pounds already existed and only its value has been transferred to the new product. The variable component of 100 pounds (equivalent to 666.66 days of work) has, firstly, recreated its value. Secondly, it has created 100 units of surplus value. Thirdly, it has served to preserve or keep alive the fixed component of 400 pounds and to transfer it to the new product. The first component, the value of the product or the real and actual price of production of the commodity, or 400 pounds, has a double meaning. On the one hand, it is included in the cost price of the commodity because it is a part of the value of the commodity that compensates for the capital expended. On the other hand, it is a part of the value of the commodity only because it has been expended as capital. Or because the means of production of the commodity have incurred this amount of expense. As for the other component of the value of the product, the matter is fundamentally different. The 666.66 daily hours of labour used in the production of commodities have created a new value of 200 pounds sterling. Half of this new value is the variable capital advanced, or the price of the labour-power consumed; this part or these 100 pounds sterling does not enter into the formation of new value at all. Labor-power is considered value in the capital advance, but in the production process it acts as value-creating. The 100 pounds of variable capital acts as value at the stage of capital formation, but in the production circuit it enters into the form of living labour-power itself or value-creating capital.

To see more clearly the distinction between the two components that make up the value of a commodity, let us suppose that we increase or decrease the fixed component of 400 liras by 200 liras. In this way, in the first case, the cost price of the commodity will be 600c+100v=700 liras and the value of the product will be 600c+100v+100m=800 liras. In the second case, the cost price of the commodity will be 200c+100v=300 liras and the value of the commodity will be 200c+100v+100m=400 liras. Now, assuming that all other conditions remain constant, let us increase or decrease the price of labour power by 50 liras. In the first case, the cost price will be 400c+150v=550 liras, and in the second case 400c+50v=450 liras, but the value of the product will remain the same at 600 liras in both cases. More precisely, in the first case it will be 400c+150v+50m=600, and in the second case 400c+50v+150m=600 liras. The advanced variable capital does not add its own value to the product, but the new value produced by labour (the worker) in the form of the product replaces that value. On this basis, the change in the absolute amount of variable capital, insofar as it represents a change in the price of labour power, does not produce any change in the absolute value of the commodity. This is because there is no change in the amount of new value created by labour power. In other words, it is only the quantitative relationship between the two components of the newly produced product that changes. The increase in one component compensates for the decrease in the other. In contrast to all previous forms of production, capitalist production makes the value of labour power the value of the total labour of the worker. The capitalist does not buy the labour of the worker, he buys his labour power, for example, for an 8-hour working day. He pays, for example, $120 for the purchase of this power. But in the process of production, it is not this $120 wage that acts. It is the worker who enters the field. The value he creates in these 8 hours may be several times or several dozen times $120. In the cost of production, we see only the fixed capital used plus $120, but the value of the product produced by the worker is the fixed capital used plus all the newly produced value.

So far, only one component of the value of the commodity or the cost price has been discussed. Let us examine its second component or surplus value. This component is a value added to the capital used in the production of the commodity. It arises only from the change in the value of the variable capital or from its internal growth and development in the production curve, but after the end of the production process, it is an added value for the total capital used c + v. For example, before production, we had a capital of 500 liras composed of 400c + 100v and at the end of the production process we have achieved a product with a value of 600 liras composed of 400c + 100v + 100m. But the story does not end there. Surplus value is not only a value added to the capital entered into the production process of the commodity. It is a new and additional value for the total capital present in the production process, even the capital not used in the production of the new product. In other words, it is not just a value added to the cost price of the product, it is a value added to the total capital involved in the production process, including its fixed component. Let’s consider a capital of one million dollars, of which 700 thousand dollars are constant components, 250 thousand dollars are constant capital circulating components, and 50 thousand dollars are workers’ wages. The depreciation of fixed capital in the payback period is 10 thousand dollars, and the rate of added value is 700%. The value of the product produced during a payback period is 660 thousand dollars. Of the fixed capital, 690 thousand dollars, although it was present in the production process, did not enter the production process of the product and its value remains in full. If we add these two together, we have a value of one million three hundred and fifty thousand dollars at the end of the reversal period, of which one million dollars is the total fixed and variable capital that has been advanced and another $350 thousand is the surplus value produced. $350 thousand of value that has been added to the total of one million dollars. The origin of this value is solely the variable part of capital, but the capitalist sees it as arising from his total capital!! What is meaningless in his vision is the difference between the fixed and variable parts of capital and the only thing for him is the world of meanings. The addition of $350 thousand to the previous $1 million.

In capitalist production, surplus value acquires the title of profit by inverting its essence and turning it upside down. Capital is the value that generates profit, and profit is the value that capital must be advanced to obtain it. If we define profit as p, then the formula w=c+v+m=k+m gives way to the formula w=k+p. (The letter w represents the total value of the product) In other words, the value of the product becomes a composite of cost price and profit!! The role of fixed and variable capital becomes a bowl!! Variable capital wages are induced. The chain volcano of forgery, stupidity, lies, and reverse weaving on whose exploding faults the capitalist system is built. The cost price is always less than the value of the commodity. The two become equal only when surplus value becomes zero. Something that is not possible in capitalist production, although under special conditions, the selling price of goods can fall to the level of cost price or even lower. If we subtract the cost price from the value of the commodity, what remains is profit. Profit is the surplus value produced by the worker and contained in the value of the commodity. The capitalist can sell the commodity below its value and still make a profit. The amount of his profit in this case will be the surplus value between the cost price and the value of the commodity. If the value of the commodity is $800 and its cost price is $300. This commodity carries $500 of surplus value. The capitalist can sell from $301 to $799 and in all these cases receive a share of the surplus value under the name of profit. The closer the selling price is to the cost price of the commodity and the further away from its value, the greater the volume of surplus value he captures and the greater the profit he makes. The foundation of capitalist competition, which political economy has not understood, and which is the determining factor of the price of production and the general rate of profit, lies here, in the difference between the cost price and the value of the commodity. In the fact that it is possible to sell the commodity below its value and at the same time make a profit. The capitalist, the economist and the intellectual representative of capital, sees the sale of the commodity not as the basis for realizing the surplus value hidden in it, but quite the opposite, as the source of this surplus value or profit!! “Torrance” believes that “profit does not come out of the costs of production, it comes out of circulation and is paid by consumers”!! “Ramsay” replies: “If profit does not exist before exchange, it is not born in exchange”, “Pierre-Joseph Proudhon ” mixes the issue with theoretical charlatanism and says: “The cost price is the true basis of the value of a commodity, the surplus value is obtained from the sale of a commodity at a price higher than its value, and if the sale price equals the cost price, then the commodities are sold at their own value”!! This very reduction of the value of commodities to their cost price is the foundation of Proudhon’s “People’s Bank” and “socialism”. He is under the gross illusion that if the selling price of commodities is determined on the basis of their cost price, that is, the price of the means of production consumed plus wages, then all commodities are sold at their own value! The reality is certainly the opposite of Proudhon’s fabrications. Even if the price of labour power, the daily labour, the rate of exploitation are the same, the surplus value in different commodities will still be different based on the different degrees of organic composition of capital.

Chapter 2: The Rate of Profit

Capitalist production is the production of surplus value. Surplus value is only achieved when capital employs living labour. In order to exploit living labour, capital needs the advance of instruments of labour, machinery, and raw materials, in other words, the conditions of production. The capitalist is a capitalist only because he is the one in charge of the process of exploiting labour, the owner of the workers, and the owner of the conditions of production and labour. What is meaningless to the capitalist is the constancy and variability of capital or the rate of surplus value. He only knows profit, he thinks about how much capital he has advanced and what percentage of profit he has made. The value that is replaced in a commodity is equal to the labour time that has been spent in its production. This labour is composed of a paid component (the worker’s wages) and an unpaid component (surplus value). The cost of the commodity to the capitalist is only that part of the value for which he has paid money. He does not pay a single riyal for the surplus value. He considers the resulting surplus value to be the result of the advance of the total capital, and he is not at all concerned with which part of the capital the surplus value has grown from. On the one hand, he looks at the total capital, and on the other hand, he looks at the amount of surplus value and its ratio to the capital advanced. The capitalist calls this ratio the rate of profit and calculates it with the formula m/C. For him, C is the entire capital, and m is the profit that has been produced. C is actually a compound of c+v, and therefore the formula for the rate of profit will also be m/c+v. If the rate of surplus value is obtained by dividing the surplus value by the variable capital, in order to obtain the rate of profit, we must divide the same surplus value by the total capital advanced, whether variable or constant.

We have repeatedly stated that the source of surplus value is only the immediate process of production, but it is this surplus value that is organized in the cyclical movement. Where the place of sale of goods, the competition of capitals to steal customers from each other, the use of the lever of price reduction for this theft, the formation of the production price and the emergence of the general rate of profit as the basis for the distribution of surplus values. It is here that goods may be sold below their value and at the same time make a profit. One thing is certain. The total price of goods cannot be a riyal more or less than their total value. In the cyclical process, circulation time is also placed next to labour time and, consequently, the volume of surplus value that can be realized in a given period of time becomes more limited. Circulation time and labour intersect in their path, and this suggests the false or distorted idea that both are creators or determinants of surplus value! The original form in which capital and wage labour are opposed to each other is surrounded and distorted by relations that are apparently distinct and independent of it. Surplus value, which is nothing but the unpaid labour of the worker, dresses in an inverted and false manner as the profit derived from the total capital. Let us examine why and how.

1 – The immediate process of production is a specific moment in the general process of production and organization of capital. A moment that continuously enters the process of circulation or, conversely, accepts the cyclical process and intersects with it. A situation that largely removes the real source of surplus value or unpaid labour from the reach of the eye and mind.

2 – In the calculation of costs, the price of labour power is also listed alongside other expenses such as the cost of raw materials and the depreciation of machinery. In this regard, unpaid labour constitutes a false form of cost saving. The payment of the price of labour power in the form of wages deepens this transformation. The dynamics of the formation of the rate of profit clothes surplus value in the form of profit, the totality of the productive forces of labour (the worker) appears as the productive forces of capital. The value of past labour, which dominates living labour in the form of dead labour, is embodied in the person of the capitalist. The worker, as objectified labour power, becomes a commodity. Capital hides its social relation and puts on the mask of an object. Capitalist relations are a bomb of falsification, the heart of nature, the inversion and distortion of realities. Here everything is mysterious and all the mystery serves to conceal the true origin of surplus value or profit, to disguise the separation of the worker from labour and the product of his labour, and to deny the worker’s absence from determining the fate of production, labour, and life.

David Ricardo and his colleagues in political economy are desperately trying to draw a line between the rate of profit and the rate of surplus value and to substitute the former for the latter. This is a misleading and futile attempt that is based on a falsification of reality. The rate of profit m/C is the ratio of surplus value to the total capital advanced and is therefore the focus of the capitalist’s consciousness and perception. While the rate of surplus value indicates the extent of the pressure and dimensions of the exploitation of the worker, the ratio of his paid labour to his unpaid labour, and in this regard, it is a window to his spontaneous class analysis to become aware of the savagery and inhumanity of capital. The rate of profit distorts and disguises the source of profit or surplus value production. It suggests that profit is the difference between the sale price and the cost price!! It is the result of the dynamics of capital circulation!! It is the product of buying cheaper and selling more expensive!! Or it is the miracle of the capitalist’s power of thought and resourcefulness!! Profit is a distorted form of surplus value and a code name to make its source mysterious. Profit is the same surplus value, the same unpaid labour of the worker, it arises from within the process of production, capital and political economy keep its true origin away from the reach of human consciousness and attribute it to the whole of capital, to both the spheres of production and the circulation of capital!

Chapter 3

The Relation of the Rate of Profit to

the Rate of Surplus-Value

Our assumption for now is that the total surplus value is equal to the total profit of the capitalist. In other words, we ignore two very basic points. 1- That the surplus value is divided into property interest, land interest, taxes, etc. 2- That the surplus value produced in the production cycle is often significantly different from the amount of surplus value that accrues to the capitalist based on the general rate of profit. By ignoring these two points, we will examine the relationship between the rate of profit and the rate of surplus value. It was previously said that we determine the rate of surplus value by m/v and the rate of profit by the formula m/C. Let us not forget that C here is not just constant capital, but the sum of both the constant and variable parts of capital, that is, c+v. On this basis, we can also express the latter formula as m/c+v. The formula that screams that the rate of profit is always and inevitably smaller than the rate of surplus value. Unless the total capital in its variable part is reduced to wages!! And no riyal is set aside for tools, raw materials, or fixed capital in general, whether fixed or circulating. An assumption that is fundamentally illusory, meaningless, and impossible. In this review, a few other points should also be noted in advance.

First: We assume that the value of money is constant everywhere.

Second: We determine the rate of profit by p’, and as a result its formula will be p’=m’v/C.

Third: We consider the reversal as annual and ignore the effect of its successive periods on the rate of profit. In other words, we consider the formula of the rate of profit p’=m’v/C only for one reversal per year.

Fourth: We represent the rate of surplus value by m’ and we consider it as annual and necessarily m’n. A formula where n specifies the number of annual reversals of variable capital.

Fifth: The productivity of labour has a huge impact on the rate of surplus value, but in this analysis, we ignore its impact. Because our assumption is that commodities are produced under normal social conditions and are sold according to their value.

Sixth: We consider the daily length of work, the intensity of the work rate, and the amount of wages to be constant. These issues have already been discussed in detail in the first volume. Here we only recall that the effect of wages on the amount and rate of surplus-value is the opposite of the effect of the length of the working day and the intensity of the pace of work. The increase of the first causes a decrease in surplus-value, but the increase of the second and third causes a rise in the amount of surplus-value. These effects in turn point out the special organic relationship between variable capital and the dynamics of the appreciation of total capital on the one hand, and the substantial difference between variable and constant capital on the other.

Seventh: As we have always and everywhere stated, fixed capital plays no role in value creation. Therefore, if, for example, its value is equivalent to one million dollars, as far as value creation and the rate of profit are concerned, it will be completely indifferent whether the said value is the price of 1,000 tons of iron at a price of $1,000 per ton or 500 tons of iron at a price of $2,000 per ton. In the case of variable capital, the situation is fundamentally different. What is important here is not the value of this component of capital and the labour embodied in it, but rather the whole significance of the matter is how much new value the said labour creates in addition to its own value, how much of the new value produced is spent on compensating for the socially necessary labour inherent in this component of capital (variable) itself or the price of labour power, and how much of that surplus labour or surplus value becomes the capitalist’s. Needless to say, the less the former or necessary labour, the more the latter or unpaid labour of the worker will be. Now, with all these points in mind, let us examine the equation of the rate of profit p’=m’v/C in different cases, by changing the value of its constituent factors and the effect of each case on the rate of profit. This analysis can be carried out for successive changes in the conditions of operation of a single capital or for different capitals.

A – m’ is constant and v/C is variable

1 – We divide the product m’vC into two separate components m’ and v/C.

2 – We consider the numbers C1 and v1 to represent the changed items of the total capital and its variable component.

3 – Based on this, the different rates of profit in two different conditions will be: p’=m’v/C and p’1=m’v1/C1.

4 – We calculate the ratios between C and C1 as C1/C = E and then v and v1 as v1/v= e

5. If we put these ratios or values ​​that we have obtained for p’1, ​​C1 and v1 in the above equation, we will arrive at the equation:

p’1=m’ev/EC.

6. Let us relate the two equations of the rate of profit for two distinct conditions of capital appreciation, namely: p’=m’v/C and p’1=m’ev/EC, as p’/p’1 = m’v/C: m’v1/C1.

7. Let us assume that C and C1 are each 100, and simplify the fraction, so that we have v/100=v/C and v1/100=v1/C1. Then, eliminating the denominators, we arrive at the equation p’/p’1 = v/v1. The equation states that two equal capitals in two different areas of advance, with equal rates of surplus value, if all their items and amounts are expressed in percentages, the ratio of their rates of profit is the same as the ratio of their variable components.  

Why? Because profit is surplus value and its source is nothing other than the variable component of capital and the unpaid labour of the worker. Again, let us remember all these points or data and be ready to continue examining step by step the equation of the rate of profit in different states or cases of capital advance, by changing the value of the components of the equation and the effect of each of these changes on the rate of profit.

First: The value of v varies, but m’ and C are constant. In this case:

1- If the variable capital v decreases, the total capital (C) can remain constant if its other component, c or the constant part of the capital, increases by the same amount. The opposite is also true. Let C be 100, of which 80 units are c and the remaining 20 units are v. If v decreases to 10 or increases to 30, c must become 90 or 70.

2- If the rate of surplus value m’ remains constant and the variable capital changes, the volume of surplus value will also change. By changing the value of v, the first equation p’=m’v/C, is transformed into the second equation p’1=m’v1/C1, which indicates the change of v to v1 and the rate of profit p’ to p’1. The new rate of profit is obtained through the proportion p’/p’1 = m’v/C: m’v1/C1=v/v1. This means that if the rate of surplus value and the total volume of capital do not change, the ratio of the original rate of profit to the rate of profit resulting from the change in variable capital is the same as the ratio of the original variable capital to its changed form. If we consider the data, we will see the following changes in the two different cases of advance.

1 – 15000 C = 12000 c + 3000 v + 3000 m

2 – 15000 C = 13000 c + 2000 v + 2000 m

In both cases C is equal to 15,000 and m’ is equal to 100%. The rate of profit in the first case is 20%, in the second case a little more than 13% and their ratio to each other coincides with the ratio of the first 3,000 variable capital to the second 2,000 units.

3 – Variable capital can increase. Let us consider a capital of 120 with the composition 100c + 20v + 10m. Its rate of surplus value is 50% and therefore its rate of profit is more than 8%. Variable capital increases from 20 to 30, constant capital decreases from 100 to 90. The amount of surplus value increases from 10 to 15 with the same previous rate of exploitation.

The formula 100c+20v+10m gives way to 90c+30v+15m. The increase in variable capital can result from various factors, such as an increase in the number of workers, an increase in wages, the rate of exploitation, the working day or the intensity of the work. In the first place, we assume that all other factors, except the number of workers, remain constant. In this case, the increase in variable capital from 20 to 30 implies that the number of workers has increased by one and a half times. A change that has led to an increase in the value of the product from 30 to 45. Here the number of workers has increased but the amount of fixed capital has fallen from 100 to 90. In fact, we are witnessing a situation where the productivity of labour has decreased and at the same time the volume of fixed capital has decreased. Is this possible? It is an exception within the boundaries of capitalism, but it is not surprising in the case of two separate capitals in two different countries or in the agricultural and extractive industries. Now let us set aside the assumption that wages remain constant and see the increase in variable capital from 20 to 30 as the result of a 1.5 percent increase in wages. Here, assuming constant daily labour, the value of the product is the same as before. No surplus value is produced, and the entire 30 units of value are spent on the reproduction of variable capital. Let us not forget one point, the purpose was to keep the rate of surplus value at 50%. This is possible when the daily labour increases from 10 to 15 hours and the previous formula of the form 90c + 30v + 15m is satisfied. In other words, the same 20 workers work with the same machines and only convert more raw materials into products. If variable capital is reduced, the above is reversed, but the conditions governing the rates of profit and their interrelationship remain unchanged.

Second: m’ is constant, v changes, C changes in proportion to the change in v.

The difference between this and the previous situation is only in the size and degree of fluctuation of the factors. The constant capital c, instead of decreasing or increasing exactly and inversely with the increase or decrease of the variable capital, remains unchanged. With the increasing development of capitalism and large-scale industry, the variable capital is only a relatively small part of the total capital. Accordingly, the increase and decrease of the total capital will also be relatively small insofar as it is due to a change in the amount of variable capital. Here again, let us consider the total capital of 120, consisting of 100 c and 20 v, and a rate of surplus-value of 50%. The volume of surplus-value is equal to 10 and the rate of profit p’ is slightly more than 10/120 = 8%. Now the variable capital increases from 20 to 30. The total capital C amounts to 130. c or constant capital is the same as 100. The rate of surplus-value reaches 15. The rate of surplus value remains at 50% and the rate of profit p’ becomes 11.5%.

Third: m’ and v are constant, c and therefore C are variable

In these circumstances, the initial equation of the rate of profit p’=m’v/C gives way to the second equation p’1=m’v/C1, which if we put them in the ratio p’/p’1 = m’v/C : m’v/C1 and then simplify the fraction, we arrive at the equation p’1/p’=C/C1. The simple meaning of the equation is that with variable capital and the rate of surplus value remaining constant, an increase or decrease in the rate of profit is inversely proportional to the decrease or increase in the total capital and its constant component. The change in c can result from a change in the composition of its constituent materials and can be the result of a change in the technical composition of the total capital C and, thereby, an increase in the organic composition of capital. In the latter case, it is the increase in labour productivity that causes less variable capital to put into operation a larger volume of raw materials, spare parts, semi-finished products and machinery and produce more products. Savings in fixed capital are considered and welcomed by capitalists both in terms of increasing the rate of profit and in terms of freeing up capital.

Fourth: m’ is constant and v, c and C are all variable.

1- If the increase in constant capital is such that the growth rate of total capital exceeds that of variable capital, the rate of profit falls.

2- The rate of profit remains unchanged when the growth rate of variable capital (e) is equal to the growth rate of fixed capital (E).

3- If e is greater than E, in other words, the growth rate of variable capital is greater than the growth rate of total capital, the rate of profit rises.

B – m’ becomes variable

To determine the relationship between different rates of profit on the one hand and different rates of surplus value on the other, independently of whether the organic composition of capital (v/C) is constant or variable, the formula p’1 = m’1/m’ * v1/v * C/C1 * p’ can be used.

Let us remember that p’1, ​​m’1, v1, C1 represent the changed values ​​of p’, m’, v, C. This formula is obtained by converting the first equation of the rate of profit (p’=m’ * v/C) into its second equation (p’1=m’1 * v1/C1) and then calculating the ratio between them. Let us explain the working of the formula with an example. Let us consider a capital of 100 and a composition of 80c+20v, whose rate of surplus value is 100%, the amount of surplus value is 20, and the rate of profit is 20%. Now let us change the data. The total capital is 280, its composition is 240c+40v, the volume of surplus value is 160, and the rate of surplus value is 400%. The rate of profit according to the above formula is p’1 = 400% / 100% * 40 / 20 * 100 / 280 * 20%, which if we calculate, amounts to 57%. The 100% surplus value and 20% profit rate in the first case have changed to a 400% surplus value and 57% profit rate in the second case. The first has increased 4 times and the second has increased less than 3 times. Let us examine the different cases of these conditions.

1- m’ is variable and v/C is constant.

If the organic composition of two capitals is equal, the ratio of their rates of profit to each other is the same as the ratio of their rates of surplus value. In the fraction v/C, it is not the different values ​​of v and C that are important, but the ratio between them. Accordingly, capitals with a composition equal to any absolute value of v and C have equal ratios between the rate of surplus value and the rate of profit. Total capital 100 with a composition of 80 fixed, 20 variable, surplus value 20, rate of surplus value 100% and rate of profit 20%, after the first round of advance, ends the second round of reversal with the data: 200 total capital (160c+40v), surplus value 20, rate of surplus value 50% and rate of profit 10%. We see that the composition of capital is the same in both periods of valuation. In this regard, the ratio between the rate of surplus value and rate of profit is also 2 to 1 in both periods.

If the values ​​of v and C coincide in both rounds, the ratio of profit rates will be the same as the ratio of the volume of surplus values. For example:

1- 80c+20v+20m m’=100% p’=20%

2- 80c+20v+10m m’= 50% p’= 10%

Thus, it is clear that in the case of capitals with a completely equal composition or an equal percentage v/C, the rate of surplus value varies only when wages, the working day or the intensity of the work are different. Meanwhile, the rise or fall of wages in the opposite direction and the decrease or increase in the intensity of the work or the length of the working day in the direct direction affect the amount of the rate of surplus value and consequently the rate of profit.

2 – m’ and v are variable, C is constant

Three cases can occur. First, the change of m’ and v occurs in the opposite direction but by the same amount. For example:

80c+20v+20m gives way to 90c+10v+20m, in which case m’ has increased from 100% to 200% and v has decreased from 20 to 10. One of them has doubled and the other has halved.

Second: The changes in m’ and v are again inverse but unequal. For example, 80c+20v+20m with a surplus value of 100% and a profit rate of 20% gives way to 72c+28v+20m with a surplus value of more than 71% and a profit rate of 20%, or vice versa to 84c+16v+20m with a surplus value of 125% and a profit rate of 20%.

Third: The changes in m’ and v are in the direct direction together. For example, 90c+10v+10m with a surplus value of 100% and a profit rate of 10% gives way to 80c+20v+30m with a surplus value of 150% and a profit rate of 30%, or vice versa to 92c+8v+6m with a surplus value of 75% and a profit rate of 6%. Changes that are in line with each other and reinforce each other.

3 – m’, v and C are variable

Here too, several cases arise. First: v/C (the ratio of v to C) remains constant and p’ changes in the same proportion as m’. For example, 80c+20v+10m is replaced by 80c+20v+20m. Here the rate of surplus value has fallen from 100% to 50% and the rate of profit from 20% to 10%.

Second: If v/C rises or falls in line with m’, the rate of profit rises or falls by a greater proportion than the rate of surplus value. For example: 80c+20v+10m is replaced by 70c+30v+20m. Here the rate of surplus value rises from 50% to 66% but the rate of profit rises from 10% to 20%.

Third: v/C changes in the opposite direction of m’ but in a smaller proportion. In this case, the rate of profit rises or falls in a smaller proportion than the rate of surplus value. Example: 90c+10v+15m replaces 80c+20v+10m. The rate of profit of 10% and the rate of surplus value of 50% give way to rates of 15% and 150% respectively.

Fourth: If v/C changes in the opposite direction of m’ and in a larger proportion, then the rate of profit rises despite the fall in the rate of surplus value and falls despite the rise in the rate of surplus value. Example: 80c+20v+20m gives way to 90c+10v+15m. In this way, the rate of surplus value falls from 100% to 150% and the rate of profit falls from 20% to 15%.

Fifth: If v/C changes in the opposite direction to m’ but in exactly the same proportion, the rate of profit remains constant despite the increase or decrease in the rate of surplus value. This situation requires explanation. We have seen earlier that a single rate of profit can arise from different rates of surplus value. With the rate of surplus value remaining constant, any arbitrary change in v/C can produce a difference in the rate of profit. Let us consider a capital of 80c+20v+20m, whose rate of surplus value remains constant at 20 percent. It is clear that any change in the ratio between v and C changes the rate of profit. With a change in the value of m’, an inverse and completely proportional change in v/C is necessary for the rate of profit not to change. This is possible only exceptionally in the case of a single capital or two capitals belonging to a single country. According to what we have said so far, the rate of profit depends on two main factors, namely the rate of surplus value and the value composition of capital (the value ratio between the two fixed and variable components).

The rates of profit of two separate or single capitals but in two different conditions are equal in the following cases.

1- The percentage of the composition of capitals and the rate of surplus value are equal.

2- Whenever, while the percentage of the composition of capitals is unequal and the rate of surplus value is unequal, the product of the percentage of the variable capital and the rate of surplus value (the product of v and m’) are equal. In other words, v and m’ are inversely proportional. For example, two capitals with the characteristics: 80c + 20v and a rate of surplus value of 80.73% in the first area and 90c + 10v and a rate of surplus value of 175% in the second area, where the rate of profit for both is equal to 17.5%.

The rates of profit of two capitals will be unequal in the following cases.

1- Despite the percentage equality of the composition of capitals, the rates of surplus value are unequal. In this case, the ratio of the rates of profit to each other coincides with the ratio of the rates of surplus value. Example: 80c+20v+20m and 90c+10v+15m

2-The rates of surplus value are equal, but the percentage form of the composition of capitals is unequal. In this case, the ratio of the rates of profit to each other is the same as the ratio of the variable components of capital to each other. Example: 80c+20v+20m and 90c+10v+10m

3-The rate of surplus value and the percentage form of the composition of capitals are both unequal. In such a situation, the ratio of the rates of profit is like the ratio of the products of v and m’. (Percentage ratio of the volume of surplus values ​​to the total capital) For example, two capitals with the characteristics of the advance 80c + 20v + 20m in one area and 90c + 10v + 20m in another area, where the product of v and m’ is both 20.

Chapter 4

The Effect of the Turnover on the Rate of Profit

In a single turnover period, the entire capital cannot be used in production at the same time. Some of it, in the form of cash, raw materials, warehouse reserves, unsold goods-capital, uncollected receivables, and the like, remain unused and outside the specific production curve. Accordingly, the equivalent of all the aforementioned components is deducted from the total capital, and the remainder enters the flow of surplus value and profit as active capital. The shorter the turnover period, the smaller this over-utilized part of capital will be compared to its total. It is quite clear that as the turnover period shortens, the rate of profit increases. Let us emphasize a few basic points in this regard.

The most effective means of reducing the time of production is to increase the productivity of labour. This, however, can only lead to an increase in the rate of profit if the investment is not accompanied by an excessive increase in the cost of expensive machinery and a significant rise in the organic composition of capital. The great advances in industry and technology have certainly made the payback period of capital much shorter, especially in industries that previously required a long time. The development of communications is a very powerful factor in reducing the payback period. The progress made in the last 50 years has been extremely impressive and is comparable only to the industrial revolution of the latter half of the eighteenth century. The round-trip time for a shipment to East Asia, which took at least 12 months until 1847, has now been reduced over the course of several decades to about 12 weeks in 1870. The turnaround time of world trade has also been shortened to the same extent, and the scope of action of capital in this sphere has increased many times. This situation cannot but affect the dynamics of the rate of profit. To understand more precisely the effect of turnaround time on the rate of profit, let us compare two separate capitals with all the same conditions, but with different turnaround periods. Capital C1 is 100%, with a compound of 80c+20v and a rate of surplus value of 100%. The annual product will be 160c+40v+40m. But let us calculate the rate of profit not with reference to the two turnarounds, but to the capital initially advanced. In this case, p’=40%.

Now let us consider another capital (C2) of 200 with the same composition and the same rate of surplus value of 160c+40v+40m, which is reversed only once during the year. The annual product is still 160c+40v+40m, but the rate of profit is only 20 percent because: p’=40/200=20%. In other words, the rate of profit has been halved. The result of this analogy, or the above points in general, can be summarized as follows: whenever the organic composition of capitals, the rate of surplus value, and the daily labour of workers are the same, the ratio of the rates of profit is inversely proportional to the reversal time. Otherwise, that is, by calculating the difference in the three components above, then the difference in the rates of profit will be due to other factors. This is not what we are examining here.

The direct and obvious effect of the shortening of the turnover time on the amount of surplus value or profit is due to the role played by variable capital. In Book II, we showed somewhere that a variable capital of 500 units, whenever it is turnover 10 times during the year, will create the same amount of surplus value as a variable capital of 5000 units in one turnover cycle per year, provided that the rate of surplus value and the wages of the workers remain the same. To make the matter clearer, let us consider two capitals in two different conditions. Capital 1, consisting of 10,000 fixed with an annual depreciation of 1000, a fixed circulating component of 500, a variable component of 500 and a surplus value rate of 100%, is turnover ten times a year. If we denote depreciation by the symbol S, which stands for Sublation. The product of the first turnover cycle:

500c+500v+500m+100D = 1600 and the annual product will be 5000c+5000v+5000m+1000D = 16000. The total annual surplus value is 5000, which if divided by the total capital of 11000 units, we will see a rate of profit of 45.5%. Now suppose that the number of rounds of reversals is reduced from 10 to 5. In this case, for one reversal we have 1000c+1000v+1000m+200D = 3200 and for the whole year we have 5000c+5000v+5000m+1000D equal to 16000. The total capital is 11000 and the amount of surplus value is still 5000. The rate of profit P’ will also be the same 45.5%.

Let’s look at the third capital. The fixed component is zero. The circulating part of the fixed capital is 6000, the variable part is 5000, the rate of surplus value is 100%, and the number of reversal periods is 1. 6000c+5000v+5000m=16000, the total capital is 11000, and if we divide the 5000-surplus value by it, we still arrive at a profit rate of 45.5 percent. Thus, in all three cases above, the total volume of capital is 11000, the volume of surplus values ​​is 5000, and the profit rate is 45.5 percent. Now, if capital 1 reverses 5 times instead of 10 times, we will see the following changes for each reversal period:

500c+500v+500m+200D=1700 and the annual product: 2500c+2500v+2500m+1000D=8500. The total volume of capital is 11000, the surplus value is 2500 and the higher rate of profit is a little more than 22 and a half percent. In other words, the rate of profit has been halved. All these calculations narrate the fact that: the volume of surplus value earned by a capital during a year is equal to the surplus value produced in one turnover period multiplied by the number of annual turnovers of the variable part of that capital. It is also necessary to mention the relationship of these calculations with the formula for the rate of profit that was explained earlier. If we denote the total surplus value of the year by M, the surplus value of one reversal by m, the rate of surplus value of one reversal by m’, the annual rate of surplus value by M’, and the number of reversals by n, then we will see that P’=m’v/C = m’v/c+v is only true when capital has only one reversal during the year. For the formula for the rate of profit to be exactly correct, we must base the calculation on the annual rate of surplus value instead of the simple rate of surplus value. In other words, instead of m’, we must use M’, or we must multiply the variable component of capital by the number of reversals.

Chapter Five: Economy in the Employment of

Constant Capital

1 –In General

The lengthening of the working day, while the volume of variable capital, the number of workers and the same amount of wages remain the same, regardless of whether the surplus-time is paid or not, lowers the relative value of constant capital in terms of the variable component of capital. In the same way, the rate of profit rises, regardless of the growth of the volume and the rise in the rate of surplus-value. The lengthening of the working day, while the fixed components of fixed capital, such as machinery and buildings, remain the same, does not impose any new expenses on the capitalist for this most expensive part of fixed capital. Furthermore, the value of constant capital is reproduced in a series of shorter reversal periods. Even if the surplus-time is paid, it increases profit. In cases where the wages of surplus labour are added to the normal hours of work, they still increase profits. The increasing necessity of increasing fixed capital in the new industry compels the profit-hungry capitalist to increase the daily work as much as he can. If the daily hours of work remain constant, the owner of capital gains none of the above advantages. He is forced to increase the number of workers and with it the volume of fixed capital, in order to exploit a larger volume of labour. (Here we ignore the question of lowering wages below the normal level, intensifying the pace of work or increasing the productivity of labour and raising the relative surplus-value altogether.) With the lengthening of the working day, the consumption of raw materials and the circulating component of fixed capital increases, because, firstly, more work is done on raw materials in a given time, secondly, the machinery used by a given number of workers increases and this component of fixed capital also grows. In this way, the growth of surplus-value follows the growth of fixed capital. The increase in the exploitation of workers is accompanied by the increase in fixed capital and the more expensive conditions of production under which they are exploited. Profits rise on the one hand, while profits fall on the other. A long series of costs remain almost the same with a short or long working day. The cost of controlling 500 workers working an 18-hour day is less than the cost of controlling 750 workers working 12 hours a day. State taxes, municipal dues, fire insurance, wages of permanent employees, depreciation of machinery, and other current factory costs do not change much with the length or shortening of the working day. These costs increase when production decreases, while profits increase.

The period of reproduction of fixed capital is not the same as that which is declared to be the life of the machinery or other parts of this part of capital. It is the whole process of labour and the manner in which fixed capital is employed which determines this period. If the workers work 18 hours a day instead of 12, this makes the weekly working time 3 days longer. It makes one week a week and a half, and two years three years. If no wages are paid for this extra work, then the workers have worked for the capitalist one week in addition to every two weeks, and one year in addition to every two years, completely free of charge. This at the same time speeds up the reproduction of the value of the machinery and reduces its time by two-thirds. We proceed in our calculations under the strict assumption that the volume and rate of surplus-value remain known.

In the previous volumes of the book, we have spoken sufficiently about the significant effect of the division of labour and the chain cooperation of workers within the production cycle on reducing production costs or making production conditions cheaper. There, it was clarified how the large-scale gathering of workers under one roof and their planned cooperation with a certain division of labour, on the one hand, greatly increases the efficiency of production, and on the other hand, does not increase the cost of machinery, energy resources, buildings, transportation, and the like. The important point in this passage is that the economy resulting from the concentration of the means of production arises essentially from the concentration of workers and the social cohesion of labour. This economy arises from the social character of labour. If surplus value comes from the surplus labour of individual workers or individual workers, the profit resulting from the concentration of machinery and the mass accumulation of fixed components, the circulation of fixed capital, is a direct product of the social character of labour. Even the reforms which are made in this direction, and which are aimed at increasing economy, are the result of the experiences and observations which have been made possible by the mass production based on the collective labour of the workers. This argument is also valid for another class of economy. This class consists of the objects which are called waste or rubbish of production. These wastes are reused in the same or other branches of industry and are put into productive or individual consumption. A matter which arises solely from the process of collective labour or the social dynamics of labour. It is mass and large-scale production which makes the use of these wastes in the production process important and possible. The use of these wastes in proportion to the amount required makes the costs of raw materials and the circulating component of fixed capital cheaper. The reduction of these costs, in turn, causes the rate of profit to rise, provided that the amount of variable capital and the rate of surplus-value are known. When the amount of surplus-value is given, the rate of profit to rise can only be due to a fall in the value of constant capital. The exchange value of the constant capital that enters into the new product is not important. What is important is its use value and quantity. The assistance that a machine provides to a number of workers does not depend on the value of the machine, but on the contrary on the role it plays as a machine.

There is also a third form of saving in the cost of fixed capital, which is achieved by shortening the cycle time. The development of means of transport and the continuous improvement of machinery play an effective role in this transition. Whatever reduces the wear and tear of machinery or fixed capital as a whole makes a unit of goods cheaper, and at the same time reduces the capital expenditure for a given cycle of valuation and turnover. All these savings can be realized only when work becomes increasingly socialized, and production is carried out on a large scale. 

Improving labour productivity in one industry, such as iron production, leads to a reduction in the value and cost of fixed capital formation in other industries, such as agriculture and textiles. This is natural because goods produced in one industry are used as components of fixed capital in other industries. The cheaper goods are the result of the growth in labour productivity in the first industry, but they also reduce the cost of fixed capital and increase the rate of profit in other industries. The characteristic feature of this particular type of economy in the cost of fixed capital resulting from the development of industry is that the rise in the rate of profit in one sphere is due to the improvement in the productivity of labour in another sphere. The greater profit that accrues to the owner of capital here is not produced by the workers he directly exploits, but has been produced by workers elsewhere, but its flow to the capitalist’s account is precisely the result of social labour. The increasing increase in the productivity of labour is in its fundamental analysis due to the social character of the labour involved in the process of production, the division of labour within society, and the development of intellectual labour, including in the natural sciences. The improvement in the productivity of labour in the production of means of production makes fixed capital cheaper in other sectors, a development that helps to increase the rate of profit. Another form of increase in the rate of profit does not originate in a decrease in the price of the components of fixed capital but in the way in which fixed capital is employed. It was said earlier that the increasing concentration of machinery and means of production in one workplace can reduce the costs of water, electricity, buildings, machinery, and transportation, and thereby increase the rate of profit.

The increase in the rate of profit can sometimes be due to the quality of raw materials. The higher the quality of this component of fixed capital, the lower the amount of waste, the smaller the volume of materials required to absorb a given amount of labour. The wear and tear of machines is reduced. It helps to increase the amount and rate of surplus value. The poor quality of raw materials, on the contrary, requires more time to be converted into products, makes the surplus labour lighter than the necessary labour. It has a significant impact on the process of accumulation and reproduction, because in the reproduction process, the main determinant is the productivity of labour, not the volume of labour used. The relative cheapness of the means of production does not contradict the absolute increase in their value. The increase in the productivity of labour and the expansion of the scale of production increase the scope of application of the means of production enormously. Economy in the use of fixed capital, from all sides and in whatever form it may be, is overshadowed by the operation of the following principles. First: It appears exclusively as the result of the mass concentration of interconnected means of production and their collective use by the workers, in other words, the product of the social character of labour is directly productive. Second: It is the fruit of the expansion of the productivity of labour in the sphere that supplies the means of production of capital. Just as if we disregard the individual existence of the owner of capital and the workers directly exploited by him, and instead consider all capitalists and all workers, this economy appears as the fruit of the increase in the productivity of labour in the entire sphere of reproduction of social capital. With this distinction, the individual capitalist does not profit only from the increase in the productivity of labour in his own workshop, but on the contrary, he also achieves greater profits when this increase occurs in other centres of labour.

The very basic point here is that capitalism transforms all these savings into the real fabric of the conditions of work, production and life of the worker. Conditions that guarantee the creation of greater profits and higher rates of profit for capital, but for workers, more intense exploitation, more deadly exhaustion, more destructive physical and intellectual degradation and more terrifying slaughter. Here, as elsewhere, as the basis and foundation of its existence, capital locks every riyal of its increase and its profits into greater poverty, deeper exhaustion and increasing degradation of the worker, absolutely not content with more crushing intensification of exploitation and deeper physical slaughter of him, it also bombards his intelligence, knowledge, recognition and ability to think, it talks very easily about savings!, preaches rationality!!, talks about its leadership in prudence, reason, knowledge, the application of all these in the production of wealth, welfare, social facilities!! It extols and glories in serving society and people! Here, capital, as the basis of its existence, disguises the entire process of self-expansion and the production of greater profits through the more deadly exploitation of workers as rational savings in production costs and paving the way for the economic, political, and civil development of society. It induces the most horrific slaughter of the working class, body, and mind, and it instils in the workers a campaign to serve them and makes them eat their consciousness. It places the worker in conditions where the more astronomically he considers the capitalist to improve his livelihood and well-being, the more he sees the increasing and more rebellious profits of capital, which are the result of his more brutal exploitation, as the product of the capitalist’s more dazzling rationality!!

In the same way that capital, by continuously increasing the productivity of labour, produces the greatest volume of goods from the least number of workers and seizes the greatest profits, just as it constantly economizes on the consumption of living labour and reduces its relative amount, it also strives to economize on the cost of fixed capital, to lower the cost of its formation, and to use this reduction for wider accumulation and greater advance. The dynamics of capital’s valorisation have historically been intertwined and inseparable from its forced effort to reduce the relative cost of living labour on the one hand and the cost of forming dead labour (fixed capital) on the other. When we speak of economizing on fixed capital, we must distinguish between its forms. The volume and with it the value of the capital employed increases. It seems that more and more capital is concentrated in the hands of one person. The more concentrated capital exploits more workers but relatively fewer. The important point is that this process of capital concentration makes it possible to save more on the cost of fixed capital. It is true that the total capital, especially its fixed part, grows, but the value of this fixed capital decreases in comparison with the total capital employed and the labour force employed.

2 – Savings In Labour Conditions at The Expense of The Labourers.

Let’s start with the coal mine. The capitalists who own the mines refuse to accept the costs related to ensuring the minimum health of the workers. They do not spend a riyal on dehumidification; they do not take any measures to ventilate the mine. They build the holes with maximum economy. They use the worst timbers; they avoid accepting the minimum cost of training and skill of the miners. They dig the tunnels with the least expenses and, consequently, the most dangerous working conditions. They install the cheapest rails, in all these cases they make the greatest savings, with these savings they make the greatest profits and at the same time they bring the exhaustion, old age, fatigue and mortality of the workers to the peak. Capitalists exploit the misery of the workers, their need for a higher wage and the competition between them, to the most inhumane exploitation, employing and exploiting them and young children deep in the mines in these deadly conditions. Even government statistics indicate that between 1852 and 1861 a total of 8,466 workers were killed in the capital’s mines under the pressure of the lack of the most elementary safety facilities. The real figure is much higher. (Marx quotes the first report on the employment of children in mines – April 1829). 

It is the nature of capitalism that, in order to increase labour productivity, competitiveness, shorten the period of return, physically and intellectually suppress the labour movement, in a word, to increase profits and ensure its survival, it commits the greatest waste, but at the same time sacrifices crores and crores of human lives for every rial of added value. Everything we said about mines also applies to factories. Evading any necessary and vital cost of workplace safety, rest and health of workers is the foundation of the work of the owners of capital in all workplaces. A crime that even government inspectors admit. “Leonard Horter,” one of these inspectors, says: “Most factory owners are not willing to install ventilation systems, even though they are very cheap. In many factories, they start the machines without informing the workers, an action that can lead to great risks to life. In 1855, capitalists did not stop at killing workers by not paying for workplace safety but formed the “National Union for Labor Law Reform” to demand the legalization of these killings!! The text of their proposal was that “killing is not murder if it is done for profit”!! The poisonous irony of the story is that sometimes the cost of workplace safety is even much less than the capitalist’s union membership fee to resist paying the said cost!! In the context of these fierce oppositions to any amount of cost of safety of working conditions, the factory owners succeeded in passing a “law” in 1859 that made any kind of protection for workers impossible. The “law” said that workers’ complaints about workplace accidents should be referred to ordinary “courts”!! A task that no worker could handle due to its high cost, and it was obvious that the capitalist would win. With the passage of this law, the number of accidents due to the lack of safety in working conditions and the number of deaths increased by 21%. The heavy density of machines in small halls, the minimum breathing space for each worker working in the workshop, the lack of ventilation, in a word, the most deadly working conditions, on the one hand, made the working masses suffer from all kinds of diseases and plunged them into the abyss of death, on the other hand, made profits even more galactic. The inspectors’ reports reflected this prevailing situation everywhere, but what was happening was simply the increasing growth of capital and the physical and mental deterioration, deterioration and decay of the workers. The reports said that in the period 1860-1861, for example, if 100 people in the agricultural areas lost their lives due to tuberculosis, this figure would reach 263 people in the industrial areas of Manchester. Other forms of saving on production costs, at the expense of the wear and tear, death, and sacrifice of workers without any hesitation, with the aim of achieving ever more astronomical profits, include:

3 – Economy In the Generation and Transmission of Power,

And In Buildings

4 – Utilisation Of the Excretions of Production

5 – Economy Through Inventions

Chapter 6

The Effect of Price Fluctuation

1 – Fluctuations in raw material prices and their direct impact on profit rates

Let us assume that the rate of surplus value is constant to make our calculations simpler and clearer. A capital can achieve a larger volume of surplus value due to fluctuations in the price of raw materials. Let us examine the issue in the following different cases.

First: The effect of fluctuations in fixed capital on the rate of profit.

Second: The effect of changes in wages on the rate of profit.

Changes in constant capital, whether in various forms of saving or in the increase or decrease of the price of raw materials, affect the rate of profit. These changes affect the data of the formula m’v/C and cause a change in the result of the deduction. It makes no difference in which of the two basic branches of capitalist production the change occurs. Moreover, it is also true of the branch of production of luxury articles. The raw materials we are referring to in this discussion are indigo, coal, wood, leather, iron, and the like. Materials whose prices are themselves affected by the prices of their constituent parts. If the price of machinery rises as a result of price fluctuations, regardless of whether it is due to an increase in the price of raw materials or auxiliary means, in both cases the rate of profit will fall by the same amount. The reverse is also true. We shall focus our discussion specifically on the fluctuations in the prices of items which enter the production process as raw materials. One point to note. Natural resources such as iron, coal, wood, etc., i.e. the elements used in the construction of machinery and their use, appear here as natural returns to capital, these materials being an element in the formation of the rate of profit, independent of whether wages are high or low.

If the price of raw materials decreases by an amount equal to d, then m/C or m/c+v will give way to m/(c-d)+v or m/C-d and the rate of profit will also rise. Conversely, if the price of raw materials increases, then m/C will give way to m/C+d and the rate of profit will fall. Note that this decrease or increase in the rate of profit, a decrease or increase based on the fluctuation of the price of raw materials, has no special connection with changes in the sales market or the amount of supply and demand. Accordingly, by examining the subject carefully, we arrive at several conclusions. First: It becomes clear what an important role foreign trade plays in the rate of profit of capital. It is through trade with the world market that the very basic raw materials needed can be obtained at the cheapest possible price.

Second: The great importance of cancelling or reducing customs duties on raw materials for the industry can be understood. It is not without reason that “the free entry of raw materials as much as possible” determines the important slogan of the customs protection system, or “abolition of grain customs duties” and “abolition of cotton customs duties” are the focus of the “free trade” flag bearers. Just look at the use of flour in the cotton industry, not as a raw material, but only as an auxiliary material. R.H. Greg’s calculations show that in 1837, British capitalists paid over 200,000 pounds of customs duties on 342,000 pounds of flour they consumed. The rebellion against the abolition of the import tariff arose from here. A simple protest that, unlike the massive labour riots, gave immediate results. Customs duties were cancelled and in addition to that, duties on cotton and other raw materials were also cancelled. This was not enough. Under the pretext of these complications, capitalists launched a campaign to increase working hours and reduce wages.

It is needless to say that the raw materials are consumed in the production process of the product, while only the wearable part of the fixed capital enters the new product. This means that although the profit rate is determined based on the value of the total capital employed and not just consumed, the fluctuations in the price of raw materials have a much more significant effect on the profit rate compared to other components of fixed capital. Our assumption here is that the goods are sold at their real price, but what happens in practice is that the rate of increase and decrease in the profit rate is not necessarily the same as the increase and decrease in the price of raw materials. It may be a little less or more.

The volume and value of the machinery entering the labour process grow with the development of the productive power of labour, but the amount of this growth is not proportional to the increase in the productivity of labour. In other words, it is not as much as the new machinery delivers more product. The increase in the productivity of labour at the same time implies the maximum production with the minimum of labour. On this basis, parallel to the increase in the productivity of labour, the share of the depreciation component of fixed and variable capital in the price of the product falls, while the share of raw materials increases. This in turn highlights the importance of the price of raw materials and the effect of their waste on the fall and rise of the rate of profit. This importance is still greater when we remember that raw and auxiliary materials, equal to the wages of the workers, are completely replaced in each round of capital turnover. If, following all these calculations, the total annual sales of the capitalist ensure his desired savings and the process of capital increase, it becomes unnecessary to set aside a large amount of savings after each sale. But one must also consider the situation where the cash price obtained from the sale of goods is not sufficient to compensate for all the elements of the production process. In such a situation, the high or low price of raw and auxiliary materials and the amount of their waste have a decisive impact on the continuation of the process of reproduction and valorisation. The more expensive the raw materials, the more widespread the consumption of inferior types of them becomes, and the inferior these materials are, the greater their waste and the greater the losses and losses. This naturally puts a noticeable pressure on the rate of profit of capital.

2 – Appreciation, Depreciation, Release and Tie-Up of Capital

Is the free and locked-up capital the same as its increase and decrease, or are they different phenomena? To find this answer, we must first answer another question. Basically, when is capital free and when is it locked up? Locked-up capital is a certain share of the total value of the product, which, for example, in simple accumulation, compensates for fixed and variable capital and keeps the accumulation process going. A part of the product that does not fulfil this role and does not enter the reserve flow is called free capital. This locking and unlocking of capital are different from the locking and unlocking of wealth, and its effects are different. Let us give an example. The annual surplus value of capital is equal to x, which in simple accumulation is allocated to the consumption of capitalists. Now the capitalists’ consumer goods become cheaper. Let us denote this amount of cheapening by the letter a. In this case x-a is sufficient for the consumption of the owners of capital, and a can become additional capital or the surplus consumption of the capitalists. The reverse is also true. If the price of goods rises, either accumulation must be restricted or the consumption of the owners of capital must be reduced.

We have already discussed the consequences of fluctuations in the price of raw materials. There we reached a general conclusion. That, other things being equal, the rate of profit changes in inverse proportion to the value of the raw materials. This law is also true of all capitals which are advanced for the first time. A large part of the capital present in the labour process belongs to the circulating sphere. Part of it is in the production curve, part is available on the market in the form of goods that must be converted into money, and part is in the form of money. The part that is in the production environment can be raw materials, auxiliary materials, or semi-finished parts. The rate of increase or decrease in the amount of capital is affected by the way these components are combined. To examine the subject, we will first ignore the total fixed capital and consider only the circulating part of constant capital. If the price of a raw material, such as cotton, rises, the price of yarn, cloth, etc., which are already made from cheaper cotton, also rises. The value of cotton that has not yet been used or is even being prepared for weaving also rises. In the latter case, cotton becomes worth more than its real value. The same rule applies to reserves of raw materials. This rise in value can compensate for the loss caused by the rise in the price of raw materials and prevent the rate of profit from falling. If the opposite happens, in other words, if the price of raw materials falls, the rate of profit will rise.

In the case of machinery, land, or the fixed component of constant capital in general, and the effect of its depreciation and appreciation on the rate of profit, the matter is somewhat different. Here the interest on land is an important factor to be considered, and we shall therefore postpone its consideration to another place. However, as far as the depreciation of capital is concerned, it is worth mentioning one point.

The constant innovations which take place in industry reduce the use-value and, in this connection, the value of existing machinery or factory installations relatively. This phenomenon is most striking and powerful in conditions where the new machinery is of less technical precision. Machines become obsolete before they have had the opportunity to reproduce their value. With the aim of achieving the greatest surplus value and avoiding every rial of loss of profit, the capitalists resort to all forms of victimization of the workers. They arrange work shifts on the basis of round-the-clock work without any factory stoppage, extend the working day to the utmost extent possible, maximize the speed and intensity of work, and engage in every other atrocity. If machinery, installations, and other components of fixed capital have reached a certain degree of development, precision, and strength, innovations still result in a decrease in value, but the decrease in the value of machines does not result from the introduction of modern technology and the displacement of old machinery, but from the fact that their reproduction has become cheaper. A factor that in turn contributes to the disclosure of a secret. The secret of why large enterprises often flourish only in the hands of their second owners. The answer is clear. Because the first owners have gone bankrupt and the second have bought the entire enterprise, machinery, buildings, and other installations at the cheapest price. This is most striking in the case of agriculture.

Let us return to variable capital. The value of labour power rises if the value of the means of subsistence produced by this power rises, and vice versa, it falls if the value of the means of subsistence decreases. With the length of the working day remaining constant, the fall in surplus value will lead to an increase in the value of labour power, and the fall in the latter will lead to an increase in the former. But the confinement and liberation of capital can also play a role in this transition. If wages fall along with a fall in the value of labour power or even an increase in the real price of labour, a part of the capital previously spent on wages is liberated. (Liberation of variable capital) The effect of this on new investment is that the capital in question operates at a higher rate of surplus value. But in the case of capital that has been in the process of valorisation, not only does the rate of surplus value rise, but part of the wages is also liberated, becoming free capital and can become additional capital. Let us take an example. Let us consider a capital that exploits 500 workers with 500 pounds sterling and produces an annual product of 1,000 pounds. The surplus value is 500 and its rate is 100%. Now the same capital exploits 500 workers with 400 pounds and produces the same product. Here the volume of surplus value will be 600 and its rate will be 150%. For someone who starts with a variable capital of 400 pounds and a fixed capital corresponding to it, these changes are only a higher rate of surplus value, but for an enterprise that has been working already, it is not only an increase in the rate of surplus value, but also 100 pounds of new variable capital to buy more labour and invest more. The reverse is also true. Let us assume that a capitalist exploits 500 workers with a variable capital of 400 liras, his surplus value is 600 and the rate of surplus value is 150%. In the next round, wages rise and he is forced to pay 500 liras instead of 400 liras for the same 500 workers. The rate of surplus value falls to 100%. An event that for the new investor is only tolerating a lower rate of surplus value, but for the capitalist who has already been exploiting workers, the story is different. By increasing wages by 400 liras, he can exploit only 400 workers. The fixed capital that he had previously advanced also decreases significantly, for example, 2000 liras become 1600 liras. A number of machines stop, and everything changes to his disadvantage. The increase and decrease in the productivity of labour can also cause a part of the variable capital to be released or locked up. If wages remain constant but a larger volume of constant capital is set in motion with less variable capital, part of the variable capital is freed up and can become additional capital. The reverse is also true. Let us not forget that a mere change in the organic composition of capital without being caused by a change in the productivity of labour does not play such a role.

From all that has been said, it becomes clear that the more capitalist production develops, the more the production of machinery increases, the faster accumulation takes place, the more massive the surplus production of the constant part of fixed capital becomes and the more obvious the relative shortage of production of vegetable and animal raw materials becomes. An event that leads to an increase in the price of the latter materials. The irritations caused by price fluctuations of the main elements of production (raw materials) also increase. Considering all these components, let us assume that the price of these materials suddenly falls from its peak and collapses due to special conditions such as the expansion of production, a decrease in demand or new imports. The question is what will happen? This collapse naturally creates a brake on the reproduction of the aforementioned materials, but this does not put pressure on the process of production of raw products in other countries, especially the primary areas of production and their export. Even the monopoly role of these areas in the production of the aforementioned products becomes stronger. Evidence suggests that, for example, in the last few decades, whenever cotton production has declined in India, it has peaked in the United States. It is the custom of capitalists to expand unionization when raw material prices rise and thereby try to lower prices in various ways. They continue to do so for a while, but very quickly competition begins to dominate and exert its dominant role, pushing back unionization and other mechanisms and declaring that it has the first say in determining prices.

3 – Cotton Crisis 1861 – 1865 – Historical Background 1845 to 1860

The year 1845 was the time of the cotton industry’s boom. Raw materials were cheap. New investments were made every week. New factories were established; more and more abandoned workshops were put into operation with powerful steam engines. It didn’t take long. Employers’ complaints began, satisfactions declined, and the workday was reduced at the employers’ discretion!! From 12 hours to 8 hours. Why? This was because the price of cotton rose while the textile market was stagnant, and the price of cloth not only did not rise but also fell. The dramatic increase in factories over the course of four years, the abundance of supply and the lack of sufficient demand caused this situation. In 1849, business flourished to some extent. The low price of linen and wool ensured a decent profit for textile factories, but the high price of cotton was still a problem for this industry. The American Civil War between 1861 and 1864 interrupted the relative prosperity, as the price of cotton continued to rise. In order to prevent the decline in profits, the capitalists made the pressure of exploitation of workers explosive and committed all sorts of other crimes. They reduced the diameter of the threads as much as they could and compensated for this reduction by adding glue. This work, which was disastrous, made many workers suffer from incurable diseases and victims of the increasing profits of the owners of capital. In 1863, half of the workers in the textile industries lost their jobs. Wages fell sharply. Working conditions became much more deadly than before. In a word, any decrease in the supply of raw materials and an increase in their prices drove the volume of surplus values ​​and the rate of profit to a decline, put industries out of business, and the capitalists spread the burden of all these crises on the lives of the workers.

Chapter 7: Attachments (Supplementary Remarks)

Again, we assume that the volume of profit in a given sphere of production is equal to the volume of surplus value produced in that sphere. But the capitalist does not see profit as identical with surplus value, and his refusal to accept this identity is based on the following reasons. First: He looks at the cyclical trend and overlooks the production process. The organization of the value of commodities, which is also the organization of surplus value, is for him the source of profit. Second: Assuming the rate of exploitation in a sphere and ignoring certain factors such as the credit system, favourable market privileges, etc., the surplus value produced can still appear at different rates of profit. For example, a variable capital of 1000 liras produces a figure equal to 1000 liras of surplus value in each of the three enterprises A, B and C. The rate of surplus value in each of the three enterprises is 100%, but the organic composition of capital in the enterprises is different. In the first, the same variable capital of 1,000 liras employs 10,000 liras, in the second 12,000 liras, and in the third 15,000 liras of constant capital. The difference in the composition of the capitals inevitably leads to different rates of profit of 10% above 8% and below 7%. The volume of surplus value is the same in all 3 institutions, but we are faced with 3 different rates of profit. The capitalist overlooks these differences, does not see their unitary basis, is unable to understand the oneness of profit and surplus value. He becomes a stone in the rate of profit, refers the difference in the rates of profit to different degrees of expertise, competence, and miraculous power of the employers, calls the talk of surplus value or its rate “a hindrance to national security”!! Here, let us point out the incorrectness of the theory of ” Johann Karl Rodbertus “. He says that: “Unlike the interest on land, which changes in proportion to the area rented, the rate of profit is not a function of the amount of capital”!! This statement is fundamentally wrong and applies only in two cases as an exception. First – when all conditions, especially the rate of surplus value, are constant, but a change in value occurs in the money-commodity circuit. Let us give an example. The total capital is 100 liras. 80 liras are constant, 20 liras are variable, surplus value is 20 liras, the rate of surplus value is 100% and the rate of profit is 20%. Now all components remain constant and only the value of the same 100 lira capital in the money-commodity circuit changes to 200 lira or falls to 50 liras under the influence of the fluctuation in the value of money. In the first case, the 20 liras of the previous surplus value also appears in 40 liras, and in the second case it reaches 10 liras. In both cases, the rate of profit remains constant, while the capital has apparently changed. But this change is solely due to the value of money. If, for example, we had witnessed a change in the organic composition of capital, the rate of profit would certainly have changed. Secondly, a change in the real value of capital occurs but is not accompanied by a change in the organic composition of capital. Here, let us clarify the matter by giving an example. The total capital is equal to 1000, the surplus value is 200, and its rate of profit is 20%. This capital increases to 2000 or decreases to 500. The volume of surplus value also becomes 400 or 100 in parallel with this change. The composition of capital is constant in all these cases. There is no change in the relationship between c and v, only the value of capital and, with it, the value of surplus-value. In this connection, the rate of profit remains constant. The increase in the rate of profit always arises from the fact that surplus-value, whether relative or absolute, increases in relation to the costs of production or to the total capital. A fluctuation in the rate of profit occurs without a change in the organic composition or absolute value of capital when the value of the capital advanced, whether fixed or circulating, increases or decreases due to the increase or decrease in the labour time required for its reproduction, independent of the capital already available. Let us remember that the value of any commodity is not necessarily the labour contained in the commodity itself, but the socially necessary labour time required for its reproduction. This socially necessary labour time can vary, double, halve, or undergo any other fluctuation under different conditions of production. When this increase or decrease in value affects all components of capital equally, then the rate of profit can remain unchanged. Meanwhile, as soon as there is a change in the organic composition of capital, the matter will definitely be different.

Part Two

Converting Profit into Average Profit

Chapter Eight

Different Compositions of Capitals in

Different Branches of Production and

Resulting Differences in Rates of Profit

In the first part of this volume, it was shown that the rate of profit can change while the rate of surplus value remains the same. At the beginning of the present part, our assumption for the continuation of the analysis is that the degree of exploitation or the intensity of exploitation and the daily length of work are at the same level and equal in all production environments. The differences in the exploitation of labour in different areas, the differences between wages, which are mainly related to the simplicity and complexity of work, or similar factors, despite their very obvious importance in intensifying the poverty and misery of certain layers of workers and in the heterogeneity of the living conditions of the working mass, are ignored in the present study. These differences are certainly important, but firstly, they do not have a significant impact on our calculations in this discussion. Secondly, they are not sustainable and capitalist production in the process of its expansion drives them towards parity. The difference in the rate of surplus value in different countries is also ignored. The main focus of the discussion is how a general rate of profit is formed and established in a society?

It was previously stated that, with the rate of surplus value being constant, the change in the rate of profit is a function of the changes that occur in the value of the various components of fixed capital. The rise and fall in the value of these components is such that the relationship between the fixed and variable parts of capital changes. It was also explained that the length of the turnover period of capital has a significant effect on the rate of profit. Another important point is that all other conditions being constant, the rate of profit in different branches of production changes with the change in the length of the turnover period or the change in the organic composition of capital. Our present study focuses on these last two points.

1 – Difference in the organic composition of capital. 2 – Difference in the time of reversal.

When we speak of the organic composition or the time of turnover of capital in a given sphere of production, we are always referring to the average level of these factors in the capitals of the sphere in question, or to the average position of the capital advanced in that sphere. Furthermore, since the rate of surplus-value, the daily rate of work, and, of course, the rate of wages, are all assumed to be constant, a given quantity of variable capital necessarily represents the employment of a given quantity of labour-power, and consequently a given quantity of embodied labour. For example, if £100 represents the weekly wages of 100 workers, then a weekly work of 60 hours would represent 6,000 hours of work per week, £200 £12,000, and £50 £3,000 only. All these points are important in our present analysis, but apart from them, the following fundamental questions must be borne in mind everywhere.

1 – There are two types of relations between the two constant and variable components of capital. At each level of labour productivity, a certain volume of variable capital (a certain number of workers) converts a certain volume of means of production into a product. This ratio is called technical composition. This technical composition, in different areas of accumulation, is accompanied by small, large, or enormous value differences. Copper is more expensive than iron, and the price of each of them differs from wood, cotton, raw materials, or other auxiliary materials. We call the second composition value. The value composition of capital when it reflects its technical composition is called organic composition.

2 – A change in the value of variable capital can only indicate a lower or higher price of the same amount of labour, but in the current discussion, the rate of surplus value and the daily rate of labour are assumed to be constant and we are not faced with wage fluctuations. Here, on the contrary, the difference in the amount of fixed capital can indicate a change in the volume of means of production and materials that are set in motion by a certain quantity of labour. This difference may also arise from the difference in the value of the aforementioned materials and means in different production environments.

3 – It is necessary to distinguish between the two roles of variable capital. On the one hand, value is embodied in the form of wages, which express the quantity of labour. On the other hand, it expresses the volume of living labour that capital has set in motion and therefore contains a value higher than the wage or paid labour. Accordingly, the same capitals with the same rate of surplus value, when exploiting different labour forces or volumes of living labour, capture completely different amounts of surplus value and, accordingly, have different rates of profit. Let us consider a variable capital of 100 pounds sterling, which is equivalent to the wages of 100 workers. The weekly working time is 60 hours, and the rate of surplus value is 100%. Workers work 30 hours a week for themselves (necessary labour) and deliver 30 hours of surplus labour to the capitalist. 100 workers perform a total of 3,000 hours of necessary labour and 3,000 hours of surplus labour per week. Now let’s look at two different production environments, in which the first has a total capital of 700 liras, a variable component of 100, and a fixed component of 600 liras. In the second production environment, the total capital is 700, but vice versa, the variable component is 600 and the fixed component is 100. The first capital exploits only the labour power of 100 people and exploits 100 weeks of 60 hours or 6,000 hours of living labour. The second capital targets 600 weeks, or 36,000 hours of living labour, instead of 100 weeks, for slaughter and exploitation. The first capital produces only 50 weeks or 3,000 hours of surplus labour, and the second capital appropriates 300 weeks or 18,000 hours of surplus labour as surplus value. If the rate of surplus value is one, then the rate of profit for the first is slightly above 14% and for the second slightly below 86%. If the first capital increases from 700 to 7,000 and the second remains at 700 lire, and the composition of capital remains the same, then the first has 1,000 lire of variable capital, with which he exploits 1,000 workers, exploits 60,000 hours of living labour per week, pays 30,000 lire of wages, and produces 30,000 lire of surplus labour or surplus value for his share. Even then, the former will only generate one-sixth of the latter’s output for every 700 liras, and its rate of profit will remain just a little above 14%.

4 – The result obtained above from the distinction between the organic composition of capital in two different production environments can also be obtained under other conditions and under the influence of other factors. Let us suppose that the technical composition of capital in two different spheres of accumulation is the same, but the cost of forming constant capital in the second sphere is twice that of the first. For example, the variable capital in each sphere is equal to 100 pounds sterling and the number of workers exploited is 100. The volume of raw materials and machinery that are put into circulation by these workers and converted into products is also exactly the same. But the cost of raw materials, auxiliary materials and depreciation is 200 pounds sterling in the first and 400 pounds in the second. The rate of exploitation in both spheres is also the same. Accordingly, the volume of surplus value resulting from the exploitation of 100 workers will also be the same and equal to 100 pounds. But the rate of profit in the first is 100/200c+100v or above 33% and in the second is 100/400c+100v, equal to 20%. In the first, out of every 100 pounds sterling of total capital, more than 33 pounds of that capital is variable. In the latter it is only 20 liras. The former has employed relatively much more living labour than the latter and has a correspondingly greater surplus-value and a higher rate of profit. The greater the proportion of living labour, the greater and heavier will be the surplus-value, which has no other source than the surplus-labour of the worker.

5 – The fundamental difference between the two examples above in numbers 3 and 4 is that in example 4 the change in the value composition of capital is not due to a change in the technical composition, while example 3 speaks of a capital whose technical composition is the basis of its value composition.

6 – So far it has been clear that equal capitals with different organic compositions in different production environments have unequal profits. Accordingly, the amount of profit of unequal capitals in different areas of production cannot be explained by the criterion of the size and smallness of these capitals. Why? For the obvious reason that the high and low reference of profits to the total amount of capitals implies the equality of profits in terms of a certain percentage of different capitals. Which is not true and its incorrectness was explained above. The conformity of the amount of profits in proportion to a certain volume of capitals, whether in a single productive environment or in different spheres of accumulation, occurs and is true only when the organic composition of capitals is completely identical. In other words, equal amounts of capitals exploit equal amounts of living labour.

7 – What was said above is realized only when commodities are sold at their real value. The value of the product of 100 units of capital with an organic composition of 90 constant, 10 variable and a rate of surplus value of 100% can be 90c + 10v + 10m = 110, and the same capital with the same rate of surplus value but with a composition of 10 fixed and 90 variables will be 10c + 90v + 90m = 190. The amount of surplus value in one place is 90 and in another place 10. The rate of profit in the first place is 10% and in the second place 90%. If the commodities are sold at their real value, then the first product is only 110 units and the second 190 units. The very important point here is that if the commodities are not sold at their real value, these calculations will change. But one principle will remain true and constant. That in any case the total price of commodities will remain consistent with their total value.

8 – The variation of the rate of profit in different societies arises from the variation of the rate of surplus value. Let us suppose that the rate of exploitation in Europe is 300%, in Asia 400%. Then a million dollars of capital in Europe, combined with 95c + 5v, will yield, for example, the following result.

Constant capital	Variable capital	Surplus value	Constant Consumed	Cost price	Value of product	Profit rate
950000	50000	150000	500000	550000	700000	15%

And in an Asian society like Singapore, Philippines, Indonesia, Iran, for example, we will still see the following figures:

Constant capital	Variable capital	Surplus value	Constant consumed	Cost price	Value of product	Profit rate
850000	150000	600000	600000	750000	1350000	60%

The volume of surplus value in the first sector is 150,000 and in the second sector is 600,000. The profit rate in the first is 15 percent, in the second 60 percent.

9. Contrary to the role played by the organic composition or the ratio between the fixed and variable components of capital on the rate of profit, the composition of the fixed and circulating components of constant capital does not, in itself, have any effect on this transition and does not change the rate of profit. The ratio of these two components affects the rate of profit only when it changes the organic composition of capital. In such a situation, again, it is not the composition of the fixed and circulating components of constant capital that actually causes the rate of profit to change, but rather the organic composition of capital itself that plays a role. The same is true for the length of the reversal period and its role in changing interest rates. It is quite clear that the difference in the ratio between the fixed and circulating parts of the constant capital can cause the period of turnover to be lengthened or shortened. But the main point here is to analyse in detail the mechanism of the effect of the length of the turnover period on the fluctuation of the rate of profit. Let us consider two different areas of capital advance. One consumes more raw and auxiliary materials, the other uses more machinery. If both have equal quantities of labour, although they sell different quantities of products with different values ​​during the year, the volume of the product of both enterprises contains the same amount of surplus value. Here is the essential point. The composition of the two capitals differs in the fixed and circulating components of their constant part. Their turnover time also differs. But their rate of profit, calculated on the basis of the total capital advanced, will be equal. Why? For the obvious reason that both capitals, in spite of their different turnover times, will produce equal amounts of profit. The role which the length of the period plays on the rate of profit is only in so far as it affects the amount of surplus labour done by the workers for the unit of capital. To put it more simply, the whole question is about the surplus labour or the amount of surplus value which a given capital obtains in a given period of time through the exploitation of the workers. If the two capitals, in quite different proportions of their fixed and circulating components, appropriate the same amount of surplus labour of the mass of workers or an equal amount of surplus value at different intervals of time, then the difference in turnover time loses its effect on the rate of profit. This effect appears and prevails when the extension of this period is accompanied by the capture of a unit of capital on greater amounts of surplus value, or conversely, the shortening of this period results in a reduction of surplus labour and the amount of surplus value.

Chapter 9

The Formation of the General Rate of Profit (Average Rate of Profit)

The Conversion of the Value of Commodities into Prices of Production

Consider five different production environments with the same capital, unit value added rate, different organic composition as follows.

Row	Capitals	Rate of surplus	Surplus value	Value of Product	Rate of profit
1	80c+20v	100 %	20	120	20%
2	70c+30v	100 %	30	130	30%
3	60c+40v	100 %	40	140	40%
4	85c+15v	100 %	15	115	15%
5	95c+5v	100 %	5	105	5%

The total amount of capital advanced in these five areas is 500, the surplus value produced is 110, the total value of the commodities produced in these areas is 610, the organic composition of the five capitals is 390c+110v or, more simply, 78c+22v. To calculate the rate of profit, we divide the total surplus value by the total capital, the result will be 110/500 = 22%. This means that for every 100 units of capital, 22 units of profit are allocated. Let us also divide the total annual product into the five separate areas of investment. The share of each area is 122.

The assumption of the above calculation is that in each area, the entire constant capital, whether fixed or circulating, has been consumed in the production of the new product. This assumption is not unrealistic, but in practice, except in exceptional cases, it does not happen. The reality is that although the constant part of the capital is completely included in the production process, a significant part of it is not transferred to the new product. All circulating capital, consisting of raw and auxiliary materials, enters the body of new commodities in each round of turnover in full, but only the equivalent of the depreciation share of the fixed part becomes part of the body of the new product (Used up c, Constant c consumed). Considering this, the above table can be changed as follows.

Capitals	Rate of surplus	Surplus value	Rate of profit	Constant consumed	Product value	Cost price
80c+20v	100%	20	20%	50	90	70
70c+30v	100%	30	30%	51	111	81
60c+40v	100%	40	40%	51	131	91
85c+15v	100%	15	15%	40	70	55
95c+5v	100%	5	5%	10	20	15
390c+110v plus	–	110	–	–	–	–
78c+22v average	–	22	22%	–	–	–

If we divide the total surplus value by the total capital of the five sectors, we arrive at 22%, which is the rate of profit, which we discussed above. This rate of profit is different from the original rates of profit in the five separate sectors. We are faced with different rates of profit in different sectors, but these different rates of profit have been converted into a single general rate of profit.

Capitals	Surplus value	Product value	Cost-Price of Commodities	Price of commodity	Rate of profit	Product value	Deviation of Price from Value
80c+20v	20	90	70	92	22%	90	+2
70c+30v	30	111	81	103	22%	111	-8
60c+40v	40	131	91	113	22%	131	-18
85c+15v	15	70	55	77	22%	70	+7
95c+5v	5	20	15	37	22%	20	+17

The cost price of commodities is the sum of the constant and variable capital used in their production. The value of each commodity is also composed of this cost price plus the surplus value or certain additional labour performed by the worker for which he has not received any pence. But the essential and important point in the above table is that the five distinct areas of capital advance have not each acquired the same surplus value produced in their own territory or the unpaid additional labour of their exploited workers.

The first, fourth and fifth capitals have captured 2 units, 7 units and 17 units respectively, a total of 26 units more than their actual share of surplus value, while the second capital has lost 8 units and the third 18 units of surplus value, a total of 26 units. The surplus values ​​have been shifted and divided equally between the five aforementioned spheres. Some commodities have been sold above their value, while others have been sold on the contrary cheaper than their value. Every hundred units of capital, independent of its organic composition, independent of the amount of constant and variable capital used in the production of its commodities, has captured 22 units of surplus value. In other words, every 100 units of capital has captured 22 units of the 110 units of total surplus value. If we divide this 22 by the capital of each sphere or 110 units by 500 units of capital, we arrive at the rate of profit, which is equivalent to 22%.

What is the production price?

Commodities are not sold at their real value except in rare cases. They are sold at the same price, regardless of the territory to which they belong, with what organic composition of capital. This price is the sum of the cost price of the commodity plus the average rate of profit and is called the price of production. The capitals advanced in different spheres have different organic compositions. Their variable component or the number of workers they exploit is different. These different variable capitals or living labour forces deliver different volumes of surplus labour to the capitalist. But this surplus labour is ultimately divided equally among the owners of capital in the five spheres. How is this done? And where, where, and under what pressure is it carried out here and there? This is a question that must be answered.

The Commodities that are produced enter the market in the form of commodities-capital. The capitalists who produce them must compete with each other to sell them. It is in the process of competition for the sale of goods that the price of production emerges. The price that replaces the value of different goods and on the basis of which all products are sold, it is within this process of competition that the different rates of profit of different areas also give way to a single rate of profit. The average rate of profit that we discussed above. The price of production is the sum of the general rate of profit and the cost of production of Commodities.

By selling their commodities, the capitalists of the various spheres of production recover the value-capitals they have expended in the production of these commodities, but they do not obtain the same surplus-value or profit as is produced by the workers they exploit in the same spheres. They seize a share of the total surplus-values ​​or profit produced in a given period of time, in the whole of society, by all capitals, in all territories, and which is allotted to them in proportion to the capital they possess. – In proportion to the total capital they have advanced, the total fixed and variable capital, the total fixed and circulating components of capital, and not just a part of the capital used up in the production of new commodities, but in proportion to the total of this capital – a profit which is allocated to each unit or hundred units of capital on the basis of an equal division of the total profits among the total capital. Here, and in relation to the share of profit, the capitalists resemble the members of a public joint-stock company, among whom the annual profits of the company are divided according to the number of shares and the volume of capital.

When a capitalist sells his goods, he receives money in proportion to the value of the capital spent in producing them, but as part of social capital, he shares in the total profits produced in society in proportion to all the capital he has advanced. The profit added to the cost price of his goods is independent of his particular production environment. Let us give an example. The social capital of a country, composed of all forms of production, trade, banking, “services”! and finance, is a total of 5 trillion dollars. 5 trillion dollars that have been advanced in dozens of different areas, but for the convenience of calculating the total, we divide it into 5 distinct categories in terms of organic composition or other components of the valuation process. In order to place the figures in the table correctly, we also take the index 1000 as the criterion.

	Constant capital	Variable capital	C consumed (Used up c)	Surplus value	Cost price	Product value
1	850 000 000	150 000 000	500 000 000	300 000 000	650 000 000	950 000 000
2	750 000 000	250 000 000	420 000 000	500 000 000	670 000 000	1170 000 000
3	700 000 000	300 000 000	350 000 000	600 000 000	650 000 000	1250 000 000
4	900 000 000	100 000 000	150 000 000	200 000 000	250 000 000	450 000 000
5	950 000 000	50 000 000	120 000 000	100 000 000	170 000 000	270 000 000
total	4150 000 000	850 000 000	1540 000 000	1700 000 000	2390 000 000	4090 000 000

In this table, the total capital advanced in the five areas is $5 billion, constant capital is $4.15 billion, variable capital is $850 million, and the total surplus value is $1.7 billion. If we divide the latter figure by the total capital, we arrive at a rate of profit of 34%. This means that the capitalists of each of the five areas have achieved a profit of $340 million. Let us add another assumption to the data in the table. That the depreciation cost of the fixed capital of each area is a part of the constant capital consumed in each round of turnover. With such assumptions, if we add the profit of each area of ​​accumulation or the figure of $340 million to the cost price of production of that area (consumed constant capital and the price of labour), the sum will be the same price of production of that area. The price for areas 1 to 5 is $990 million, $1,010 million, $990 million, $590 million, and finally $510 million, respectively.

The objective process of the matter is that each capitalist, or more precisely, each component of social capital, receives the cost price of his manufactured products in accordance with the items he has spent, but the profit he captures has no direct connection with the surplus values ​​resulting from the direct exploitation of the workers in his territory. The capitalist or the component of capital owned by him receives a volume of the total profit produced by the entire proletariat, which is the result of dividing the total surplus values ​​by the total social capital, whether industrial, commercial, banking, financial, fixed, constant or variable circulation. He appropriates a share of this total profit in proportion to his capital. Meanwhile, if we put the sales figure of the total social capital composed of the total cost prices of commodities plus the total surplus values ​​or profits on one side and the total value of products on the other side and compare them, we will certainly find their amounts equal. Both are actually equivalent to 4 trillion and 240 billion dollars, with reference to the index of 1000. (Note: A separate discussion is needed on monopoly profits).

The rates of profit of the separate spheres of accumulation differ from each other because the volume of surplus-value produced in the spheres differs according to the organic composition of the capitals and the ratio of their variable to constant components. It is quite certain that the average profit of social capital or the general rate of profit can be greater or smaller depending on the size or smallness of the variable capital advanced in different environments. Let us consider four capitals 1, 2, 3 and 4, each of which has a value of 100 and a rate of surplus-value of all of which is 100%.

In contrast to these capitals (1 to 4), there are 25-40-15 and 10 units of variable capital, respectively. In this case, for every hundred units of capital, in the same order as 1 to 4, the amounts of 25-40-15 and 10 surplus value or profit are assigned. The total profits are 90 and the rate of profit of the four capitals is 22.5%. Now let us imagine that the amount of capitals is 200-300-1000-4000. It is natural that the profits will also be 50-120-150-400, a total of 720, which if divided by the total capital, i.e. 5500, we are faced with a general rate of profit higher than 13%. In this way, the general rate of profit of social capital is not simply an average of the different rates of profit related to different areas, but rather the relative weight of these individual rates of profit plays a significant and decisive role in its formation. A component that in turn is affected by the organic composition and the amount of capital that has been advanced in each of the specific environments of production. Accordingly, the general rate of profit is affected by the following two important factors.

1 – The organic composition of the capitals existing in different environments and the different rates of profit in these areas

2 – The distribution of the total social capital among the various spheres, the relative amount of capital advanced in each sphere and the specific rate of profit arising in each sphere.

In the first and second books we were dealing only with value, but now a part of this value has taken the form of the cost price. It has also taken a modified form of the identity card of the price of production. The greater the quantity of means of production set in motion by a given labour force at a given time, the greater the organic composition of capital. If we consider an average of the organic composition for the total social capital, then we can divide the total capital with reference to this average into three distinct categories: capitals with an intermediate organic composition, a higher organic composition and a lower organic composition. Let us consider the diagram below.

1 – 80 constant + 20 variable + 20 Surplus value – 20% profit rate – product price 120 – value 120

2 – 90 constant + 10 variable + 10 Surplus value – 20% profit rate – product price 120 – value 110

3 – 70 constant + 30 variable +30 Surplus value – 20% profit rate – product price 120 – value 130

Capital 1 has an average composition, 2 has a superior composition, and 3 has an inferior composition. The value of the goods produced by capital 2 is less than the price of production, and the value of the goods produced by capital 3 is higher than its price of production. Meanwhile, capital 1, which has an average organic composition, has the same value and price of production of its products.

One thing to remember is that not only the difference in the technical composition, but also any change in the value of the elements of constant capital can change the ratio between Constant and variable capital, or the organic composition of capital, and deviate it from the general average. When we talk about the cost price of a commodity, based on all the previous discussions, we are referring to the sum of the constant and variable capital consumed in its production. What is clearly different from the price of production, in this regard it should be noted that the capitalist does not think this way, he considers the price of production to be the same as the cost price and calculates it in the capital advance with the same inference. In this regard, the cost price of a new commodity in which the production price of another commodity has been entered can be higher or lower than that part of the value calculated by the value of the means of production entered into it. In all these cases one thing is clear. That the cost price of commodities is always less than their value. This ruling also implies the meaning that the cost price is always less than the price of production. When we consider the total social capital, the cost price of all produced commodities is less than their value and price of production. But value and price of production coincide. The cost price of a given commodity only relates to the amount of paid labour crystallized in it, while value is composed of paid and unpaid labour.

With the above explanation, it is time to translate the formula of the production price of the commodity (p+k) or cost price plus profit into a more precise form, as (kp’+k) or cost price plus profit rate. If k (cost price) is 300 and p’ (profit rate) is 15%, then the production price will be 345. The production price in each separate area of ​​production can change under the influence of various factors as follows.

1 – The value of commodities is constant but the general rate of profit changes under the pressure of influences from other spheres.

2 – The general rate of profit remains unchanged, but the value of commodities rises or falls due to changes in the technical composition within the sphere of production or changes in the value of commodities that constitute elements of fixed capital in the production environment in question.

3 – If both of the above situations occur simultaneously.

Any real change in the general rate of profit, so far as it relates to the different spheres of production, is the gradual result of fluctuations which take place and develop in the long run. The change in the prices of production of these separate spheres in the short periods is essentially due to the real change in the value of commodities. In the case of the total social capital, so long as the degree of exploitation or the rate of exploitation and the volume of surplus-value remain constant, the rate of profit falls or rises only if the change in the value of the constant, variable or both capitals is accompanied by a change in C.

In all these cases, a change in the rate of profit requires a change in the value of the commodities which enter the process of production as elements of fixed, variable or both capitals. The rate of profit can be changed by a change in the rate of exploitation if the value of the commodities remains constant. Otherwise, assuming that the intensity of exploitation remains constant, for the rate of profit to rise or fall, there must be a change in the technical composition of the labour process. In other words, the volume of labour exploited must have changed in proportion to the amount of fixed capital. Technical changes which are generally accompanied by changes in value and are evidence of a change in the organic composition of capital. We have already repeatedly stated that surplus value and profit are the same. But the rate of profit and surplus value are completely different. The rate of surplus value can remain constant while the rate of profit changes. The rate of profit is the ratio of surplus value to total capital, and political economy has made this calculation the basis for a multitude of deceptions about the origin of surplus value. It has suggested that the source of surplus value is the total capital!! A deception that does not require explanation.

With the formation of the general rate of profit, the adaptation of the profit or surplus value produced in each separate production territory, with the surplus value or profit that accrues to the capitalist in the process of selling goods, becomes a rare possibility or coincidence. From this date onwards, not only the rates of profit and surplus value, but also their values ​​will be distinctly different from what is produced in the given territory. In this regard, the amount of surplus value that is produced in any specific production environment, with a certain intensity and rate of exploitation, is much more important and sensitive for the entire capitalist class, than the capitalist who owns the factory directly. The reason for this sensitivity is clear enough. Any additional production value, more or less in each area, affects the process of the general profit rate of capital and affects the profit share of all the capitalists. The amount of surplus-value produced in any factory, any industrial territory, or the social capital of any country is of importance to the capitalists who own them only in so far as it can affect the whole mechanism of the formation of the general rate of profit. Of course, this process or this effect happens behind the back and away from the eyes of individual capitalists, it is not important for them because what dazzles their eyes is only the amount of profit that they get after all these interactions. The above trend in turn further mystifies the origin and true nature of profit. A form of concealment which no longer blinds the eyes of the capitalist, who is obsessed with denying the origin of surplus value, to the source, but also prevents the worker from seeing it. With the transformation of value into the price of production, the original birthplace of value is hidden from view. More precisely, when surplus value is transformed into profit, one part of the value of the commodity, which constitutes profit, is set against its other part, the cost price. This very opposition hides value from view. The capitalist does not see himself in relation to the total labour expended in the production of the commodity, including the unpaid labour in the commodity, but only in relation to the living or dead labour paid in the form of the means of production. Accordingly, profit is considered something separate from the real value of the commodity, or the value composed of cost price, paid labour, and unpaid labour. Now, by replacing value by the price of production, the illusion or inversion mentioned above is fixed and becomes a fossil, because the profit added to cost price in a given territory is not the same as the surplus value produced in that territory, but a share of the total surplus value that has accrued to the capital advanced here. All the laws explained in the first part regarding the rise and fall of profit have the following double meaning.

1 – All these are the laws of the general rate of profit. Laws that explain the factors that cause the rate of profit to rise and fall. A review of them may give the impression that the rate of profit must change every day. But this inference is completely unfounded. Let us consider the total social capital of a country or of world capital. These capitals, with all their greatness, are being valued in very different and diversified production environments. Their organic composition in these very numerous territories is very different. The prices of the commodities they use are different, the intensity of exploitation within them is high and low, their specific rates of profit are different. All this is constantly fluctuating and changing. All these fluctuations influence each other, reinforce or neutralize each other. The process of forming the general rate of profit is under the impetus of all these changes and fluctuations. What is going on here is the common result of the fluctuations, shifts, and ups and downs in all areas on the scale of social or world capital. Accordingly, the idea of ​​sudden changes in the general rate of profit is a misconception and the generalization of what is true in one productive territory or one capitalist enterprise to this entire global process is unrealistic in every respect.

2. In every productive environment there is a field of activity which allows the rate of profit specific to that environment to fluctuate for a more or less long period and, following these fluctuations, to finally reach a degree of stabilization which can affect the general rate of profit. In this regard, conditions must be established which will make it more important than an isolated and local establishment. Whatever the composition of industrial capital, whether three-quarters dead labour and one-quarter living labour or vice versa, if the rate of surplus-value remains the same, it will achieve equal profits. The capitalist, with all his narrow-mindedness and obscurantism, understands that his share of profit does not arise only from the work done within the four walls of his establishment. However, it is certainly very difficult for him to determine which part of the profit is produced were. The matter becomes much more complicated when he sees that in order to achieve the most astronomical profit or surplus value, he must set in motion a larger part of the fixed capital with the smallest possible labour force. He allows himself to ask himself or others: If the source of all surplus value is living labour or the variable part of capital, then why, in order to maximize profits, should the constant part of capital be increased as much as possible and its variable part be reduced as much as possible?! The correct answer to the question is not within the reach of the capitalist mind, because its mind is fused and locked in a complete denial of the real source of surplus value. What is real is that the surplus values ​​resulting from the exploitation of the working masses are distributed among the various capitals and capitalists according to the laws of the rate of profit. One thing is clear. The source of all profits is the unpaid labour of the workers.

Whenever, in a given production environment, a part of the cost price representing the value of constant capital rises or falls, it enters the production process in the same enlarged or reduced form. If the employed workers do less or more work without changing the number, a part of the cost price representing the value of variable capital can remain unchanged and enter the price of the product, but more or less paid or unpaid work goes into each unit of the goods, when this happens, a change occurs in this part of the price of the goods. Now, if as a result of these value changes, the cost price of a unit of goods changes, the rate of profit can remain unchanged. If the degree of productivity of labour rises or falls, the same thing happens. Let us give an example. 100 pounds sterling is the weekly wage of 100 workers. The workers produce 200 units of goods each week. In this case, the variable capital contained in each unit of goods becomes 100/200 equal to 10 shillings. Now the productivity of labour doubles. Instead of 200 units, the workers produce 400 units. The variable capital per unit becomes only 5 shillings. Let us consider the reverse. The productivity of labour is halved, and 100 workers produce only 100 units. The crystallized variable capital per unit becomes 20 shillings. In these cases, what the capitalist or bourgeois economist sees is the changes in the paid labour concentrated in the goods, and what they are unable to see is how the same changes in the unpaid labour within the goods. Why and for what reason? The answer is clear. He receives an average profit, part of which is unpaid labour in other spheres of production.

Chapter 10

The Equalization of the Average Rate of Profit through Competition

Market Prices – Market Values ​​– Surplus Profit

In some spheres of production, the capital advanced has an intermediate organic composition. In this part of social capital or world capital the total value of commodities corresponds exactly or approximately to their price of production. Competition distributes social capital among the various spheres in such a way that the prices of production of each of these spheres are equal to the price of production of the sphere of intermediate organic composition. In other words, it is k+kp’ or the cost price plus its product by the general rate of profit. The general rate of profit in all spheres of production is uniform and is on a par with the rate of profit in the spheres with the average organic composition of capital. Let us recall a few points. The total surplus value produced is equal to the total profit. The sum of the total value and the total price of production is also the same. Different spheres of production with different organic compositions of capital, in the process of competition, reach a level of production price that corresponds to the production price of the goods of the sphere with the average organic composition. In this sector of social capital (the sector with the average organic composition), as already mentioned, the total surplus value is equal to the total profit, and the total value is equal to the total price of production. The capitals advanced in other sectors, whatever their composition, tend, under the pressure of competition, to adjust to the capitals of this sector. In this direction, all capitals, regardless of the volume of surplus value they have produced in the specific areas of advance, are driven towards the realization of the average profit or general rate of profit. The average profit or average rate of profit is nothing but the external part of the total surplus value over the total capitals. For this reason, the average profit corresponds to the profit of that part of social capital which has the average organic composition. The difficult question is how this adjustment is made or how the general rate of profit is formed?

Let us first assume that all commodities produced in the various territories are sold at their real value. This means that all commodities are exchanged for each other according to the value or socially necessary labour inherent in them. What happens then? The answer is clear; in each territory a specific rate of profit prevails. Note that selling commodities at their real value is quite different from selling them at a price at which they receive a share of the total surplus-value in proportion to the equal amounts of their advance. In order for capitals with unequal variable components to capture unequal amounts of surplus-value, the intensity of exploitation of the labour force or the rate of surplus-value in their respective fields of activity must be the same. The condition for this is competition between workers and their constant migration between the various spheres of work and production. Let us also clarify that the general rate of profit, like all economic laws, has a tendency, this tendency phenomenon is practically the precondition of the capitalist mode of production. An approximate precondition that the more capitalism develops, the more deeply it distances itself from the remnants of previous forms of production, the more accurate this approximation becomes. The essence of the problem is that commodities are exchanged not only in the form of commodities but also in the form of products of capital. Capitals that each demand a share of the total surplus value in proportion to their quantity, and the total price of the commodities produced by a given capital at a given time must guarantee the receipt of this share of surplus value. The total price of commodities is also the sum of the prices of the individual commodities that constitute the product of capital.

First of all, let us assume that the workers themselves own the means of production and only exchange their own commodities with each other. In other words, commodities are not products of capital, the value of the means of production and raw materials in different branches varies according to the technical nature of their work. A given commodity is produced in one hour and another in one day, and consequently the quantity of the means of production used by a given volume of work also varies. These workers work equally in terms of the intensity of their work. Putting all this together, two workers work for themselves under these conditions and data. Both of them, with their own labour and the daily product they produce, firstly, replace the cost of production or the cost price of the means of production. Secondly, both of them have created new value in the same amount, and this includes the two parts of wages and “surplus value.” The term “surplus value” here means the labour or value created in excess of the needs of the workers, which belongs to them. If we examine this story in capitalism and under the laws of this mode of production, we must say that both workers have earned the same wages and profits, which are equal to the value of the product of a day’s work, for example, 10 hours. But firstly, the value of their commodities is different. For example, the commodity of the first worker has a greater value component of the means of production than the second, or other differences that can be summed up and said: the first commodity has absorbed more living labour than the second, and on this basis its production requires a longer working day. The result is that the commodities produced by the first and second workers are different in value. Their rates of profit will also be different, because the rate of profit is the result of dividing the surplus value by the total means of production or total capital. Meanwhile, the surplus value produced by the two workers is equal. Attention to all these points out that the exchange of commodities on the basis of the price of production requires a level of capitalist development that goes beyond the phase of exchange on the basis of the value of commodities. It is also obvious that the law of value governs the movement of commodities. Wherever socially necessary labour time increases, other things being equal, prices rise. Another certain point, regardless of the rule of the law of value over prices and their changes, is that the value of commodities has not only theoretically but also historically preceded the price of production. The sale of commodities on the basis of their value or the socially necessary labour embodied in them belongs to the situation in which the worker or, in fact, the independent producer is the owner of his own means of production. Conditions that existed in the ancient world. It can be true of the contemporary world as long as such producers or craftsmen exist. This statement also corresponds to the basis of our analysis of the commodity economy, which we have explained in its place that the growth of commodity production began with exchange between communities and not with conventional trade within them. A process that was further developed during the period of slavery and serfdom. In order for the current prices on which commodities are exchanged to correspond to their value, it is necessary that:

1 – the exchange of products has ceased to be purely random.

2 – insofar as we speak of direct commodity exchange, commodities have been produced on both sides in quantities sufficient for mutual needs.

3 – no natural or artificial monopoly causes commodities to be sold at a higher or lower price than their real value.

What is obvious is that the assumption that commodities produced in different territories are sold at their values ​​simply means that the value of the commodities in question is the centre of gravity around which prices revolve and on which they level their rise and fall. Furthermore, a distinction must always be made between market value and the individual value of commodities produced by different producers. The individual value of commodities may be lower or higher than their market value. In other words, less or more time may have been spent on their production than the market value indicates. Market value can be seen on the one hand as the average value of commodities produced in a single environment, and on the other as the individual price of commodities produced under the average conditions of an environment. It is only when special conditions arise that commodities produced under the best or worst conditions take over the market price. Three cases are conceivable.

First: The supply of commodities of average value or goods of average value between the two opposite poles meets the normal market demand. In such a situation, it is the value of these goods that determines the market price. In this case, commodities of lower individual value will earn a profit higher than the surplus value contained in them. The opposite is true for goods of higher value. These commodities are not able to realize a part of the surplus value concentrated in them.

Second: The demand is higher than the normal amount or the supply is lower than this amount. In this case, the commodities produced under the worst conditions and having a value higher than the average value determine the price index. The commodities produced in the other two sectors, the average value sector and the lower individual value sector, earn a higher profit from the surplus values ​​inherent in them. Some say that the commodities produced in the worst conditions are sold because they are a need of society. This statement does not clarify anything. Whether the commodities are a need of society and whether they become price indicators are two different things. Here the discussion is not just about being needed. It is about demand being higher than normal or supply being lower than this limit.

Third: Supply being higher than normal or demand being lower than this level. In this case, it is the commodities produced in the best and cheapest conditions that determine the market price. These commodities can only be sold at their accumulated value, while the commodities produced in the other two sectors lose large amounts of their surplus values. Independently of how prices are formed, we can emphasize the following conclusions.

1. A decrease or increase in the labour time required to produce commodities causes a rise or fall in prices. This means that the law of value everywhere governs the dynamics of price determination.

2. The average profit, which is related to average prices, is always approximately equal to the quantity of surplus-value that accrues to a given capital as a divisible part of the total social capital. Whether the general rate of profit is higher or lower than this, whether the capitalists declare it, for example, 10 or 15 percent, or the like, is of no importance as long as wages are normal and the balance between necessary and surplus value has not changed. The important point is that the total value of commodities determines the total surplus-value, and the total surplus-value regulates the level of the average profit or the general rate of profit as the governing law of fluctuations. The regulating force of production prices everywhere is the law of value.

What competition does initially within a single environment is to establish a single market value and market price, distinct from the different individual values ​​of commodities, but competition between capitals in different environments leads to the emergence of the price of production, the formation of an average rate of profit, or the establishment of a general rate of profit. The latter requires a higher degree of development of the capitalist mode of production. In order for commodities of the same kind and in approximately the same quantity in a single environment to be sold at their value, two conditions are necessary.

First – different individual values ​​take the form of a single social value and become equal in the form of market value. This depends on the competition of the producers of the said commodities and the existence of a market in which competition can take place. The complete and undeviating correspondence of the market price of similar commodities, but produced under different individual conditions, with their market value requires strong pressure from different sellers on each other, so that the mass of commodities flowing into the market responds to social needs and adapts to the ability of society to pay the market value of the commodities. If the volume of products exceeds this amount, the commodities are sold below their market value. If they are supplied less than this amount, on the contrary, they will be sold above the market value. If the market value changes, the conditions for selling the totality of commodities will also change. As the market value decreases, demand expands, and the opposite is also true. All this indicates the fact that if on the one hand supply and demand determine the market price, on the other hand it is market value that regulates the ratio between supply and demand.

The expression “social needs” was mentioned above. Social need, or that which regulates the basis of demand, is a matter which concerns the relations of the different classes with each other and the economic condition of each of them. On this basis it depends on the relation between the total surplus-value and wages, and also the relation between the various parts of surplus-value, i.e. profit, interest, rent, taxes, etc. Thus, nothing can be explained by the relation between supply and demand alone unless we have first clarified all the foundations and foundations of this relation. The establishment of market value, in practice or in the real market, is achieved by the ongoing competition between the sellers of commodities, provided that the demand is sufficient and capable of absorbing the entire mass of commodities produced.

Secondly, when we speak of the use value of a commodity, it does not mean only that the commodity in question satisfies a need of society. This definition is valid as long as a separate commodity is involved. As soon as the total product of a line of production on the one hand and the social need on the other are confronted, the quantitative aspect of the needs becomes essential. This quantitative aspect must be explored. In the previous analysis of market value, our assumptions were that the volume of commodities produced remains the same and what changes is only the relationship of the constituent elements of the commodities produced under different conditions. Now we must focus on the assumption that the total mass of goods available corresponds to the normal amount of supply. If the demand for this quantity of goods remains normal, regardless of which of the three situations described above prevails, the total mass of commodities will be sold on the basis of their market value. Here, the mass of goods no longer satisfies just one need, it satisfies this need in its social scope. If the quantity of supply is greater or less than the demand, the market price deviates from the market value. When the quantity of commodities is too small, the commodities produced under worse conditions will determine the market value. When the quantity supplied is too high, the commodities produced under better conditions will determine the market value.  There are some difficulties in the definitions of supply and demand which require further explanation.

Let us first look at “supply”. The mass of commodities that constitute supply are, firstly, not use-values ​​for satisfying human needs, but market use-values ​​that exist in a certain quantity. Secondly, they have a certain market value, which is a multiple of the market value of the commodity. Thirdly, there is no connection between the quantity of commodities on the market and their market value. Some of them have little value, some have a lot. In each separate sphere, a certain quantity of social labour time is consumed to produce a certain volume of a commodity. This ratio varies in different environments and has no intrinsic connection with the utility or the specific nature of their use-value. If society finds it necessary to produce a certain type of commodity to satisfy its needs, it must pay for it. In this way, if he devotes part of his working time to its production, he also intends part of his working time to its purchase. That part of society which, under the rule of the division of labour, is obliged to spend its work on the production of a commodity, must find its equivalent in the social labour of others, which is crystallized in other goods and meets its needs. But there is no necessary and obligatory connection between the total quantity of social labour used in the production of a type of commodity and the demand of society for that volume of commodity. If these commodities exceed the needs of society, it will indicate a lower quantity of social labour crystallized in them and evidence of the waste of part of this social labour. In this regard, the said commodities will be sold at a lower price or will remain without a customer. If the volume of commodities is less than the needs of society, the opposite will occur.

Let us look at the other side of the story, at “demand”. Commodities are purchased as means of production, means of subsistence, and sometimes for both purposes. Let us first assume that there is a certain volume of social needs on the demand side and a certain quantity of social production on the supply side, which are relatively consistent with each other. For example, the textile industry requires a certain volume of cotton for its annual reproduction, and the cotton capitalists have also supplied this volume. But this branch of industry is also preparing for its expansion, so the volume of demand is in the process of increasing. The same applies to the means of subsistence. The workers want at least the same amount of subsistence to reproduce their labour power, but both the workers and the other classes need an increased quantity of means of subsistence, given the annual increase in population. All these facts show that the quantitative determination of the amount of demand is a very difficult matter and full of unknowns. Leaving aside all the above confusing factors, if the means of subsistence become cheaper, the workers buy more and the range of wants expands; if the price of cotton falls, the capitalists’ demand increases and more capital is invested in the cotton industry. There is a profound difference between the commodities which represent a want or demand in the market and the real social need. A difference which varies greatly in the case of different commodities. Nothing is easier to understand than the inequalities between supply and demand and the resulting deviation of market prices from market values. The real difficulty is to clarify what is meant by what is called the adjustment of supply and demand? Is such a thing really real? If not, what is the basis of the matter?

Demand and supply coincide when the mass of goods of a certain field of production are sold according to their market value, neither higher nor lower. If supply and demand match, their effect is neutralized and accordingly the goods are sold at their value. The fact is that these two never coincide under any real conditions, if such a coincidence occurs it is just a coincidence. There is no doubt about it, but this is not the whole story. Although the supply and demand do not coincide in any particular case, their inequalities are followed in such a way that they continuously cover each other in a more or less long period. A type of adaptation or overlap that originates only from the average of past fluctuations and the constant movement of their opposites. If we consider the average deviations of market prices from market values, we see that prices compensate each other, but the deviations of prices from values ​​are added and subtracted, in this way prices and values ​​find a kind of correspondence. The relationship between supply and demand on the one hand determines the deviations of market prices from market values, and on the other hand, it follows the elimination of these deviations or the neutralization of the mutual effects of supply and demand on each other. For example, if demand and subsequently the market price decline, a part of the capital may be withdrawn and the supply may decline. At the same time, it is possible that the discovery of new inventions will increase the productivity of labour and shorten its time. This time the market value will decline and become equal to the market price. The opposite is also true. If demand increases, the market price increases above the market value. If a lot of capital is put into the production process, production increases, the market price falls below the market value. There are other possibilities, for example, if the price increases and pushes back demand. In some fields, the market value increases for a period, and it becomes necessary to produce some of the products in demand under worse conditions.

If the market price depends on supply and demand, supply and demand also depend on the market price and ultimately the market value. Demand moves in the opposite direction of price; when the latter falls, the former rises. The opposite is also true. The same is true of supply. The prices of the means of production enter into the prices of the goods produced and being supplied. These prices thus determine demand and, conversely, supply itself. The relation between supply and demand can still be affected by the market value of commodities, even in circumstances where no change in their quantity has taken place. Whatever the market values, demand and supply must be equalized to obtain it. The relation of supply and demand does not express market value. Quite the contrary, it is market value that explains the fluctuations of supply and demand. In order for a commodity to be sold at its market value, that is, in proportion to the socially necessary labour embodied in it, the total quantity of social labour transformed into the mass of commodities must correspond to the quantity of social needs for these commodities. Competition and the fluctuations of market prices, which correspond to the fluctuations of supply and demand, play a role in ensuring this equilibrium.

The aim of capitalist production is not to obtain an equal amount of value in the form of money or goods in exchange for amounts of value advanced in the form of commodities!! Quite the opposite, it is about the capital advanced, in proportion to its size, capturing the same amount of profit as the capital of the same amount, in every branch of production. Here the lowest expectation is that the commodities should be sold at the price of production and that in the process of sale they should yield a profit equal to the average profit. Capital recognizes itself as a social force. A force in which the capitalist shares in the total profits in proportion to his capital. It must be emphasized that capitalist production is completely indifferent to the specific use value and to the characteristics of the commodities. Capital’s sole concern is the production of surplus value, i.e. the appropriation of unpaid or unpaid labour by workers. In this regard, the unchanging subject of wage labour is indifferent to the specific nature of labour. As long as labour is wage labour, it is subordinate to capital and moves from one environment to another according to the will of capital. For capital, all environments of production are equally good and indifferent, provided that profit is obtained. The problem is that different capitals create different rates of profit within different territories with different organic compositions. Accordingly, capitals fly to any territory with a higher rate of profit. On the contrary, when the rate of profit is low, all capitals there take a flight. This same transfer and transfer, resulting from the greedy fascination with profit, causes competition, the division of the total social capital into different territories, the regulation of the supply and demand relationship, the formation of the general rate of profit, the conversion of value into the price of production. The continuous alignment of permanent inequalities or, in the above process, takes place more quickly under the following conditions.

First: The more capital is mobile and easier to transfer from one environment to another.

Second: The easier and faster the transfer of labour from one area to another.

The first point depends on complete freedom of trade in society, the prevention of the emergence of any monopoly other than natural monopolies, the elimination of all monopolies that escape the capitalist mode of production, the existence of a strong credit system that concentrates the mass of free capital in society against individual capitalists, and finally the dominance of the capitalist mode of production over all spheres of production. The second point requires the abolition of all laws that prevent the movement of workers from one environment to another or from one region to another, the transfer of work to simple work in all spheres, the elimination of professional prejudices against workers, and finally the adherence of the worker to the capitalist mode of production.

From what has been said, it follows that every individual capitalist, like all the capitalists of a particular productive environment, participates in the exploitation of the working class as a whole by the total capital and in the degree of its exploitation. This participation is not only in the sense of solidarity of the whole class but also has a direct economic aspect. For, assuming all other conditions, including the value of the total advanced capital, then the average rate of profit will depend on the degree of exploitation of the working class by the total capital. The special interest of a capitalist or the capitals of a given productive environment in the exploitation of the mass of workers under their direct exploitation is limited to the fact that they can achieve an abnormal profit above the average profit by means of exceptional surplus labor, a fall in wages below the average, an exceptional productivity of labour, yes, by means of all these. Moreover, the capitalist, who has no variable capital in his environment, does not exploit any workers. (An exaggerated but true assumption) is just as interested and involved in the exploitation of workers by capital and appropriates his profits from the unpaid labour of the working class, as the capitalist of a productive sphere who has advanced only variable capital and has invested his entire capital in wages. (An exaggerated but true assumption again).

Every particular sphere of capital and every individual capitalist is as sensitive and interested in the productivity of the social labour exploited by the whole of capital as he is in the specific sphere of his own capital advance. For it is the volume of values ​​produced by the whole of the workers that determines the fate of the average profit or the general rate of profit, and the share of consumption of the owners of capital is also a function of the volume of these surplus values. Since the volume of fixed and variable capital advanced is known, the share of each component of capital is also determined. Here we touch and understand with mathematical precision why the capitalists, while they fight like hyenas in the field of competition for the largest share of profit, form an iron alliance against the whole of the working class. We have already explained many times that selling at the price of production guarantees the achievement of an average profit.

Chapter 11

The Effect of General Wage Fluctuations on Prices of Production

Let us start with the assumption that the average composition of social capital is 80c+20v+20m, the rate of profit is 20%, and the rate of surplus value is 100%. But there is a 20% increase in wages. The capital that was set in motion at a wage of 20 now has to pay a wage of 25. Accordingly, our previous formula changes to 80c+25v+15m. The new value produced remains 40 (25+15). But the rate of surplus value has fallen to 60% and the rate of profit to a little more than 14%. We know that the price of production of commodities resulting from the valorisation of capitals with average conditions is equal to their value. So here, despite the drastic changes in the rates of profit and surplus value, we do not witness any change in the value and price of production of commodities. This situation, based on our assumption, concerns capitals with average conditions or capitals with average organic composition. The combination that was originally expressed with the formula 80c+20v has now been changed and has been approximated as >76c+<24v. In the new form, its data can be 80c+25v=105 cost price, 80c+25v+15=120 value, 15/105>14% profit rate, and 105k+>14=120# production price, respectively. (Since the data are sometimes not whole numbers but fractions, three symbols greater than >, less than <, and approximate # have been used to make the text easier to understand.).

We said that the average composition of social capital is now >77c#+<24, the valuation data of which are also as described above. Now let us see what happens in other spheres of production. Let us first look at the sphere with worse production conditions and lower organic composition, for example, capitals with a composition of 50c+50v. Our assumption is still that it is time to revert to the old way, all fixed capital is consumed in the form of wear and tear in the production of the new product, in which case the annual production price of the product will be 50c+50v+20k(m)=120. Continuing the search, wages will increase by 25%, from 50 to over 62. If the product is sold annually at the previous price or 120, the result will be 50c+>62v+>7k=120, which will make the rate of profit #7/112, i.e. a little over 6 percent. We have seen that the new average rate of profit of the social capital was more than 14 percent, and, assuming other conditions to remain constant, the capital of 50c + 62v should also realize this rate of profit. On this basis, it will have a profit equal to 112 * 14%, about 16, which is represented by the formula 50c + 62v + 16k. We see that with a 25 percent increase in wages, the price of production of goods has increased by 7 percent from 120 to 128.

Now let us examine another production environment that has a better combination than the average capital combination, say 92c + 8v. The average profit is still 20 and the price of production is 120. Wages have increased by 25 percent and reach 10. The cost price of goods becomes 102. The average rate of profit is higher than 14 percent, and the profit that accrues to 102 is also higher than 14. The total product is sold for a little over 116 and the price of production falls from 120 to 116. From examining all these cases regarding the effect of a 25% increase in wages on the general rate of profit and the price of production, we conclude that:

1 – In the case of capitals with an average social composition, the price of production of the commodity remains unchanged.

2- The production price of capitals with a lower composition increase, but this increase is not proportional to the decrease in profits.

3- Capitals with a better composition witness a decrease in the production price, but this decrease is not proportional to the decrease in profits.

With the equality of the value and price of production of goods – capitals of the area with average social composition remaining constant, the price of production of products of all capitals also remains equal to their value. The increase in prices in the area with a lower composition and their increase in the area with a higher composition cancel each other out. In the second case, the price of goods increases, but in the third case, it decreases, because the capitalist is not able to compensate for the decline of surplus values ​​by raising prices. In the second case, the increase in prices cannot prevent the decline of profits. The rise in prices of production on the one hand and their fall on the other hand is due to the alignment with the new average profit which has fallen. The next question is what effect it will have on prices of production if wages are generally reduced. The answer is clear. The opposite of what we have said above will happen. Let us illustrate the matter with an example. We begin with capitals with the social average composition. Our first assumption is the existence of capitals with the composition 80c + 20v. The rate of surplus value is 100%, the rate of profit is 20%, the amount of surplus value is 20, the value of the product is 120 and the price of production is also 120. Wages are reduced by 25% and fall from 20 to 15. The total capital, which was 100 before, now becomes 95. The amount of surplus value is 25, its rate is about 166%, the rate of profit is 26% higher than the value of the product is 121 and the price of production is also 121. There is not much change in product value and production price. Let’s look at funds with a lower composition.

The initial form was 50c+50v with a value-added rate of 100%, production value and price of 150 and a profit rate of 50%. After establishing the average profit rate of 20%, its production value and price increased from 150 to 120. Now, with a 25% reduction in wages, its variable capital will decrease from 50 to 37.5. Total capital falls from 100 to 87.5. The new profit rate is slightly higher than 26%, the capital profit share of 87.5 becomes about 23, and accordingly, the value of the product will be 50+37.5+23=110, which means it will decrease from 120 to 110. The production price also suffers the same fate.

Let us turn to capitals with a higher composition. The original formula was 90c+10v, a surplus value of 100%, a profit rate of 10%, a value of 110, and a price of production of 110. With the establishment of an average profit rate of 20%, the value and price of production increased from 110 to 120. Now wages are reduced and reach from 10 to 7.5. The total capital is reduced from 100 to 97.5. The new rate of profit, as mentioned, is above 26%. The share of profit of the 97.5 capital at this rate becomes slightly more than 25. In this regard, the total value of the product is about 123, which is 3 units higher than before. The same change is also true for the price of production.

Chapter 12

Supplementary Remarks

1-Causes Implying a Change in the Price of Production

The price of production of commodities changes under the influence of two factors. First, a change in the general rate of profit and second, a change in the value of commodities. A change in the average rate of profit occurs when either the average rate of surplus-value changes or the ratio of the total surplus-value to the total capital advanced by society changes. The fluctuation of the rate of surplus-value, if not the product of a deviation of wages from their normal level, is a function of the rise or fall of the value of labour power, and neither of these can occur without a change in the productivity of the labour of the producer of the means of subsistence, and in the same vein, without a change in the value of the commodities consumed by the workers. The change in the ratio between the total surplus-value and the total social capital is also related to the current fluctuations in the volume of the constant component of capital. Fluctuations in the volume of this component, which also changes its value. An increase and decrease, which again is due to a change in the productivity of labour. From all this we conclude: if the price of production of a commodity changes as a result of a change in the general rate of profit, the value of that commodity itself may remain constant, but there must be a change in the value of other commodities. If the general rate of profit remains constant, any change in the price of production of a commodity is subject to a change in the value of that commodity. This means that more or less labour is required to reproduce the said commodity. All changes that occur in the price of production of commodities arise in the final analysis from a change in their value, but not every change in the value of a commodity is necessarily reflected in the price of production of that commodity. The reason is that the price of production does not depend only on the value of a given commodity, but on the value of all commodities.

2 – The price of production of goods with an average composition

The deviation of production prices from the value of goods has the following specific sources.

First: What is added to the cost price of a commodity is not the surplus value inherent in it, but the average profit.

Second: The cost price of a commodity that has deviated from its value enters into other commodities as an element constituting the cost prices. Taking these points into account, it must be accepted that the cost price of products of average conditions can also differ from the value of the sum of the elements used in their production, and this difference is reflected in the relationship between their value and production price. Let us assume that the composition of capital in the average area is 80c + 20v, but c can be greater or smaller than its real value because its components fluctuate due to the deviation of their production prices from their values. The value of the variable component (v) can also change, because the cost of production of goods constituting the basic needs of workers can increase or decrease. The important point is that none of these possibilities contradict our theses on commodities of intermediate organic composition. The quantity of profit belonging to these capitals corresponds to the surplus value latent in them.

3 – The capitalist’s view of the phenomenon of the balance of profits

It was said that competition transforms the rate of profit of different spheres of production into an average or general rate of profit. At the same time, it transforms the values ​​of the products of these spheres into the price of production. These substitutions and changes take place routinely because it is the inherent tendency of capital to move from one sphere to another in search of increased profit. In the meantime, the periodic fluctuation of the rate of profit in the years of recession and boom must also be taken into account. Fluctuations that arise in a given branch of industry in a given period following each other. The continuous movement of capital between different production environments causes an increasing or decreasing movement of the rate of profit. Rates that neutralize each other and drive to the level of the general rate of profit. The movement of capital is everywhere primarily due to the state of market prices. Prices which in some areas raise profits above the average profit and in others lower it. What competition conceals, however, is the dominance of the law of value over the movement of production and the values ​​which lie behind the prices of production. And what competition reveals is as follows.

First: Average profits, which are independent of the organic composition of capital in different spheres and, consequently, independent of the mass of living labour that each specific capital exploits in its specific environment of advance.

Second: The rise and fall of production prices as a consequence of changes in wages – something that at first glance seems contradictory to the value relation of commodities.

Third: Fluctuations in market prices. Fluctuations that cause the average market price of a commodity, at a given point in time, to deviate from its market value and become the market price.

The above points indicate the fact that competition turns everything upside down, it suggests that the value of commodities is not determined by the socially necessary labour concentrated in them!! As if surplus value is nothing but unpaid labour without any wages for the workers!! The truth is that the present and ready-made picture of capitalist economic relations or the picture presented by the defenders and thinkers of this system is fundamentally at odds with its inner, mysterious, crude realities. The alignment of the rates of profit of individual territories and the general rate of profit in the advanced stages of capitalism is also not achieved only by the transfer of capital and under the influence of market prices. Moreover, when average prices and the corresponding market prices stabilize for a while, individual capitalists find that certain differences are neutralized by this alignment. They include this issue in their calculations and consider the differences as the cause and foundation of establishing equilibrium. The basis of their idea is the same average rate of profit. What they see is that any amount of capital, independent of its organic composition, in any area of ​​advance gains the same amount of profit as its equivalent capital in other environments. Every unit of capital with any composition in any area of ​​accumulation receives a share of the total surplus value equal to its equivalent capital. Every given capital is a part of the total capital, and every capitalist is a shareholder in the joint-stock company of all capitalists who, in proportion to the size or smallness of his capital, receives his share of profit from the surplus values ​​resulting from the exploitation of the workers of countries or the world. Competition, the replacement of the value of commodities by the price of production, the formation of the general rate of profit, lead the capitalists to this inverted idea that it is as if the differences themselves compensate each other and establish equilibrium.!! The intelligence born of capital is incapable of digging to the root of reality to any extent. He sees competition, the formation of the price of production, the establishment of the general rate of profit and the share of profit, and he sees them as a lock on his intellect and a steely gaze. He is completely unable to understand and see the real source of profits, surplus values, and the unpaid and unpaid labour of the workers. He considers whatever is an obstacle to understanding and seeing the source of surplus values ​​as the creator and source of his own profits. In all cases, he is a prisoner of this inverted vision, petrification, and illusion. He looks at the reversal period, sees the effect of its short and long duration on the volume of profits, considers this short and long duration to be the source of profits, contemplates the risk of a ship sinking at sea, the terrible losses, and the role of insurance, and considers the dynamics of these things to be the real field for the growth of profits and capital. He sees his own capital’s equal share of all profits, and with this vision, he becomes overwhelmed by not seeing the source, the origin, the real centre of the production of surplus values.

Part Three

The Law of the Tendency of

the Rate of Profit to Fall

Chapter Thirteen: The Law as Such

Let us start with the assumption that wages and the daily wage are both fixed. A variable capital of $100,000 also represents the number of workers exploited, say 100 workers in a week. The rate of surplus value is 900%. For every dollar they receive, workers give the capitalist $9 in surplus value. The fixed capital employed by these 100 workers can be very different and have very different organic compositions. For example, from left to right:

1 900 000 + 2 150 000 + 2 470 000 + 2 900 000 + 4 400 000

With these data, the sum of constant and variable capital and the amount of surplus value in the above five cases will be as follows:

1 – 2 000 000 C —— 1 900 000 c+100 000 v+ 900 000 m

2 – 2 250 000 C —— 2 150 000 c+100 000 v+ 900 000 m

3 – 2 570 000 C —— 2 470 000 c+100 000 v+ 900 000 m

4 – 3 000 000 C —— 2 900 000 c+100 000 v+ 900 000 m

5 – 4 500 000 C —— 4 400 000 c+100 000 v+ 900 000 m

Let us not forget that C represents the total capital, c the constant capital, v the variable capital and m the amount of surplus value. The rate of surplus value in all five cases is 900%. But these same rates of surplus value, under different conditions, have appeared in completely different rates of profit. The reason is clear. If the rate of surplus value is the result of dividing the surplus value by the variable component of capital, the rate of profit is the excess of the surplus value over the total capital, both constant and variable. Accordingly, the rate of profit of the first capital is 45%, the second capital 40%, the third 35%, the fourth 30% and the last capital only 20%. What is quite clear is that the higher the fixed capital employed by a given number of workers, the lower the rate of profit. In other words, the upward trend of the organic composition of capital has been intertwined with the downward trend of the rate of profit. If what we see is generalized to the entire capital of society, or social capital, if the upward trend of the organic composition of capital encompasses the cycle of valorisation of social capital, then, assuming that the rate of surplus value remains constant, a decline in the general rate of profit is inevitable. This is inevitable and inherent in capital, which, for greater profit and greater self-promotion, requires an increase in the productivity of labour. As labour productivity increases, the greater the volume of raw materials, auxiliary means, and components of constant capital that are converted into products by fewer and fewer workers, the organic composition of capital increases, a trend that inevitably leads to a fall in the rate of profit. The increase in the value of constant capital, together with the decrease in the variable component of capital, also causes the products to become increasingly cheap. This is clearly because each separate unit of commodities will contain less socially necessary labour than before. The downward trend in the rate of profit is actually an expression of the gradual development of the social productivity of labour, which is specific to the capitalist mode of production. This does not mean that other factors have an impact on the dynamics of the decline in the rate of profit. The important point to emphasize is the nature of the capitalist mode of production, which, with its further development, the average rate of surplus value is homogeneous and accompanied by the falling rate of profit. Why? The answer is the same as above. In this mode of production, the volume of living labour employed is continually decreasing in relation to the volume of objectified or already accomplished labour set in motion by this living labour and transformed into products. In the same vein, the unpaid portion of the labour of the workers is also decreasing in relation to the total volume of advanced capital, while the rate of surplus value remains constant, or, more precisely, the rate of profit is decreasing.

The above law seems very simple and trivial, but it is worth pondering that no bourgeois economist or any great scholar of political economy from Smith to all his successors has managed to discover it!! They have talked a lot about it, considering its importance to capitalism, they have tried to recognize and challenge it, but the more they have tried, the deeper they have fallen, they have failed to recognize this inner workings of capital, just as they did not recognize the difference between constant and variable capital. In the same way that they considered profit to be something other than surplus value and a phenomenon that exists in nature! The recognition of each of these requires a free human intellect. The bourgeoisie, by virtue of its social existence, is a miserable prisoner of the profitability of capital and therefore lacks this intelligence and knowledge. With the example we gave at the beginning of the discussion, we showed that the more capitalism develops, the more the average social productivity of labour rises, and this rise, even when the rate of surplus value rises with increasing speed, still leads to a downward trend in the rate of profit. This trend and what was said about the successive stages of capitalist development in a country are also true for different societies involved in different stages of development in a single period of time. The lower the capitalist development of a society, the higher the average rate of profit of that society, and the opposite is also true. The difference in the distinct and separate rates of profit of two countries can be eliminated or even reversed when, in a less developed society, labour is less productive and a larger part of the worker’s labour is devoted to his necessities of life. In other words, the rate of surplus value is lower. In our example, let us assume that the workers in the first sector (1,900,000 c + 100,000 v) produce only 450,000 units of surplus value instead of 900,000, in other words, they double the price of their labour power and reduce the rate of exploitation by 50%. In this case, the rate of profit falls to 22.5% and approaches the rate of profit of the most advanced sector or industrial country. Another point is that in a society with a more developed capitalism and a higher average organic composition of capital, even a shorter working day compared to the longer working day of less developed countries can produce a higher rate of surplus value and therefore a higher rate of profit. For example, the 8-hour working day in Scandinavia may be equal to the 12-hour working day in the Philippines due to the higher productivity of labour. If we divide the working time of the two countries equally, then the 4 hours of extra work of the Danish worker would represent a higher value than the 6 hours of extra work of the Filipino worker. Accordingly, a larger part of the daily work of the Danish worker would be extra work compared to the Filipino worker.

The tendency to a fall in the rate of profit is a necessity of capitalism and expresses the fact that for any given quantity of average social capital, a constantly increasing part is allocated to the means of production and constant capital and a constantly decreasing part to living labour. The ratio of living labour to dead labour decreases; with the relative decrease of living labour, the unpaid component, or surplus value produced by it, also decreases. A trend which at the same time illustrates the unstoppable upward trend of the productivity of labour in capitalist production. Let us give an example. Let us consider two separate capitals at two different levels of labour productivity and organic composition. The first capital is 80c+20v with a rate of surplus value of 100% and the second capital is 20c+80v and a rate of surplus value of 50%. The new value created by the first capital is 40 and the second is 120. The surplus value of the first is 20 and the second is 40. The rate of profit of the first capital is 20% and the second is 40%. The second capital, despite its lower rate of surplus value, has a higher rate of profit because it exploits more workers. Let us not forget that the present discussion is focused for the time being on the process of capital appreciation under different conditions, with different rates of surplus value and rates of profit. How the data we have mentioned change under the pressure of competition, the dynamics of the formation of production prices and the general rate of profit is a matter that has been explained earlier and will be discussed later.

The relative decrease of the variable component of capital in comparison with its constant component does not in any way negate the absolute and continuous growth of the living labour exploited by the social capital of countries or by the total world capital. Just as the falling rate of profit does not contradict the rising growth of the rate of surplus value. Let us consider a working population of 2 million people with a daily wage of 20 million dollars, which transforms 80 million dollars of constant capital into product, the amount of surplus value is 20 million and its rate is 100%. Now the number of workers, the daily work, the intensity of exploitation and the ratio between paid and unpaid labour remain constant, but the composition of capital undergoes a change, and the volume of its constant component reaches 180 million dollars. With this change, the rate of profit decreases and falls from 20 percent to 10 percent, because the same amount of surplus value is divided over a larger constant and variable capital. Another course of events is also conceivable. If the constant part of capital increases from 180 million to 400 million dollars, at the same time the number of workers increases from 20 to 30 million and their daily wages from 20 million to 30 million dollars. Here the rate of surplus value and the daily rate of labour remain unchanged, but the volume of surplus value has increased by 50%. The ratio of variable to constant capital has also changed from 20 to 180 to 30 to 400. With these changes, the rate of profit also falls to about 7%. In the first situation, the total volume of constant and variable capital was 200 and the volume of surplus value was 20 million dollars. In the second situation, the total volume of capital is 430 million and the volume of surplus value is 30 million dollars.

The capitalist process of production is also essentially a process of accumulation. In the course of the progress of accumulation and the growth of the productivity of labour, the mass of value that must be preserved and reproduced, even assuming that the number of labourers remains constant, continues to rise. In this process, and with the ever-increasing growth of the social labour force, the volume of created use values, whether means of production or means of subsistence, continues to grow, and it is this growth that creates the need for an increasing number of workers. Let us remember that in the labour process the worker deals with the volume of means of production and subsistence, not with their value. All this implies that the ever-increasing accumulation and concentration of capital leads to the increasing growth of means of production and subsistence and their transformation into capital, a process that entails the need for more labour or a larger labour force. An increase proportional to the limits of the requirements of capital, or even more, since if the number of workers is lower than the requirements of capital, it may cause an increase in wages. Which itself will be a basis for population growth. All this is one side of the story, the other side is the continuous progress of knowledge, technique and the introduction of ever more modern machinery into the market of accumulation. A process that implies a progressive improvement in the productivity of labour and makes the emergence of a relative surplus of workers inevitable. Capital is intertwined with all these functions, and their overall result is that in the process of the development of production and accumulation, with the growth of the volume of constant capital, the value of this part of capital grows much larger and more rapidly compared to the value of variable capital. In this same process, the absolute volume of profits increases astonishingly, but the rate of profit tends to decline. This process is fraught with another accident. With the continuous growth of the volume of capital, the number of capitalists can increase, but small capitals, under the pressure of the falling rate of profit, lose the possibility of increasing in value. They are swallowed up by larger capitals and are dispossessed of their owners. This reveals why individual capitalists, despite the drastic change in the ratio between the variable and constant parts of their capital, still rule over the great army of workers and, despite the falling rate of profit, still seize astronomical profits.

Given a given labour force, if the rate of surplus value increases as a result of the lengthening of the working day, the intensification of the pace of work, or the increase in the productivity of labour, the volume of surplus value, and consequently the absolute volume of profit, will increase despite the decrease in the ratio of variable to constant capital. The increase in the productivity of social labour, the same process that causes the relative decline of the variable component of capital in relation to its constant component, is accompanied by an increase in the absolute number of workers, an increase in the absolute volume of surplus value, an increase in the absolute volume of profits, and a decrease in the rate of profit. The question is how these contradictory functions are combined.

How do the increase in the absolute volume of profit and the fall in the rate of profit flow from a single source? The answer is simple. The increase in the productivity of labour vastly reduces the paid component of labour in favour of its unpaid component, transforms an ever greater share of labour into surplus labour or surplus value, the absolute volume of profit rises, but this trend is accompanied by a rapid increase in the constant component of capital and therefore in total capital, and the rate of profit, which is the excess of the surplus value over the total capital, falls. Let us suppose that the amount of social capital of a society is $100 billion and its average organic composition, which determines the rate of profit, is 80c + 20v, or 80 billion constants against 20 billion variables. With the relative decrease of the variable component in relation to the constant component, even if the intensity of exploitation remains unchanged or even increases, the rate of profit will still fall. Because the ratio of surplus value to total capital falls. Let us remember that not only the relative amount of surplus value falls, but its absolute amount also falls. A rate of surplus value of 100% produces a surplus value of 20 for a capital with a composition of 80c + 20v, but with a change in the composition of capital to 70c + 30v the surplus value becomes 30, and for a capital with a composition of 60c + 40v this amount becomes 40. These changes occur in the volume of surplus value and profit, and their origin is the change in the amount and proportion of living labour exploited by a given volume of capital with an average organic composition. Since the value of capital is measured by it, it is clear that any decrease in the ratio between surplus value and this constant amount of capital indicates a decrease in the absolute amount of surplus value and, consequently, profit. The reverse is also true. This means that any increase in the aforementioned ratio results in an absolute increase in surplus value and profit. Let us clarify the discussion by giving another example.

Let us consider a capital of one million dollars with a composition of 60c + 40v and a rate of surplus value of 100%. The amount of surplus value is 400 thousand and the rate of profit is 40%. If we increase this capital to two million two hundred thousand with a composition of 80c + 20v, the amount of surplus value becomes 440 thousand and the rate of profit is 20%. The amount of surplus value has increased slightly, but the rate of profit has halved. All these examples confirm the same law as previously stated. That with the relative decrease of variable capital and the development of the productivity of social labour, a larger and larger volume of capital is required to set in motion the same amount of labour power and to absorb the same amount of surplus labour. Accordingly, the more capitalist production expands, the greater the possibility of the appearance of a relative surplus population of workers. A surplus population whose origin is the disproportion between the constantly increasing increase of capital and the relative decrease of its need for labour power or the growing population. If the rate of profit falls by 50% and we want the volume of profit to remain at the same level, the capital advance must necessarily double. In order for the volume of profit to remain unchanged in the event of a fall in the rate of profit, the coefficient of increase in total capital and the index of the fall in the rate of profit must be inversely proportional. When the rate of profit falls from 40% to 20%, the preservation of the previous surplus value and profit depends on the doubling of total capital. If this decline goes up to 8%, then the amount of capital should be 5 times and become 5 million. This is in the conditions that the capitalist is looking to maintain the previous profit volume, if he wants to increase the amount of profit at the same time as its rate falls, then the total capital must necessarily increase with a higher ratio than the rate of interest rate decline. For example, the previous capital of one million dollars will increase to two million five hundred thousand dollars. With this increase, the capital composition changes from the previous 60c+40v or (600,000c+400,000v) to 80c+20v or (2,000,000c+500,000v), the value-added rate is still 100%, but its volume has increased from 400,000 to 500,000 and the profit rate has decreased from 40% to 20%. It is very important evident in all these examples and what we emphasize is that the evolution of the social productive force of labour in the development of the capitalist production method, on the one hand, appears in the form of a tendency of the rate of profit to fall, and on the other hand, it shows a continuous increase in the absolute amount of surplus value. As the relative decrease of variable capital and profit coincides with the increase of the absolute value of both. At the same time, this process shows that the more capitalist production expands, the more capital is needed to exploit the same amount of labour. A process that inevitably leads to the birth and growth of a relative excess of working population. Political economy is not able to explain the law of profit rate decline, its “scholars” from the predecessors to the contemporaries have said everything under the pressure of this ignorance and hung up on every falsehood, but they have only fallen into the abyss, they have woven contradiction after contradiction.

The law of the concomitant growth of the productivity of labour, the fall in the rate of profit, and the simultaneous increase in volume, also implies that the fall in the price of commodities is homogeneous with the relative rise in the profit inherent in them. A rise and change that manifests itself in the process of sale. With the continuous development of capitalism and the average increase in the organic composition of social capital, a constantly increasing quantity of the means of production is set in motion by a decreasing quantity of labour. In other words, each given component of the product or each separate commodity represents a smaller volume of living labour. The same applies to the depletion of fixed capital. The total elements of constant capital, whether raw and auxiliary materials or the share of fixed capital depreciation, carry relatively less living labour. It is on this basis that the price of commodities falls. A fact that is a sure proof and confirmation of the law of value. The fact that “the value of every commodity is determined by the socially necessary labour embodied in it” means that the price of a unit of a commodity has fallen from the total annual product of labour and production, meaning nothing more than that a smaller volume of labour has become necessary to produce a larger quantity of the commodity. The rate of profit declines despite the increase in the rate of surplus value because, firstly, in general, crystallized labour in newly created commodity has decreased, even the enlarged component of unpaid labour (surplus value) in each unit of goods has become smaller in comparison with the unpaid labour crystallized in the previous commodity. Secondly, the organic composition of capital has increased and its variable component, which is the only creator of new values, has declined compared to its constant component. These changes in the organic composition of capital are also introduced in the constituent parts of each commodity unit and change its price. If we calculate the profit in relation to the cost price of the goods, then our profit rate will be p/k. p is the profit obtained during one year and k is the total cost of goods produced and sold during the same year. It is clear that this rate of interest coincides with the rate of interest p/C only when C = k. Let’s consider three different states of an industrial capital as follows.

First: A capital of $80,000,000 produces 50,000,000 pieces of commodities annually. The cost price of each piece is $1, but it is sold for $1.50. The annual return of the capital is $75,000,000, which is less than the total. The cost price of all the pieces is $50,000,000. The capitalist makes a profit of half a dollar from each piece. Accordingly, his annual profit is $25,000,000. If we calculate the rate of profit by referring to the cost price of each piece (0.5/1), we arrive at the figure of 50%. A figure that in this calculation also applies to the total capital used in return (25,000,000/50,000,000=50%). The real annual interest rate, however, will be 25,000,000/80,000,000, or slightly more than 31%. We see that these two interest rates do not coincide with each other, referring to the two methods of calculation, p/k on the one hand and p/C on the other, because k and C are not equal.

Second: The above capital increases to $100,000,000, and the productivity of labor also increases. The number of pieces produced in a payback period reaches 100,000,000, the cost price of each piece is still $1. Our assumption is that each piece sells for $1.20. In this case, the annual sales of the product will be $120,000,000. Of this amount, $100 million is the cost price and $20 million is the annual profit. p/k for each piece is 1/0.2, which is 20%, and the annual real rate of profit will be $20,000,000/100,000,000, which is 20%. Both rates of profit coincide because C and k are unit values.

Third: The same capital increases again and reaches $150 million. Labor productivity also increases. With these changes, the number of pieces produced in the payback period becomes 300 million. The production cost of each piece is 65 cents, and it is sold for 75 cents with a profit of 10 cents. Total sales or total payback of capital will be 220 million and 500 thousand lars. Of this figure, $190 million and 500 thousand are production costs and $30 million are profits. Here, the ratio of profit per piece to its production cost (10/65) is slightly more than 15%, but the annual rate of return on capital (30,000,000/150,000,000) is over 20%.

We observe that only in the second form does the real annual rate of profit, or the ratio of profit to total capital, coincide with the rate of profit of the reversal period, or the profit of each piece to its cost price, and this coincidence results from the fact that the total amount of capital is equal to the total cost price of the commodities. Here it is necessary to insist once again on the importance and fundamentality of the argument that in capitalist production the separate commodity produced at a given time, the individual commodity, cannot be studied in itself and alone. This is deeply misleading. Every commodity can only be studied and dissected as a product of the capital advanced, in relation to the total capital producing it.

The rate of profit is certainly an external part of the surplus value of the total capital and not just the capital used in the production of the commodity, but the volume of profit is in any case equal to the volume of surplus value that is embedded in the commodity itself and is realized through its sale. As the productivity of labour increases, the price of a single commodity or a given volume of commodity decreases. The number of commodities increases; the volume of surplus value or profit concentrated in a single commodity and in relation to the total number of commodities decreases. These are facts that are subject to misinterpretation or misinterpretations in the appearance or external procedure of the matter. This interpretation, which seems to suggest that the capitalist, at will and based on his will, sells each individual commodity at a lower profit and in return compensates for his loss by selling more in bulk!! The theory that sees the source of profit in sales is without any foundation!!

Competition turns everything upside down. monocapitalism can imagine that it lowers its profit per unit of goods in order to sell more goods and make more profit, everything boils down to how it is sold!! Political economy theorists also turn this same false idea into a theory and make up their minds.

Chapter 14

Factors counteracting the downward trend in the rate of profit

Political economy, which is blind to the real roots of the tendency of the rate of profit to fall, finds its occurrence a source of astonishment!! If the priests of this temple would open their eyes and look only at the mountain of fixed capital accumulated in various forms during the last 30 years, they would probably change the direction of their astonishment. This time they will ask you, drowning in the sea: Why is the rate of profit falling so rapidly?!! Why does it not throw off the brakes? These “savants” are not only incapable of understanding the law of the rate of profit to fall, but they also know nothing of the neutralizing factors that give this law the character of a tendency. Let us look at these factors.

1 – Increasing intensification of the exploitation of the worker

The prolongation of the daily work increases the volume of surplus labour or surplus value of the capitalist, without seriously changing the ratio of the variable component of capital to the constant component. More precisely, it lowers the constant component of capital in relation to its variable component. It lowers the organic composition of capital. If the worker works 12 hours instead of 8, even if his wages increase slightly, he will still deliver much more additional hours of labour to capital. This is a matter whose importance modern industry has understood very well. It is not surprising that the more capitalism uses more modern techniques and more advanced machinery, it tries to prolong the daily work of the working masses even further. As for the increase in relative surplus value, it is necessary to emphasize that all the methods used by capital for this form of increase the intensity of the exploitation of the worker, while at the same time lowering the ratio of the variable component of capital to its constant component, they convert more and more of the given volume of labour into surplus labour or surplus value and profit. A worker who receives 4 hours out of 8 hours of daily work as the price of reproducing labour power endures a rate of exploitation of 50 percent. When the same worker receives only one hour out of 8 hours as wages or necessary labour, his rate of exploitation becomes 700 percent and multiplies several times. Capital, of course, is not satisfied with any of these, it does not recognize any boundaries for intensifying the exploitation of labour and does not see any limits as acceptable. The work of children and women is one of the important strategies for increasing surplus values ​​and confronting the decline in the rate of profit. Capital, with inhuman economic force, forces women and young children to endure long working days and makes the bread and butter of the family dependent on the hard work of people, big and small, day and night. In this process, it increases the volume of surplus labour or surplus values ​​to the maximum extent possible and challenges the law of the decline in the rate of profit. All the methods that capital adopts to achieve greater relative surplus value while keeping the volume of capital constant all play the role of neutralizing the decline in the rate of profit. The use of more advanced methods of cultivation and work in agriculture is one of these. A question here is what is the function of the factors that prevent the fall in the rate of profit but ultimately accelerate it? For example, the inventions of machinery before they become general, which cause a specific increase in the volume of surplus value of a few capitalists. Are these discoveries also factors that counteract the movement of the fall in the rate of profit? The answer is yes. The volume of surplus value produced by a given capital is the product of the two factors: the rate of surplus value and the number of workers. This means that the factors that increase the rate of surplus value cause a decrease in the volume of labour, but let us bear in mind that within this same inverse relationship, the lengthening of the working day and the rise in the absolute rate of surplus value that results from it weaken the tendency to a fall in the rate of profit. Let us review our conclusions once more.

In examining the rate of profit, we saw that: as the total volume of capital employed increases, the volume of profit increases, but the rate of profit decreases. If we consider all the variable capital of society, the surplus value produced and the resulting profit are the same. The upward trend of the volume of surplus value is accompanied by the growth of its rate. The increase in the absolute volume of surplus value results from the abundance of exploited labour, and the growth of its rate results from the increase in the degree of exploitation or the intensity of exploitation. A certain amount of capital, such as $100 million, may witness an increase in the rate of surplus value, but on average it will encounter a lower volume of surplus value. The reason is that the rate of surplus value depends on the degree of productivity of labour, but its volume depends on the proportion that variable capital has in total capital. Considering the role that the increase in the rate of surplus value has on the volume and rate of profit, and that the factors that increase the rate of surplus value are able to neutralize or slow down the downward trend of the rate of profit, it is correct to consider the law of the decline of the rate of profit as a tendency. A law that, under the influence of neutralizing factors, practically establishes a state of tendency. If a worker is forced to do the work of two people or conditions arise that enable him to take on the work of three people. Then this worker will deliver the surplus labour of two people, and the rate of surplus value will grow, but the amount of his surplus labour will not be the same as that of three people and the volume of surplus value will inevitably decrease. For example, he works two 8-hour days, totalling 16 hours a day and 6 hours each day, totalling 12 hours of surplus labour for the capitalist. This worker may work the same amount of 3 people in these 16 hours, but he will not deliver 18 hours of surplus labour to capital. The relative volume of surplus value in the product will decrease.

2 – Depression Of Wages Below the Value of Labour-Power

The fall of wages below their real value implies a forced escape of capital from paying the price of the basic necessities of life or the necessary cost of reproducing the labour power of the worker. It is clear that starving the working masses as much as possible will increase their surplus labour, increase the volume and rate of surplus value, and in this way counteract the tendency of the rate of profit to fall.

3 – Cheapening Of Elements of Constant Capital

The volume of constant capital, whether fixed or circulating, increases continuously in general, but its value does not increase in the same proportion. The volume of fixed capital of automobile manufacturers has increased enormously compared to the beginning of the 20th century, but the growth in the value of their capital has not been proportional to the increase in their volume. The reason is the growth in labour productivity. The growth in labour productivity reduces the labour time concentrated in machinery, raw materials, auxiliary materials, or components of constant capital. This itself is one of the factors that neutralizes the dynamic of the fall in the rate of profit. The volume of constant capital that is put to work by a given amount of variable capital is constantly increasing, but its value does not grow at the same pace and, by creeping more slowly, prevents the acceleration of the fall in the rate of profit. Here too, we see that the same factor that increases the organic composition of capital and the fall in the rate of profit, namely, labour productivity, also causes the fall in the rate of profit to slow down inversely.

4 – Relative Over-Population

The development of the productivity of labour leads to an increase in the relative over population. The more the growth of the capitalist mode of production increases, the greater the length and breadth of the relative over population usually become. The relative over population, in turn, is a reason for the slowdown of the accelerated process of capital’s real domination of labour or the rapid development of large-scale industry. Why? The reason is clear. This phenomenon implies that small workshop owners have access to a huge mass of the dispossessed and the cheap unemployed. This causes capital to be eager to exploit this mass more intensively and to reduce its desire to use modern industry and advanced technology. The emergence of these conditions, although variable and temporary, causes a significant growth in the volume and rate of surplus value in many areas. Let us not forget that the general rate of profit gives rise to various territories from the process of converting the rates of profit into different ones. Accordingly, the growth of the volume and rate of surplus values ​​in these areas plays an active role in slowing down the tendency towards a decline in the rate of profit.

5 – Foreign Trade

Foreign trade, to the extent that it cheapens the elements of constant capital and the necessaries of life, raises the rate of profit, because it increases the rate of surplus value and reduces the value of fixed capital. Foreign trade accelerates the process of accumulation and the expansion of the capitalist mode of production. The basic question here is whether the higher rate of profit resulting from the advance of capital in colonial trade can lead to an increase in the general rate of profit? In response, it must be said that capital active in this area earns a higher rate of profit because it competes with commodities that are produced under less favourable conditions. The advanced society sells its goods at a price higher than their value, but cheaper than the less advanced country, due to more productive labour, thereby raising its rate of profit. The first society receives more surplus value than what is in its commodities. Similar to the greater surplus value that more productive labour in a workshop equipped with a newly invented invention creates, the share of the owner of the enterprise. The story is different in the case of the second society. Here more objectified labour is delivered and less is received, with the explanation that the price of the goods received is lower than the cost of their production at home. Why does investment in the colonies yield higher rates of profit? Because the intensity of exploitation is much more terrible. The composition of capital is lower. Relatively more living labour is exploited at a much lower price. The labour of slaves, gypsies, women, and children brings about greater surplus values ​​and more golden rates of profit. These greater surplus values ​​and higher rates of profit in turn have a marked effect on the general rate of profit of capital and cause it to rise. In trade between countries, the more advanced society delivers less labour and receives more labour, which in the form of surplus value or surplus labour of workers in other societies is added to the surplus value resulting from the exploitation of the proletariat of the more industrialized society and becomes the share of the capitalist class of these societies.

Foreign trade also accelerates the growth of capitalism in the country of origin, lowering the variable component of capital compared to its constant component, and thus lowering the rate of profit. At the same time, it captures additional profit compared to other countries, which counteracts the fall in the rate of profit. Here again we see that the same factors that reduce the rate of profit also slow down this fall. If it were, otherwise, what would be surprising would not be the fall in the rate of profit, but its slowness and slight acceleration. Before we go any further, let us review some of the fundamental points raised as follows.

1 – The same factor that causes the cheapening of commodities in the process of the development of the capitalist mode of production, originating from a change in the organic composition of the social capital used in the production of commodities, also causes a decline in the rate of profit. Therefore, the relative reduction in the cost of producing an individual good, even the cost related to the depreciation component of machinery in it, should not be confused with an increase in the value of constant capital compared to variable capital. Although, conversely, any relative reduction in the cost of constant capital, despite the fact that the volume of its composite components remains constant or increases, can cause a rise in the rate of profit.

2 – The improvement of labour productivity or the conditions and factors that cause a smaller quantity of additional living labour to be embodied in individual commodities, these conditions do not affect the ratio between paid and unpaid living labour in any way. Conversely, as the total quantity of additional living labour embodied in the commodities decreases, the unpaid component increases compared to the paid component. In other words, the same production method and factors that reduce the total volume of living labour added to a commodity also bring about an absolute or relative increase in surplus value. The fall in the rate of profit is connected with the rise in the rate of surplus value, and therefore with the intensification of exploitation and the rise in the degree of exploitation of labour. Therefore, nothing is more absurd than to explain the fall in the rate of profit by the rise in wages. The rate of profit does not fall because labour is less productive, but because productivity is greater, which leads to a fall in the rate of profit at the same time as the rise in the rate of surplus value.

6. The Increase of Stock Capital

With the development of the capitalist mode of production and the rapid expansion of accumulation, a part of social capital assumes the role of profit-making capital. The profit that these capitals capture is an inseparable part of the surplus value created by the working class, but this profit is less than the profit of the capital advanced in industrial enterprises. The capital in question does not enter into the process of forming the rate of profit either. The satisfaction of a part of social capital with this lower profit is in turn a lever in slowing down the downward trend of the rate of profit.

Chapter 15

Exposition of the Internal Contradictions of the Law

1- General

The expansion of labour productivity, gigantic accumulation, the decline of the rate of profit are different and opposite aspects of a single trend. The increase in the rate of profit, like the increase in labour productivity, is the driving force or driving force of the capitalist mode of production. The decline in the rate of profit slows down the formation of new capital, encourages profiteering, disrupts production and threatens the development of capitalism. David Ricardo and his colleagues do not understand this and are not willing to accept the fact that capitalism inherently sets a limit and an end for itself. They see this limit but do not seek its root in production and refer it to nature!! They tremble at the law of the decline of the rate of profit, but it is difficult to accept that capitalist production, with the development of the productive force, reaches a limit that has nothing to do with the production of wealth per se. The special limit that marks the limitation of capitalism, testifies to the purely historical character and mortality of this system. The downward trend in the rate of profit is not specific to the profit of industrial capital only; land rent also falls, even if its absolute volume increases, even if it increases relatively compared to the profit of industrial capital. To understand the matter more precisely, let us remember the following symbols. Total social capital C, industrial profit p’, money interest z and land interest r, total surplus value m and profit p. In this case, we will be faced with such an equation.

m/C=p/C=p’+z+r/C= p’/C+z/C+r/C

We have already seen that in the historical and general process of capitalist development m or the volume of surplus value constantly increases, but m/C constantly decreases, under C it grows faster than m. Thus, it is quite natural that industrial profit, money interest and land interest each grow separately or their share in total capital decreases, while the rate of profit and the ratio of total surplus value to total capital remain equal. In the same way it is normal that the different forms of profit increase relative to each other if the sum of surplus value and profit increases, while the rate of profit or the share of total surplus value to total capital decreases. Furthermore, the amounts of industrial profit, land interest and money interest change in different ways within the limits determined by the total surplus value or total profit, without the rate of profit being affected. A change in the amount of industrial profit, money interest or land interest is a change in the way the total surplus value is distributed among them. In this regard, the rate of each of these components to the total capital can increase while the total rate of profit decreases, only on the condition that their sum is equal to the sum of the total surplus value to the total capital. Let us give an example.

A capital has a combination of 50c+50v and a value-added rate of 100%. This combination changes to 75c+25v. In the first case, he had a capital of 1000 and a profit of 500. In the second case, a capital of 4000 units brings a profit of 1000. Total profit or surplus value has doubled, but the rate of profit has been halved. In the first case, if the industrial profit was 20%, the land interest was 20% and the money interest was 10%, then the industrial profit rate would be 20%, the land interest rate would be 20% and the money interest rate would be 10%. In the second case, with the reduction of the profit rate to 25%, if the ratios remain as before, the industrial profit will be 10%, the land interest will be 10%, and the money interest will be 5%. On the contrary, if industrial interest drops to 8% and money interest to 4%, land interest will be 13%. With the continuous expansion of the capitalist mode of production, all profits are first placed in the hands of industrial and commercial capitalists, and later the recipients of land interest and money interest each receive their share. Never forget one thing. Capitalist production is only the production of profit and in its nature has nothing to do with production to meet the needs of human life.

With the production of surplus value, only the first phase of the production process is completed. The capitalist has sucked up a certain volume of labour without any wages. Now the second phase begins, the entire product or goods, including the part that replaces fixed and variable capital or the part that is surplus value, must be sold. If the sale does not take place. Not all goods are sold or are sold below the price of production, then even if the worker is exploited in the most severe way, the result of this exploitation has not been achieved as intended by capital and the capitalist. A process that can lead to the loss of a large or small volume of surplus value produced. The conditions of direct exploitation and the conditions of organization of the result of exploitation do not coincide only in terms of time but also conceptually. The conditions of direct exploitation are limited to the productive labour force of society, while the conditions of organization are determined by the proportion between the different branches of production and the consumption capacity of society. But the consumption power of a society is not determined by the absolute power of production or the absolute capacity for consumption; instead, this consumption power is determined by the contradictory conditions of distribution that reduce the consumption of the overwhelming majority of society to the lowest level. A level that can only change within a narrow range. Not to mention the power of consumption is limited by the natural and uncontrollable tendency of capital to self-aggrandizement and the production of surplus value on a larger scale. This is the law governing the capitalist mode of production. A mode of production whose constant internal transformations are inevitably accompanied by the devaluation of existing capital, the brutal competition of capitals with each other, the compulsive need of capital for gigantic self-aggrandizement, as levers of the struggle for survival and the fear of bankruptcy. In this direction, the market must constantly expand. The relations and conditions governing it must become an octopus law independent of the producers and become more and more uncontrollable. In this mode of production, the internal contradiction seeks a solution with the external development of production, but the more and more production grows, the deeper it comes into conflict with the narrow foundation of consumption relations (consumption in general, whether in the form of the needs for the formation of constant capital or the necessities of life). Beyond this inherent contradiction, the coexistence of surplus capital and relative over-population is not contradictory. Their concurrence increases the volume of surplus value, but the contradiction between the conditions of production of surplus value and the conditions required for its realization and organization makes it more acute. The rate of profit falls not because of a decrease in the exploitation of the worker, but because of the greater and more brutal use that capital makes of less labour. The volume of profit undoubtedly grows with an increase in the volume of capital employed, even if the rate of profit falls, but this brings with it a simultaneous concentration of capital. The process of concentration in turn leads to the dispossession of small individual capitalists.

2 – Conflict Between Expansion of Production and Production of Surplus-Value

The growth of the productive forces of labour in the capitalist mode of production appears in a dual form. First, in the form of what has already been created, in embodied labour that is embodied in the form of means of production, raw, auxiliary and semi-finished materials, machinery, infrastructure required for the capital appreciation cycle, industrial, financial, banking, agricultural, “service” institutions!! Transportation, space facilities and many other forms, and new production is carried out in the context of their existence. Second, in the smallness of that part of the capital that is spent on wages in relation to the total capital. The development of the productive forces also takes two forms from another perspective.

First, the continuous increase of the surplus part of labour in comparison with its necessary part, and second, the continuous decrease of the amount of labour power or the number of workers required to operate a given volume of capital. The important point here is that the first and second dualities, although they are both complementary and modifying, have an opposite effect on the rate of profit. We have explained this point repeatedly, but it does not hurt to repeat it. The total volume of surplus value and the total volume of profit are equal, the rate of profit is also the ratio of the total surplus value to the total capital, but the total amount of surplus value is determined by the rate of surplus value and the number of workers. In capitalist production, the rate of surplus value constantly rises, but the number of workers constantly falls in comparison with the total capital. The rise of the first compensates to some extent the effects of the decline of the second, but it is by no means able to completely and continuously contain it.

Two workers working 12 hours a day cannot create as much surplus value as 24 workers working two hours a day, even if the two workers are unemployed and all their work is unpaid. Let us look at a few points carefully here. 1 – With the development of capitalism, the rate of profit falls. But the volume of profit and the volume of capital increase. 2 – If the rate of profit is known, the increase in the absolute growth of capital is related to the growth of its existing amount. 3 – Whenever the amount of capital is known, the rate of growth of capital is a function of the rate of profit. 4 – The growth of productive forces reduces the value of capital except when it becomes the cause of an increase in additional capital with the rise in the rate of profit. This increase can occur when either the relative surplus value rises or the commodities that enter into the reproduction of labour power and the constituent elements of costant capital become cheaper. Both of these causes a decrease in the value of existing capital, both cause a relative decrease in the variable component of capital in comparison with its constant component. Both cause the general rate of profit to fall, and both slow down this fall. If a higher rate of profit increases the working population, it will expand the source of exploitation, which is what makes capital capital.

With all that has been said, the growth of the productive power of labour indirectly plays a role in increasing the value of existing capital. Because it multiplies the volume of use values ​​and their variety. Use values ​​that contain exchange values ​​and make up the components of capital. They are transformed into constant and variable capital. Even the same capital and the same labour produce more products. Products that are capable of becoming capital apart from exchange value. They become additional capital, absorbing surplus labour and surplus labour. The volume of labour that capital can command is not related to its value, but to the volume of raw materials, machinery, auxiliary means, and the necessities of life of the worker. However, let us not forget that the two intertwined aspects of the accumulation process cannot coexist without contradiction and conflict. This contradiction is that:

• At the same time as the role of the stimuli for the increase in the working population is played by factors that only produce a relative surplus population.

• With the fall in the rate of profit, the volume of capital grows and its value decreases. A decrease that is the cause of the rise in the accumulation of value-capital.

• With the growth of productive forces, the composition of capital increases and the variable component of capital decreases relatively.

The above effects sometimes occur together, sometimes one after the other. At certain points, the conflict of opposing factors gives rise to crises. Crises are nothing more than momentary violent outbursts of existing contradictions. Violent outbursts that temporarily restore the collapsed equilibrium of the production process. The basis of the contradiction is that the capitalist mode of production inevitably advances in the direction of the absolute development of the productive forces. The aim of this mode of production is to preserve the value of existing capital and to appreciation it as widely as possible. At the same time, the methods that capital adopts to achieve this aim involve a reduction in the rate of profit, a depreciation of existing capital, and the development of the productive forces of labour at the expense of the productive forces that have already been produced. The periodic depreciation of existing capital is the internal and permanent lever of capitalism for slowing down the dynamics of the fall in the rate of profit and accelerating the accumulation of value-capital through the formation of new capital, but this very lever disrupts the process of reproduction and circulation of capital and exposes the production process to crises. The development of the productive forces and the relative reduction of the variable component of capital in comparison with its constant component stimulate the growth of the working population, but it also creates an artificial surplus population. The accumulation of capital, in terms of value, slows down with the fall in the rate of profit. The fall in the rate of profit causes the accumulation of use-value to intensify even further. This fall in turn increases the acceleration of accumulation in terms of value. Capitalist production tries to overcome these internal and permanent obstacles, but it does so only by means that create the obstacles themselves anew on a stronger scale.

The real barrier to capitalist production is capital itself. In this mode of production, capital itself and its appreciation are the starting point, the end, the motivation, the aspirations of production. Production is only the production of capital. Production is in no way a means for the progressive improvement of the living conditions, development, well-being, needlessness, freedom and material-spiritual ascension of producers. The sole purpose of this mode of production is the preservation and development of value-capital, its foundation is based on the expropriation of the vast mass of producers and their forced impoverishment, it is able to guarantee its survival within certain limits. Limits whose existence is in irresolvable contradiction with the methods of labour of capital for the realization of the said goal. These methods rush towards the unlimited increase in the production of capital or the essential goal of this mode of production and, consequently, the unconditional increase in the productive forces of social labour. Here, the unlimited expansion of the productive forces of social labour and the essential goal of this mode of production, which is only the unconditional fertilization of capital, are in constant and violent conflict. If capitalism is the cause of the growth of material productive forces and the creation of a world market, it is also the manifestation of the rebellious and insoluble contradiction between this historical task and its own existence.

3- Excess Capital and Excess Population

With the decline in the rate of profit, the minimum capital that the capitalist needs to exploit the worker, obtain the desired profit and balance the labour time necessary to produce his commodities with the socially necessary labour time or less, becomes greater than before. At the same time, the concentration of capital increases. A trend that again causes the rate of profit to decrease. Small capitals take the path of profiteering, credit fraud, buying and selling shares, and creating crises. These capitals constitute a part of social capital that is unable to increase its volume to compensate for the decline in the rate of profit, they are unable to compete in the market, they are excess capitaland become available to large capitalists in the form of credit. They arise from the same background that the relative excess Population to rise. Phenomena that complement each other, even though they are at opposite or antithetical poles. Here we are faced with the surplus production of capital and not the surplus of a specific commodity. Undoubtedly, the unruly abundance of commodities is evident, but everything is a story of the surplus accumulation of capital. It is absolute surplus production, and this important phenomenon, absolute surplus production, must be recognized and dissected. Absolute surplus production occurs at the moment when no more surplus capital can be employed for the purpose of capitalist production. The purpose of capital is simply to appropriate surplus labour, produce surplus value, and form additional capital. Now, if capital has grown in comparison with the working population so much that neither the absolute labour time of this population nor its relative surplus labour time can expand, then absolute surplus production definitely prevails. Capital is unable to produce more surplus value than before, and there is no opening to the advance of additional capital. Conditions in which increased accumulation does not lead to greater profits, and perhaps less surplus value. In both cases, the rate of profit falls abruptly, but this fall does not stem from the upward trend of organic composition and the increasing growth of the productive forces; its source is the increase in the money value of variable capital, the rise in wages, and the reduction of surplus labour in relation to necessary labour. Why? Yes. The answer is a little complicated. To get around this complexity, let us remember that the particular process we have been discussing, which has led to the sudden fall in the rate of profit, began when the same profits as before were made available on the advance of ever greater volumes of capital. A larger volume of capital which must be put to work by an ever-greater labour-power, while producing no more profit than before. Thus, it is the increase in the money value of variable capital and the rise in wages which has caused this fall.

What happens in this situation? A part of the capital, whether complete or incomplete, remains unused. The other part continues its process of capital appreciation under the pressure of these inactive or semi-active capitals and the low rate of profit. The fall in the rate of profit continues, and this time it is accompanied by a decrease in the volume of profit, because the volume of labour remains at the same level and, consequently, the volume of surplus value has not increased. The reduced volume of profit is divided by the same old capital, and the rate of profit is lower. The decrease in the actual value of the old capital intensifies the internal struggle of capital, the competition with regard to surplus production becomes more rebellious. The owners of active capital stagnate part of their surplus capital in order to prevent the depreciation of the old capital. Part of the new surplus capital succeeds in driving out part of the former active capital. This formerly active part now remains idle, but which capitals? The answer is determined by the acute competition between them.

Competition under normal conditions, for example in the process of forming the general rate of profit, is the manifestation of the practical solidarity of the capitalist class in the distribution of surplus values, but in the conditions under discussion, the wind of crisis sometimes blows in the opposite direction. Here, the task is no longer the distribution of profits, but the distribution of losses. Every capitalist escapes its consequences and tries to reduce the volume of losses. This conflict must eventually take the path of reduction and opening up, but how? We have already seen the answer. Part of the capital must remain idle. If it is destroyed, the surplus capital, or at least a part of it, must be eliminated. How will the losses and damages be distributed? It is quite clear. The capitalists, like the beasts of the desert, fight each other to reduce their share of the losses. The stronger one suffers the less loss, one capital is idle, the second is destroyed, the third suffers a relative loss or only a temporary depreciation. Parts of the fixed capital, whether circulating or fixed, stagnate in the form of a reduction in the capacity of production.

A crushing collapse occurs in capital values. Capital, which in the form of credit claims and awaits a share in surplus values. With the decline in the incomes that are the reference for their calculations, they undergo a serious decline. Part of the existing gold and silver also becomes idle. In order to organize their sales process, a significant mass of commodities take the path of a decline in price and, consequently, a decline in the value of capital in the form of commodities-capital. The elements of fixed capital also undergo the same decline. A process that leads to a general decline in prices, stagnation and collapse. This collapse and stagnation paralyze the function of money as a means of payment. The same function that had grown with the growth of capital. In this regard, the chain of payment obligations on time breaks, one by one. A rupture that is connected with the collapse of the credit system that developed during the growth of capital. All of this leads to severe crises, forced and sudden devaluation, stagnation, immediate disruption in the reproduction process, and finally a real decline in reproduction.

Other factors also come into play. The stagnation of production causes unemployment in a part of the working class and forces employed workers to accept a reduction in wages to a level much lower than the average cost of reproducing labour power. This is a “valuable necklace” for capital. and plays the same role as the surge of relative or absolute surplus value when wages sometimes remain stable. The fall in prices and the intensification of competition force capitalists to strive to reduce prices. This requires an increase in the productivity of labour with the help of modern techniques and machinery. A process that leads to a relative decrease in the variable capital compared to the constant component, unemployment of workers and an increase in the artificial surplus population. In addition, the decrease in the value of the elements of fixed capital causes an upward trend in the rate of profit. This causes the volume of fixed capital to increase compared to variable capital. This increase can be accompanied by a decrease in the value of the constant component of capital and, finally, it is with all this that a new development of accumulation occurs and replaces stagnation.

There is a difference between the absolute surplus production of capital and the absolute surplus production of the means of production. The latter to some extent reflects the former, in that the means of production function as capital. They increase in value in proportion to the development of their value that occurs with the development of volume and create an additional value. However, the surplus production of capital implies the surplus production of the means of labour and production that can function as capital. Exploit and exploit labour power at the level possible. A decline in the level of exploitation below a certain level is the starting point of disruption, stagnation and crisis in the process of capitalist production. Let us emphasize once again this identity of capital that in this mode of production, the same factors driving the increase in labour productivity and the growth of productive forces increase the volume of commodity products. It develops markets, accelerates the accumulation of capital in terms of volume and value. It reduces the rate of profit, creates a relative over population and makes it grow, an overpopulation that the existing capital is unable to absorb. If capital is exported abroad, it is not because it is not used at home, but because it attracts a higher rate of profit. At home, for the working population and for society, capital is completely surplus. Capital that exists alongside the relative surplus population. They coexist and condition each other. It has been said that the purpose of capital is not to meet human needs but simply to produce profit. To achieve this goal, capital determines the volume of production by referring to the scale of production and not vice versa. For this reason, it constantly encounters a gap between the limited dimensions of capitalist consumption and the production process that seeks to overcome these identity barriers, internal to capital. At the same time, the surplus production of capital is also the surplus production of goods. Some say that there is no universal surplus production!! And everything is summed up in the disproportion between the branches of production, they do not understand that in capitalism, the proportion of the branches of production is itself a process of continuous exit and entry into disproportion. Proportion is merely a manifestation of the disproportion of identity. Even sometimes, it is not the result of the collective will of the producers. It is a blind law imposed on the agents of production. Some insist that surplus production is relative. This is true, but the capitalist mode of production itself is relative. Its limits are not absolute, but for this mode of production itself and as long as it is capitalism, it is absolute. If it is otherwise, why should the very goods that the masses of people are in short supply encounter a lack of demand, why should the demand for goods reach distant markets so that the workers who produce these goods can be paid something to survive at home? Because in capitalism, the surplus product can only be offered for consumption when the capitalist can convert it into capital. It may be said that if the capitalists trade their goods among themselves, there will be no surplus production!! But in that case, there will be no more capitalism.

The obstacles to capitalist production are not obstacles to production in general. But in capitalism there is a tendency towards the absolute development of the productive forces. This tendency is in constant conflict with the conditions in which capital moves and can only move within its limits. In capitalism it is not the means of subsistence that are produced in large quantities, nor are the means of production produced to employ the population; on the contrary, it breeds a mass of population whose work is to exploit the workers, it creates jobs that only in capitalism are counted as work, it produces very large masses of means of subsistence and production that serve as means of exploiting the workers at the golden rate of profit. The commodities of the mountain range are produced so that the value and surplus value latent in them can find their way to realization through the specific capitalist mode of distribution and become additional capital. A process that cannot be carried out without repeated and repeated explosions. The internal obstacles of capital manifest themselves in the following forms.

First – the growth of the productive forces turns the fall in the rate of profit into a law which at a certain point comes into violent conflict with the dynamics of this growth. A destructive conflict which must be checked by crises.

Second – it is the ratio between unpaid labour to embodied labour, profit and the rate of this profit which determine the limits of the collection and expansion of production, and what has no effect in between. The needs of human life. Production starts, is carried out and stops as profit. The rate of profit is the sole driving force of capitalist production. The growth of the productive forces of social labour is the sole justification for the historical existence of capital. Capital carries out this task completely blindly and unconsciously. What makes Ricardo so angry is that the rate of profit, the sole driving force of capitalist production and the sole condition for the accumulation of capital, disrupts and brings to a standstill the dynamics of production itself. Ricardo does not understand that capitalism is not an absolute mode of production but a historical and transitory phase in the process of development of the material conditions of production.

4- Supplementary Remarks

The development of the productive power of labour in different branches of industry is unequal. This inequality is not only due to the anarchy of production and competition. It is also tied to natural conditions. Look at the influence of the seasons on agriculture. The growth under discussion also has a contradiction in itself. The average volume of profit is necessarily lower than the level that the development of the productive power in the most advanced branches would suggest. Progress in some areas is accompanied by regression in others. The volume of the circulating part of fixed capital increases continuously in connection with the growth of the productive power of labour, but this is not true of the fixed part of capital. With the growth of the material volume of machinery, the cost of forming this part of capital increases absolutely but decreases relatively. If 5 workers produce 10 times more goods than before, the cost of fixed capital will not increase 10 times, it will show a smaller increase.

The value of a commodity is determined by the socially necessary labour time concentrated in it. An increase in the productivity of labour causes a decrease in the share of living labour and the growth of the previously performed labour, accompanied by a decrease in the total work crystallized in it. Meanwhile, the decrease in living labour is greater than the increase in the previously performed labour. The constant capital that enters the composition of the commodity consists of two components. The circulating component, which enters the commodity entirely, and the fixed component, which enters the composition of the new commodity in the form of depreciation and in the same amount. With an increase in the productivity of labour, the value of both components decreases. Because there will be fewer socially necessary labour carriers. Let us not forget one important point. The characteristic feature of the increase in the productivity of labour is a very high increase in the fixed component of constant capital. This means that the value of the depreciation share of this capital in the composition of the new commodity increases, but the application of modern technology and the increase in the productivity of labour must make the additional value of the wear component of the fixed part entering the commodity less than the value saved by the reduction of living labour. Only then will the new technology depreciate the value of the commodity. This also applies to changes in the price of raw and auxiliary materials. Everything that increases the value of a commodity through the use of more modern machinery must be compensated for by a reduction in the share of living labour in the commodity. The effect of raising the productivity of labour must be such, but how this works in capitalism requires investigation.

Let us suppose that in a certain branch of industry a piece of goods carries these values. The wear value of the machine is half a dollar, the raw and auxiliary materials are $17.50, the wages are $2, the surplus value at the rate of 100% is $2, and in this case the total value is $22. Add this to the above assumption that the price of production is equal to the value and the capitalist’s profit is equal to the surplus value produced. So the cost of production is $20, the profit is $2, the rate of profit is 10%, and the price of production is $22. Now a machine is invented, which reduces the living labour required to produce each piece of goods by half. The value that goes into the goods for depreciation is tripled. With this happening, the wear value of the machine is $1.50, the raw and auxiliary materials are the same $17.50, the wages are $1, the surplus value is $1, the total value is $21. The cost of production is as before $20. The rate of profit for the capitalist who owns the car remains the same at 10%, and he therefore captures an additional dollar of surplus value, and his profit remains the same at $2. The price of production remains the same at $22. The commodity has not become cheaper, and apparently the capitalist has not benefited either. He has also unnecessarily scrapped his old machinery and suffered losses!! All this says that the increase in productive power is the dawn of victory for the capitalist on the condition that the part of the wage labour that is more or much more than the increase in the value of the past labour is embodied in the commodity of savings. This is a rebellious contradiction of capitalist production. It increases the productivity of human labour with a geometric progression and irreversibly, but in the essence of its existence it becomes an obstacle to the expansion of this productivity. For this reason, it is not an absolute mode of production, but on the contrary, it is historical and mortal. Let us add a few important points to the present discussion.

1 – With the introduction of newer machinery and techniques, smaller capitals are gradually swallowed up by the pressure of competition.

2 – Some industries, such as railways, with their gigantic volume of fixed capital, receive not all of the average profit, but a part of it in the form of interest. If this were not the case, the acceleration of the decline in the general rate of profit would be much faster.

3 – Increasing accumulation is the cause of high changes when we witness an increase in the organic composition of capital. A part of the total capital may not experience an increase in its organic composition despite some changes. This also reduces the acceleration of the decline in the rate of profit.

4 – If the growth of the productive forces reduces the absolute number of workers so much that society can do its required work in a shorter period, most of the population will become unemployed. Another embodiment of the inherent contradiction of capital is the fact that here the growth of the productive forces is not absolute. A contradiction that is displayed in one aspect in the occurrence of cyclical crises. Capital increases the productive force only to the extent that it produces more surplus labour.

The capitalist does not voluntarily adopt a new technique that lowers the rate of profit, even if it raises the rate of surplus value. He sees the role of this technique in making the cost of producing goods cheaper, he sees that by producing cheaper he obtains more profit. The more profit that arises from the difference between the necessary labour time crystallized in his products and the average socially necessary labour time condensed in the goods. In fact, he appropriates for himself a share of the surplus value produced by workers in other areas. Over time, this situation deteriorates, competition forces other capitalists to develop the same or more modern technique. The rate of profit begins to fall, and his share of profit becomes equal to that of capital. Let us remember three main facts of the capitalist mode of production:

1 – The concentration of the means of production in the hands of the capitalist class, the transformation of these means and capital in general into a monstrous social power that shapes everything according to the dynamic needs of its own capital appreciation and self-expansion.

2 – The organization of labour as social labour through the division of labour and its connection with natural science

3 – The creation of a world market

In this way:

Capitalist production abolishes individual property and individual labour on both sides, even in contradictory forms. Therefore, the mere abolition of individual ownership of capital and the socialization of labour not only have nothing to do with the transition from capitalism but are also among the characteristic indicators of this mode of production.

The productive force that grows under the sway of capitalist production, its enormous proportion to the population, the growth of capital values, though not in the same proportions, the much higher rate of this growth compared to the population, and its increasing continuity, make the foundation on which the said enormous productive force rests narrower and narrower. They come into conflict with it, and this conflict leads to crisis.

Part Four

Conversion of Commodity-Capital and Money-Capital into

Commercial Capital and Money-Dealing Capital (Merchant’s

Capital)

Chapter Sixteen

Commercial Capital in the (Commodity-Capital) Composition

If we consider the total social capital, there is always a part of it in the form of commodity in search of conversion into money. On the other hand, a part is money, and it is the observer of the transformation into a commodity. Social capital is constantly affected by this formal transformation. Whenever the capital involved in carrying out this transformation in the process of cycles, within the framework of the internal division of labour of capital, assumes a kind of independence and continuously fulfils this role, it will be commercial capital. We have already seen that the industry of transportation of commodities or its storage and distribution is to some extent a continuation of the production process in the cyclical process. These intermediate activities are mixed with the specific functions of commercial capital, but with the development of the social division of labour, this form of capital differentiates itself more and more. The transformation of commodity-capital into monetary capital or vice versa is a part of the global process of reproduction of industrial capital, a part of the total process of organizing capital, but the capital responsible for these exchanges, in the same cycle, as a continuous part of the total capital, is distinguished from its real existence or productive capital. It takes the form of homozygous capital generating component within a single process. With this narrative and role, merchants’ capital is constantly pulled out of the commodity market, but it inevitably returns to this market. 

A businessman, like any capitalist, enters the market with a sum of money. His only intention is to convert his capital into a larger capital. He is a businessman and accordingly his capital enters the market in the form of money, because he does not produce goods. He does business with goods. He has to buy goods, for this he must have money. Let us imagine a businessman who has 3 million dollars. With this money he buys 5,000 mobile phones at a price of 600 dollars per phone from the manufacturer’s trust. The interest rate is 10%. He sells the mobile phones, making a profit of 60 dollars per phone, for a total of 300,000 dollars. He repeats this buying and selling over and over again, and the question is what his work as a businessman or owner of commercial capital has to do with the industrial capitalist and his capital. The answer is simple. The mobile phone manufacturing company uses the money of this businessman to regulate the value of the mobile phones produced. Commodity capital converts itself into money capital, thereby managing to procure the materials necessary to continue production and pay the wages of workers.

So far, the mobile phone manufacturer has sold and converted his commodities into money, but the mobile phones have not yet been sold. Their owner has changed, from the ownership of the industrial capitalist to the ownership of the merchant. However, they are still commodity-capital, the first phase of their circulation has not been completed, and its completion has been assigned to the merchant. Let us assume that the merchant fails to sell all the mobile phones, in this case the industrial capitalist is not paid either. He also suffers a break in order to restart the production cycle. This indicates that the role of the merchant is an essential part of the process of converting goods-capital into money-capital or the process of capital reproduction in general. If the merchant and commercial capital did not play this role, the industrial capitalist would have to shoulder this task himself with the help of managers or other individuals. In this way, commercial capital is essentially nothing other than the goods-capital of the producer, which must undergo the process of converting itself into money, with the difference that during this process it has now become the exclusive activity of a part of the capitalists and is carried out by a certain part of the total social capital. In the pre-capitalist circulation of commercial capital G-W-G’ or even in the circulation of commodity-capital in the circular process of industrial capital of that era, W’-G-W, each piece of money changed hands twice. The producer sold his commodity, received his money. With this money he bought means of production. The commodity he bought was not the same commodity he sold. But the movement of commercial capital in the capitalist mode of production is not like this. A businessman buys 5,000 mobile phones with $3 million, sells the mobile phones to withdraw his $3 million money-capital plus its profit from the circulation. Here it is not money that changes hands twice. It is a commodity that changes places twice. There are mobile phones that go from the hands of the factory seller to the hands of the merchant-buyer, the merchant sells these mobile phones to the customers, and perhaps a chain of purchases and sales takes place in between. The sale of a commodity is not yet definitive, just because it is transferred from the hands of the producer to the merchant, and the merchant’s only job is to organize the commodity-capital. What is done with commodities and money, from the perspective of the productive capitalist, is the sale of his commodity-capital as part of the dynamic of organizing his production, but from the perspective of the merchant, it is G-W-G’ or the fertilization of money-capital that has been advanced by him. A question arises here. If what commercial capital does is only a special form or a certain mode of the functioning of capital in the process of circulating social capital, then how can its “independent” and self-governing character be explained? In response, it must be said that:

First – the work of transforming commodity-capital into money-capital is carried out by a capital that has an existence distinct from productive capital. This role is played by an agent that is separate from the producer and what it does is distinct from the role of industrial capital. It is a specific business that exhibits a special form of division of labour. What must be achieved in the cyclical dynamics is the exclusive task of an agent different from the producer.

Second – the performance of the above role is interpreted as a kind of “independence” because commercial capital, in order to be capital and to be productive, must act exclusively as a provider and guarantor of the transformation of commodity-capital, that is, to transform it into money-capital. The activity which is the basic requirement of the circular process of industrial capital is carried out by the money-capital which is in the possession of the merchant, and which does this work continuously.

If we consider the process of reproduction of the total social capital, then commercial capital is nothing but a part of industrial capital which is in the form of commodity-capital on the market and is undergoing a process of its own organization. Accordingly, what we must now examine in relation to the complete process of the circular circulation of capital is the money-capital which is advanced through the merchant, is devoted only to buying and selling, never assumes any other form than commodity-capital and money-capital, and never fulfils the role of productive capital. If the mobile phone manufacturer had to wait until the last devices were sold in order to buy raw materials, pay wages, and resume production, he would most likely encounter a significant break in the production process. Moreover, he would have no choice but to use a larger share of his capital in the circulation process and a smaller share as productive capital, personally or with the help of others, to spend a period of the year selling goods, thus reducing the duration of his activity as a productive capitalist. The entry of commercial capital as the capital responsible for playing this role eliminates the break in the reproduction process. The industrial capitalist advances the largest part of his capital in the form of productive capital and keeps a smaller volume as a monetary reserve. He no longer has to spend a part of the year selling products and reduce the period of his effort as an industrial capitalist. If commercial capital does not exceed its volume and its certain limit, it can or must be accepted that with this division of labour:

1 – The volume of capital that is specifically responsible for the purchase and sale of commodities, transportation, storage, rental of buildings, and equipment under the name of commercial capital is smaller than the capital that the industrial capitalist would have to advance.

2 – With the entry of commercial capital, not only are the commodities of the industrial capitalist converted into money more quickly, but the commodity-capital itself also completes its transformation process more quickly.

3 – The merchant capitalist can use his capital to carry out not only the process of conversion of one industrial capital but also several separate productive capitals in the same territory. For example, he buys and sells the products of a textile factory, with this money he buys and sells the fabrics of another textile factory before the capitalist owner of the textile factory produces new commodities. In this way, a given commercial capital undertakes the turnover of several capitals of cloth producers. The smaller the commercial capital, the faster its turnover. The larger the proportion of the total money-capital which functions as commercial capital, the slower the turnover. The lower the level of development of production, the greater the proportion of the total of business (merchant) capital to the total of commodities present in the circulating process. The reverse is also true. For this reason, in low conditions of development, a large proportion of money-capital is concentrated in the hands of merchants. The speed of circulation of the money-capital advanced by the merchant is a function of:

1 – The speed of renewal of the process of production or of the overlapping processes of production. 2 – The speed of consumption of the commodities which have been produced.

In the process of his activity as a trader, the merchant is not obliged to buy first and then sell. He usually divides his money into two parts, one part appearing in the form of money-capital and the other part in the form of commodity-capital. In one place he buys and in another he sells. In one place he converts commodity-capital into money-capital and in another place, he does the opposite. If the greater volume of his money increases in one of these two spheres, it decreases in the other sphere. These quantities change places and compensate for each other’s decrease and increase. Whenever the use of money as a medium of circulation is combined with its function as a means of payment and a credit system, again the part of the merchant’s capital which is money-capital becomes smaller in proportion to the volume of transactions it carries out. Let us assume that the mobile phone merchant has purchased 1000 phones for $600,000 but instead of money he has given only a 3-month promissory note to the capitalist manufacturer. He sells all the phones within two months, pays his debt and takes back the promissory note. Here there is no need to advance any amount of money. The money-capital that has played the role of commercial capital is nothing other than industrial capital in the form of money-capital. In the meantime, if the market price of mobile phones falls by, say, 10%, the merchant issuing the promissory note has not only made no profit but has also suffered a loss of $60,000. This is exactly the case with the mobile phone manufacturer. If he had sold the phones himself, he would have suffered exactly the same loss.

In view of the above, merchant capital, if it is not the simple form of industrial capital in the form of commodity – capital or money – capital transferred to the merchant, is simply money, capital belonging to the merchant himself, which is advanced and plays a role in the environment of buying and selling. It is a part of the capital advanced for production, which could have taken the form of the monetary reserve of the industrial capitalists, but is now in the possession of the merchant capitalists in a smaller volume and always functions in the cyclical process. The faster the process of reproduction and the stronger the credit system, the smaller its volume will be. This capital is always in the process of circulation. Where no value and no surplus value are produced. The only thing that is done is the transformation of commodities and has nothing to do with any form of value production. On the contrary, these transformations also limit the creation of value. Commercial capital does not create any value or surplus value, but by shortening the turnover period of commodities, helping to expand the market and develop the division of labour among capitalists, it increases the surplus values ​​produced by industrial capital. To the extent that commercial capital shortens the turnover period, it increases the ratio of surplus value to advanced capital, just as it reduces the money-capital component present in the environment of social capital, it increases the productive component of all capital.

Chapter 17

Commercial Profit

Commercial capital is only a means of exchange for commodities and is not directly the source of any value or surplus value. Nevertheless, the circuit of industrial capital is a stage in the process of production. Accordingly, the capital that is responsible for this circuit in the sphere of circulation as a separate part from industrial capital should be given an average profit, like all other parts of capital. If the average profit of industrial capital exceeds that of commercial capital, a part of the total commercial capital will turn to the sphere of industry, and the reverse is also true. Meanwhile, no form of capital enjoys the necessary facilities for transfer from one sphere to another as much as commercial capital. Since commercial capital does not create any surplus value or value at all, the profit of this form of capital must necessarily be a part of the surplus value produced by productive capital. The question is, how does the process of obtaining this profit take place?

From the point of view of the industrial capitalist, the difference between his purchase and sale is the difference between the cost price of commodities and their production price. If we look at the total social capital, this difference is equal to the difference between the cost price of products and their value. A difference which, in the last analysis, determines the excess of the labour embodied in commodities over the paid labour contained in them. Everything the industrial capitalist buys, before it enters the market in the form of saleable goods, passes through the process of production. A process within which the profit contained in the price of commodities has been produced. This is not the case with the merchant. The commodities are in his hands as long as the process of circulation continues. He is only responsible for selling and regulating the price of the commodities produced by the industrial capitalist. The industrial capitalist demands from circulation the realization of the surplus value produced. The merchant, on the contrary, both makes and realizes his profit in circulation. He sells commodities which the industrial capitalists have sold at their production prices and at their value when the total commodity capital is calculated. What is the relation of the merchant’s profit to the profit of the industrial capitalist or how does the merchant derive his profit? It is a matter which has a very misleading appearance. Let us look at a yard of linen, for example, worth two shillings, and it seems that the merchant makes a profit of 10% by selling it for 2.1 shillings!! If this is so, in fact a yard of linen has been sold for a price equivalent to the price of 1.1 yards!! Or instead of a yard, only 9 yards have been delivered to the customer!! This is the appearance of the matter, and this appearance is completely false. Let us clarify the reality by giving an example. The industrial capitalist has advanced a capital of 900 million dollars. Its constant capital is 720, the variable component of its capital is 180 million dollars, the added value rate is 100% and the average profit rate is 20%. The total value of the product based on all data is 720c+180v+180m=1080 million dollars. With the entry of merchants, the value of the product does not increase. Remember that although individual commodities may be sold below or above their real value, the total commodity produced in the year cannot be sold more than their value. The secret of profitability of commercial capital is not to add anything to the value of products; this profit has already been generated. Commercial capital does not add anything to it, it only redistributes the profits produced. Let us suppose that the merchant has entered the process of commodity circulation with a capital of $100,000. This means that the previous capital of $900 million has become $1,000 million. The surplus value of $180 million produced no longer belongs only to the industrial capitalist, the merchant also shares in it. In calculating the average rate of profit, the $180 million surplus value is divided not by $900 million of capital but by $1,000 million. The rate of profit is no longer 20% but 18%. Each of the two capitalists, industrial and commercial, shares in the surplus value in proportion to his capital, the former receiving $162 million and the latter only $18 million. The total value of the product, which was previously $1,080 million, has now become $1,180 million.

Merchant capital, in proportion to its share of total capital, intervenes in the process of forming the general rate of profit, and in the above example, it makes the rate of profit of 20% 18%. A very important point here is the redefinition that we must make of the price of production. Until now, we considered this price to be the sum of the cost of production plus the average profit, but now this average profit is determined in a different way than before. The profit of the total capital, whether industrial or commercial, is only the profit that has been produced in the production cycle and the advance of industrial capital, but this profit is also attributed to commercial capital, and its average rate is calculated with respect to the total capital. The price of production, which in the above example was 900+180=1080, will now be 900+100+180=1180. The price of production at which the industrial capitalist sells his products is lower than the actual price of production. The profit of commercial capital also arises from this difference. All these data say that although commercial capital plays no role in the production of surplus value, firstly, it plays a role in the formation of the average rate of profit. Secondly, it receives surplus value in proportion to the volume it has in the total capital. If industrial capital receives its share of profit by producing surplus values, commercial capital, due to its role in the realization of surplus value, becomes a partner in the profits in proportion to its volume. From these explanations we conclude that:

1- The larger commercial capital becomes in comparison with industrial capital, the lower the rate of profit of industrial capital and vice versa.

2- The owner of capital who directly exploits the workers sees his average rate of profit as lower than it really is.

It is worth pondering that it is industrial capital and its competition that determine the general rate of profit, but the reality is the opposite. It is commercial capital that aligns the price of commodities with their value and in this way helps to form the general rate of profit. It is commercial profit that determines industrial profit. When capitalism becomes the dominant mode of production and the producer becomes the merchant himself, the profit of commercial capital is only a part of the total surplus value or profit. We emphasize once again that commercial capital does not create any value or surplus value, the role of this capital in terms of value creation is exactly the same as that part of the capital that does not enter into the new product and does not affect its price. Commercial capital is in fact nothing more than the commodity capital of the industrial capitalist in monetary form. Its role is to advance the process of realizing surplus value. It shortens the turnaround time and brings forward the payment of the final consumer. All this is true if commercial capital does not shoulder any other task besides buying and selling goods. Which is not actually the case. Apart from trading, this capital is also present in the fields of transportation, repairs, and warehousing, and in these areas, it can take the form of circulating or fixed capital. In the first case, like active capital in buying and selling, all its costs enter the price determination process, but in the second case, only its depreciation costs play such a role. A part of it takes the form of additional capital. The important point is that all these costs affect the process of forming the rate of profit.

In the continuation of this discussion, it is very important to emphasize the distinction between purely commercial costs of the circulation sphere and other costs of this sphere such as warehousing, repairs, and transportation. The former are necessary for the realization of the value of the commodity, without which the exchange of goods for money or vice versa for money for commodity would be closed. The latter are not of this type. The transport company, the railway manager, or the ship owner certainly play a role in the circulation of commodity, their activity is a need of the circulation sphere, but they are not merchants. The first type of costs is dedicated to buying and selling and are spent on matters such as accounting, bookkeeping, correspondence, and marketing. Their constant capital consists of office supplies, stationery, postage, and the like. The variable part of their capital is also the wages of commercial workers. All of these are pure circulation costs and enter into the overall reproduction process. Several questions arise here that need to be answered. The questions are:

1- How does the law “only necessary labour enters into the value of the commodity” operate and apply itself in the circulation process?

2- What form does the accumulation of commercial capital take and how does it take place?

3- What is the function of commercial capital in the overall process of social reproduction?

We begin the answer to all questions by saying that the exchange of goods for money or the conversion of money into means of production is an absolutely necessary necessity of industrial capital and an inescapable need of the owner of this capital. The labour time spent in this exchange is also an absolutely necessary part of the process of capital’s reproduction and its organization, while it does not create any value or surplus value.

The merchant, with his capital and the expenses he incurs, continues the work which the industrial capitalist would have been forced to do if he had not done it, and accordingly he shares to the extent of his capital in the surplus-value produced by the workers exploited by the industrial capitalist. He receives a portion of the profit which is the difference between the purchase price of the commodities and the real price of their production or value. Although his work is in no way value-creating. If the industrial capitalist were to take on the task of buying and selling commodities himself, his product would remain in the process of circulation for a long time in the form of money or commodities, the appreciation of capital would be stopped, the immediate process of production would be interrupted. To prevent this interruption, more money capital was required, and either a lower profit than before was obtained or more capital was advanced to maintain the profit. The entry of the merchant into the circulation process solved these problems. This capital took on what industrial capital had to do in the circulation process, commodities did not remain in the circulation process, the appreciation of capital did not stop, industrial capital was not forced to increase the advance, and the production of surplus values ​​did not decrease. The division of labour between these two forms of capital, as long as the merchant’s capital remained within the necessary framework, shortened the specific time of the circulation process. In the above example, 720c+180v+180m, together with 100 merchant’s capital, left the industrial capitalist with a profit of 162 or 18%. However, if commercial capital did not play its role and industrial capital was forced to assume the task of circulation, perhaps twice as much would be required instead of 100, and the total capital would not be 1000 but 1100. Surplus value of 180 does not produce a profit rate of 18%, but a little above 16%.

If the industrial capitalist is his own merchant, he allocates more capital to realize the value of commodity capital, for the circulation process and, for example, administrative costs, the wages of commercial employees. These costs are certainly additional capital but do not create any value. Now the question arises: what is the role of the employees of commercial capital or specifically the capitalist responsible for the exchange of commodities?

First of all, the commercial worker, like the industrial worker, is a seller of labour power and a wage earner. First, his labour power is purchased with the merchant’s variable capital and not with his income. The purpose of its purchase is also to increase its value and not for personal consumption. Second, the value of his labour power or wages, like all other workers, is the cost of reproducing labour power. So far, there is no difference between the commercial and industrial worker, but this difference is quite present, the same difference that exists between commercial and industrial capital. We said that commercial capital does not create any value, and the commercial worker does not directly produce any value or surplus value. Here again the question arises: where does the profit of commercial capital come from? There is no doubt that the commercial worker, like his industrial counterpart, is exploited and a large part of his working time becomes surplus labour time for the capitalist, but this does not at all imply that he directly produces surplus value. Where does the profit of commercial capital come from and how this capital itself is reproduced and preserved is a question to which we have already made the answer sufficiently clear in the chapter on the origin and formation of commercial profit. There it was explained that surplus values ​​arise only in the context of the accumulation of productive capital and the exploitation of the productive worker, commercial capital does not create any value, but its existence is an urgent need for the dynamics of the circulation and reproduction of capital. If it is not independently advanced by the merchant, its work must be done by industrial capital. In this regard, the working time of the commercial worker is also an inevitable need of the process of reproduction of capital. In view of all these facts, the story must be seen as follows: the entire surplus value is produced by the productive workers exploited by productive capital, but first of all, all industrial and commercial workers play a role in its production, realization and organization. This surplus value is at the same time attributed to the entire capital, whether industrial or commercial, productive or unproductive. All components of capital are involved in the process of forming the rate of profit, and each component receives its share of the profits in proportion to its size and in accordance with the general rate of profit. All workers are exploited, and all capitalists divide the results of this exploitation and make their own capital. If the industrial capitalist does not pay the largest part of the crystallized labour of the workers in the commodities and makes it his own additional capital, the commercial capitalist also makes a part of the same unpaid labour his share of profit and capital. Industrial capital appropriates surplus value directly, and commercial capital exercises this appropriation indirectly. The industrial worker directly produces surplus value, and the commercial worker contributes to the realization or organization of surplus value through his work. The unpaid labour of these workers does not create surplus value, but it gives the merchant the ability to appropriate surplus value.

With all the above explanations, a fundamental question remains. Is the variable component of commercial capital part of the costs of this capital? If we answer in the negative, we have violated the law of equalization of the rate of profit, because this part of the capital will not be subject to the receipt of average profit, and in that case, which capitalist is willing to advance, for example, $150 million of commercial capital but only be satisfied with a profit of $100 million?! If the answer is in the affirmative, it seems that the nature of commercial capital has been violated. Because this capital, by definition, should be expressed through the specific function of buying and selling and not through the employment of uncharacteristic labour. The issue requires further investigation. What would happen if each businessman wanted to carry out the work of capital turnover with his own capital and personal labour? Certainly, a strange dispersion would occur, and this dispersion would become increasingly acute with the increasing growth of industrial capital.

The more productive capital became concentrated, the more commercial capital became more dispersed. In this direction, the commercial costs of the industrial capitalist soared. Instead of 100 merchants, 1,000 were needed. The division of productive and commercial labour disappeared. Other cyclical costs, such as sorting and transportation, rose. This was the case with industrial capital, and the problems of commercial capital were even greater. Ten purchases of $1,000 took 10 times longer than one purchase of $1 million. A commercial enterprise minimizes the time required for commercial work by dividing its work, and if it does not, the opposite is true. The importance of the problem is that historically, commerce has been more actively centralized than industry. Let us also consider the difference in costs regarding the constant component of commercial capital. One hundred small businesses cost more than one large business, and one hundred small warehouses cost more than one large warehouse. The more dispersed the warehouse, the greater the cost of transportation. If each industrial capitalist were to be a merchant of his own commodities, his running costs would be much higher. If a single merchant’s capital were to be placed at the disposal of a large number of merchants, more workers would be required. More merchant’s capital would also be required to turn over a given quantity of commodities.

All the above are real questions, but our question is still unanswered. Should the variable part of the commercial capital be considered part of the cost of sales or not? Let us continue our investigation. Let us denote the total commercial capital by the letter B and its variable part by the symbol b, assuming that the merchant does all the work himself and does not employ workers, then B+b will be less than B, because the variable capital that must be the wages of the workers will be saved. Now the selling price of the goods must firstly guarantee the profit of B+b, and secondly compensate for b itself or the merchant’s variable capital, and the question is whether b is an element of price or only the profit arising from B+b? Let us take the matter out of its mysterious state. This time let us denote the specific capital of purchase and sale by the letter B, the constant part of the total commercial capital by the letter k, and its variable part by b. B is for the merchant equivalent to the purchase price or the price of production for the industrial capitalist. This price is paid by the merchant and sometimes he receives it as a part of the selling price. He also seizes the profit of this part from the same source according to the general rate of profit. In the case of k, we do not encounter any problem. It is a constant capital which, like the constant part of the total capital, is advanced by the merchant instead of the industrial capitalist, and accordingly the selling price up to this point must correspond to B + k plus the profit which is due to them according to the general rate of profit. Let us remember that B only adds his profit to the purchase and is nothing other than the purchase price itself. In the case of k, the matter is different, here both himself and his profit must be added to the purchase price. Let us see what happens to the duty of b and the profit of b, or the main subject of our curiosity? The assumption is that the specific capital of buying and selling is 100, the variable part of commercial capital is 10 and the general rate of profit is also 10%. What the merchant buys with b is commercial work. Work which is necessary for the realization of values ​​but does not create any value. For ease of calculation, we consider k to be zero. We also specify the profit as p and the profit rate as p’. In this case, the selling price of the commodity will be p’ + b+ p’ B+p+b+p=B+ and referring to the data of the present example, 100+10+10+1=121.

Once again, we repeat that the commercial worker does not produce any value or surplus value, and commercial capital does not create any new value. But the values ​​produced in the absence of the presence and activity of productive capital or the products created by industrial workers are not capable of organizing and realizing any rial of their values ​​without going through the circulation process. The work of the commercial worker is an unavoidable necessity for the organization of capital and the realization of the values ​​and surplus values ​​created by productive workers. From the perspective of total social capital, the greater the volume of industrial capital and the more limited the amount of commercial capital, the higher the rate of profit will be. The industrial capitalist thinks and dreams like this. The internal division of labour of capital also responds to and realizes this dream of the capitalist. The independence of commercial capital and the stronger the concentration of this form of capital create conditions in which the minimum capital takes on the most necessary and unavoidable tasks or affairs of the cyclical process. With the cancerous expansion of capitalism and the galactic growth of industrial capital, the volume of commercial capital inevitably undergoes an astonishing upward trend, but this increase is still homogeneous with the performance of the greatest number of cyclical tasks by the least amount of capital advanced in this field. It is as if the capitalists in the industrial field wanted to take on the entire work related to the circulation of capital; they would have to allocate much more capital than the existing commercial capital in the world to this task.

Chapter 18

The Turnover of Merchant’s Capital

Prices

The turnover of industrial capital is the unity of the time of production and circulation and covers the entire process of production, but the turnover of commercial capital is not. The merchant commodifies his money, converts his commodity into money, and repeats this operation. The transformation of industrial capital in the cyclical process has the form w1-g-w2. But commercial capital appears only in the form G-W-G’. In the first, the money obtained from the sale of the produced commodity is spent on the purchase of a commodity that is needed by the dynamic of production. In the second, the same commodity, by changing hands, only makes it possible to return the merchant’s money. Let us consider commercial capital of $100 million. With that commodity, the merchant buys and sells $110 million. With this, the turnover is completed, and the number of annual turnovers depends on how many times this operation occurs. The repeated turnover of the specific capital of buying and selling is nothing more than the repetition of buying and selling. But the turnover of industrial capital is a repetition of the entire process of production, which includes the process of consumption. In order for commercial capital to accelerate its turnover, industrial capital must constantly introduce goods into the market. The decline in the process of reproduction slows down the turnover of commercial capital. Commercial capital is a means of turnover of productive capital, but its effect is limited to shortening the cycle time, but it has no direct effect on the time of production.

The decline in consumption in the process of reproduction causes a decline in the turnover of commercial capital, and the decline in the total consumption of individuals also poses the same problem for this capital. With the boom in profiteering, a commodity may be bought and sold several times. In such a situation, commercial capital, firstly, shortens the stage W-G for productive capital, and secondly, with the modern credit system, takes possession of a large part of the total social capital. The growth of commercial capital helps the merchant to repeat his purchases before selling the existing goods. Whether he sells his goods to the last buyer or whether there are 12 customers between him and this person makes no difference in the essence of the matter. With the extraordinary flexibility of the process of reproduction, which is always subject to passing through any given obstacle, production itself does not pose a problem for the merchant. In addition to the separation of W-G from G-W, which is the essence of the commodity, a virtual demand also arises. Let us not forget that the movement of commercial capital, despite its independence of movement, is nothing more than a partial movement of industrial capital. But thanks to this independence, commercial capital moves within certain limits, independently of the obstacles to the process of reproduction, to the extent that it forces this process to leave its certain limits. Internal dependence and external independence drive commercial capital to a point where only crisis, by means of the lever of force and force, can reconstruct and establish this internal relationship.

Crises do not occur in retail. It is in the wholesale sector, banking or the sphere of concentration of money capital of the whole society that they explode. The situation appears to be such that the manufacturer sells to the exporter and the latter to the foreign buyer, the importer sells raw materials to the manufacturer, and the factory owner sells his products to the wholesaler. But at some unknown point the goods pile up. The inventories of the producers and intermediaries become monstrous and excessive. The accident occurs in conditions where consumption has reached its peak. Why? 1- Because a large number of industrial capitalists each feed a large number of other factories, 2- With the boom in accumulation and full employment, the wages of certain layers of workers have increased, 3- The expenses of the capitalists have jumped with the upward trend of surplus values, 4- The continuous circulation between the various fixed capitals, which is essentially independent of individual consumption, is on the rise. This circulation never enters into individual consumption but is ultimately limited by it. To be more precise, capitalist production is essentially the production of capital and, in its predominant aspect, the production of constant capital as a vital need for the self-expansion of social capital. This is quite a given, but the products of this constant capital must open a way for individual consumption. This goes on for a while, but capitalist production is the excessive production of capital, the inevitable result of this production is the accumulation of goods without customers, the blockage of sales channels, the decline of the merchant’s income, the accumulation of maturities and the pressure of banks to pay. The apparent prosperity ends and an imposed collapse begins. The effects of reversal are even greater in the case of merchant capital. The return of this capital is the lever for the successive or simultaneous return of different productive capitals and the medium for the realization of the reverse transformations of the commodity-capital. The merchant buys cloth from the manufacturer and sells it to the dyer. The return of his capital is the commodity-money of the industrial capitalist who produces the cloth on the one hand and the money-commodity of the dyer’s capitalist on the other.

If we set aside the constant part of the total commercial capital (k), or the capital in excess of the specific amount of buying and selling in the cyclical process, then the excess profit of this part of capital can also be eliminated. This is logical in order to investigate the effect of the reversal of commercial capital on prices. Let us now consider this example. The production price of a kilo of sugar is $1, and the merchant buys 100 kilos of sugar for $100 and sells each kilo at a profit of 15 percent for $1.15. He makes $115 from the total sale of 100 kilos of sugar. A little later the price of sugar falls to 5 cents per kilo. This time the merchant manages to buy 2,000 kilos of sugar with the same $100. But the prevailing market rate of profit is the same as before. He will sell each kilo of sugar for 5 cents plus 5.15*.75 = .75, or actually 5.75 cents, the total selling price of sugar being 2000*5.75=11500 cents, or $115. We see that the fall in the purchase price of sugar has not brought the merchant more profit. The rise and fall of prices have not produced a change in the rate and volume of profit, what has happened is that the total profit has been distributed among a greater number of the definite quantities constituting the mass of goods. If we leave aside the special discussion of the monopoly of the merchant and the development of this monopoly over the products produced, such as was the case with the East India Company, then nothing would be more absurd than to say that “the merchant can, at his pleasure, sell more goods at a small profit per unit, or sell fewer commodity at a high profit.” The merchant’s selling price is weighed down by two strong limits. The first boundary is the price of production of goods, which is outside the sphere of intervention of the merchant, the second boundary is the average rate of profit, which is only partially affected by his intervention. The only thing the merchant can decide on is the choice of trading in expensive or cheap goods. A choice that is also subject to the volume of his available capital and some other factors. The important point is that the merchant’s approach is in all respects affected by the degree of development of the capitalist mode of production. A point that some ignore and of course certain factors play a role in not seeing it, including:

1 – The external appearance of competition, which mostly reflects the struggle of merchants to steal more profit from each other or the competition of different parts of commercial capital for a share of profit that is greater than the total profit of this part of capital.

2 – The inversions of “high-ranking” economists such as Wilhelm Georg Friedrich Roscher! that common sense and humanism are considered by people to be the driving force behind changes in the selling price of commodity!!

3 – If, with the increase in labour productivity, the price of production and subsequently the selling price decrease, demand increases faster than supply, this causes the market price to rise, as if the selling prices carry a profit greater than the average profit.

4 – Sometimes a merchant lowers the selling price of his goods, he knows that his profit volume will decrease, but he does this because he needs a larger capital for his business affairs. All these points are related to the competition between merchants, and this external appearance of competition makes the adherence of the approach of commercial capital to the process of development of the capitalist mode of production disappear from the eyes of people.

Above, the low price of commodities does not determine the volume or rate of surplus value produced by a given capital. The price of each unit of a commodity and the surplus value hidden in this price can be greater or less than the specific amount of labour crystallized in a given quantity of the commodity. The price of each quantity of a commodity, to the extent that it corresponds to its value, is determined by the amount of labour concentrated in the commodity. If a small amount of labour is crystallized in a large volume of the commodity, then the price of the commodity will be low and the surplus value in the price will be small. The ratio of paid and unpaid labour in the commodity has nothing to do with the price and the total labour concentrated in it. The rate of surplus value is also not a function of the absolute amount of surplus value contained in the price of the commodity, but of the wages paid for its production. This rate can be small or large at the same time.

With the increasing development of the capitalist mode of production, the price of production for the merchant and the selling price of his goods acquire the status of a predetermined external factor. In previous periods, the high commercial prices resulted from the low level of productivity of labour and the absence of a general rate of profit. These factors caused the share of commercial capital in surplus value to be higher than that which it would have received in capitalist production within the framework of the operation of the general rate of profit. The greater the number of turnovers of industrial capital, the greater the volume of profit it produces. But with the establishment of a general rate of profit, the distribution of profit among the various capitals is not based on direct participation in production but on the basis of the ratio of each unit of capital to the total capital. Nevertheless, the greater the number of turnovers of industrial capital, the greater the volume of profit, the greater the volume of annual surplus value and, assuming other conditions remain constant, the higher the rate of profit. In the case of commercial capital, the situation is completely different. Here the rate of profit is a predetermined quantity determined under the pressure of two factors: first, the volume of profit produced by industrial capital, and second, the relative value of total commercial capital in the total capital advanced in production and circulation.

The number of turnovers of trading capital has a decisive influence on its relation to the total capital and on the relative amount of capital required by the cyclical dynamics, because the absolute amount of trading capital required is inversely proportional to the speed of its turnover. It is clear that, other things being equal, the relative amount of trading capital in the total capital is determined by its absolute amount. If the total capital is $10,000 and the trading capital required for the circulation process is $1,000, that is, one tenth. It is clear that for $1,000 of total capital, only $100 will be required. Let us assume that these data are taken into account for conditions in which the speed of turnover is high. Now the turnover of capital slows down, in which case $2,000 of total capital will probably be required for the circulation of $10,000, and perhaps $200 of trading capital for $1,000. With the emergence of this situation, the ratio of trading capital to total capital will change from one tenth to two tenths. Conditions which shorten the average rate of return of commercial capital reduce the absolute amount of this capital in proportion to itself, and in this way increase the rate of profit. The reverse is also true.

The development of capitalism has a twofold effect on merchant capital. First: if a given quantity of goods is produced by a smaller volume of merchant capital, the ratio of merchant to industrial capital decreases. Second: products increasingly take the form of commodities, and as a result the volume of merchant capital required in the circulation process grows. In the previous mode of production, the volume of production was low, a significant share of the products was consumed by the producers themselves, part of the labour was paid in kind, the producers sold a large part of the products directly to the consumer or delivered them to individuals against private orders. In view of all this, although at that time the volume of merchant capital was greater in relation to the total capital or to the total commodity-capital that was responsible for its turnover than in the capitalist period, but:

1- It was smaller in absolute terms because only a small part of the production had the form of a commodity and entered the circulation as commodity-capital. While it had a larger share in relative terms, and this larger share was not only due to the slowness of turnover, the price of the mass of commodities and, consequently, the commercial capital required for its circulation was also high due to the low level of productivity of labour.

2- In capitalism, not only is a larger product produced, but a larger volume of products also enters the circulation process. In this regard, not only does the volume of commercial capital increase, but the capital employed in connection with the circulation also becomes larger, for example, in railways, shipping, telegraphs, and the like.

3- With the development of capitalism, passive or semi-active commercial capital grows, but if the relative amount of commercial capital in relation to the total capital is assumed to be known, then the difference in turnover in different branches of trade has no effect on the total share of profit of this capital and the rate of profit. The merchant’s profit is not determined by the volume of the mass of commodity that he is responsible for returning, it is determined by the amount of money – capital that he has advanced to return the commodity.

The number of trade capital returns affects the trade price of commodity. why This is because the profit share of commercial capital or that part of surplus values ​​that is the share of commercial capital, plays a role in the formation of prices. Part of the market price of each unit of commodity or added value in this price represents the profit share of commercial capital. The same component is inversely related to the number of returns of commercial capital, if a certain commercial capital returns 5 times a year, then that part of its profit share that is added to the value of each unit of goods, compared to a capital that has only one round of returns per year, is reduced by one fifth. This is not the case with industrial capital. The number of reversals has no effect on the value of each unit of a commodity, while the time of reversal affects the volume of values ​​and surplus values ​​produced by a given capital in a given time, with reference to the volume of labour which this capital exploits. Here, that is, where the role of industrial capital and value creation is concerned, we are faced with the same fundamental principle of the critique of political economy that the value of each commodity is determined by the labour-time embodied in it.

The influence of the reversals of commercial capital on prices, if not properly dissected, can give rise to ideas that are very destructive. Among them is the misleading idea that the capitalist suddenly decides how much profit to make annually?! As if the cyclical trend determines prices independently of the production process?! Many superficial and unfounded ideas about the entire process of reproduction are derived from the inversions that the specific function of commercial capital induces in the minds. The imaginations of the merchant, the stock market profiteer, the banker, the manufacturer are full of these inversions. Competition, in turn, is the pump of these same misconceptions and delusions. Competition converts values ​​into production prices and then commercial prices, converts surplus value into average profit. If someone does not know in advance the amount of value and surplus value, he will be trapped in this wandering as to why, for example, the rate of profit is 1500 percent and not 15 percent. From the perspective of commercial capital, the return itself appears as a factor in determining price, and the merchant makes this tax-like induction the basis of his consciousness about the origin of prices.

Chapter 19

Money-Dealing Capital

A part of industrial and commercial capital always has the form of money, but money-capital does not mean general, only money-capital is specific to technical matters in the process of capital circulation for the entire capitalist class. This part separates itself from the total capital and is responsible for money transactions. Transactions that are the need of all capitalists, whether industrial or commercial. This part is called “specific capital of money transactions”. Capital in the form of money is the starting and finishing point of the movement only where new investment occurs, in other cases, in the case of capital present in the process of reproduction, the starting and finishing point is itself a transitional moment. The transformation of industrial capital in the interval between leaving the specific environment of production and returning to this environment is determined by the formula: w-g-w’ (commodity-money-commodity +). g-w (money-commodity) industrial capital for commercial capital is always w-g-w. But merchant capital carries out g-w (money-commodity) and w-g (commodity-money) simultaneously. The merchant does not have two separate capitals, for the realization of money-commodity in one place and commodity-money in another. He acquires the same money that he spends on buying commodities by selling them. At the same time, he buys with one hand and sells with the other. This purely technical act of paying and receiving money, an act that at the same time highlights the role of money as a means of payment, requires the clearing of accounts and balancing calculations. The tasks whose execution constitutes a part of the cost of the cycle. The smaller their volume and the shorter the time for which they are carried out, the more in favour of capital the tasks that do not give rise to any value or surplus value. And precisely for this reason, within the framework of the internal self-propelled division of labour, capital has made a part of its whole, under the appearance of a separate and independent entity, responsible for carrying out these tasks for the capitalist class. A certain part of the capital must be constantly available and at hand in the form of a reserve, in the form of means of purchase, means of payment, capital awaiting advance, capital in the process of return. This reserve is also the urgent need for the receipt, payment, accounting, even the administration or preservation of the hoard itself. It is on this basis that the reserve is constantly transformed into means of circulation and means of payment. It is reconstituted by the sale and receipt of maturities. This part of the permanent business of capitalism is carried out by a capital which always has the form of money. It has acquired a status distinct from the total capital; it undertakes functions which are purely technical and for which it incurs expenses which are part of the cost of circulation.

The internal division of capitalism, by assigning the above technical operations to a certain part of the total capital, makes the said operations the special task of a stratum of the capitalist class. The capital advance in this sphere, as elsewhere, drives towards concentration. Here another division of labour also occurs within the division of labour mentioned. First, the said operations are divided into different branches, and secondly, workshops are formed within each branch, large and numerous offices with a large number of bookkeepers and cashiers who take on the affairs of payment of money, custody, settlement of savings and current accounts, and custody of money, and they are constantly becoming more numerous and extensive.

The origin of the trade in money or money goods (the specific capital of money transactions) must be sought in international transactions. As soon as different countries had distinct coinage systems, merchants engaged in transnational transactions found themselves in need of converting their domestic currency into the currency of other countries. Money trade sprang from this, and coinage banks began to emerge and grow. Banks that exchanged the coin of one country for the coin of another or for gold and silver as world currencies. In this regard, gold and silver also played the role of bank money.

The domestic currency, in its role as international currency, loses its national identity. It takes on the guise of another currency. All currencies are converted into gold and silver. These same precious metals, which simultaneously play the role of a medium of circulation on the one hand and a world currency on the other, also follow the path of conversion in a constantly changing reciprocal value ratio. Accordingly, bullion trade is the most primitive form of money trade, which stems from the dual function of money as domestic and foreign currency. To sum up, the following conclusions can be drawn from the process of capitalist production and the commodity economy as a whole.

First, a part of the capital must necessarily be available in the form of money for purchases, payments, and investment. This is the first form of hoarding that is recreated in the capitalist mode of production, during the development of commercial capital, or at least for this form of capital. This applies to both the domestic and international cycles. The hoard in question is always fluid, constantly entering and leaving the cycle. The second form of hoarding in this mode of production is stagnant capital waiting for an advance. These hoardings make certain things mandatory, among them protection and accounting.

Secondly, the spending of money at the time of purchase, the collection of money at the time of sale, the payments, receipts, and settlements of accounts were initially carried out by the money changer. It was he who, as a cashier, was responsible for carrying out these tasks for the merchant and industrial capitalist. In the study of money in the first book, it was explained that the history of its birth and formation goes back to the stage of the simple era of commodities. From that time on, the movement and volume of money, which is the means of purchase and payment, is determined by the process of transformation, the volume and speed of the reversal of commodities. Transformation itself is merely a stage in the process of reproduction, and the acquisition of gold and silver as money was also achieved through the direct exchange of commodities, the two commodities of gold and silver. Meanwhile, the movement of money as a means of purchase and payment across internal borders was a function of domestic commodity exchanges. The movement of precious metals in the world market also followed international commodity exchanges.

The circulation of money is in all its aspects the result of the commodity cycle. That which, from the capitalist point of view, expresses the course of the capital cycle. This implies at the same time that the money trade is not only the intermediary of the money circulation, the money circulation as a link in the commodity cycle is a pre-existing datum for monetary transactions. What the money trade does is to centralize, shorten and simplify the technical operations of the money circulation by means of the said trade. The money trade does not create hoards, it performs technical operations which make the hoarding economical, the reserve required for purchases and payments, when used jointly by the capitalist class, will be much less expensive than if each capitalist had to build up such a reserve separately. The specific capital of money transactions does not buy the precious metals, but as soon as commercial capital buys them, it becomes the means of distributing them. The specific capital of money transactions, where it acts as a means of payment, facilitates the settlement of accounts. It reduces the quantity of money required for the settlement of accounts. It does not determine the relationship and volume of mutual payments, but it simplifies the technical aspects of payments. The same is true where it appears as a means of purchase; it does not change the volume and number of purchases, but by taking on the technical aspects, it facilitates their execution.

The specific capital of money transactions in the form under consideration, and apart from the credit system, is a moment of carrying out technical matters in the process of the cycle. A moment of the circulation of money with special functions required by the process of circulation and reproduction of capital. If merchant capital covers a state of the cycle in the form of G-W-G, the specific capital of money transactions for W-G-W does not have such a feature. Whenever a certain amount of money is advanced by various capitalists for the technical intermediary matters of the circulation of money, then this volume of capital, or the specific capital of money transactions, displays its general identity as capital more and more nakedly. G-M’, the capital that increases value, reveals itself in all its features, with the difference that G-M’ here is not a manifestation of the substantial factors of change but the manifestation of the effect of its technical factors. Let us not forget that the profit of the specific capital of money transactions is a fraction of the surplus value resulting from the exploitation of the workers. The owners of this capital deal with values ​​that have already been produced.

Chapter 20

Historical Facts about Merchant’s Capital

It is very absurd to call commercial capital, in whatever form it may be, commodity, money or specifically commodity-money transactions, a special type of industrial capital! Mining, agriculture, animal husbandry, industrial production, transport, and similar cases constitute various fields of industrial investment under the social division of labour. The very fact that industrial capital, even in the process of circulation, when it plays the role of commodity, money capital, does exactly what commercial capital should do, is sufficient to completely invalidate the above idea that “commercial capital is only a form of industrial capital”! What industrial capital does when it sometimes assumes the role of commercial capital is precisely the things that show its separation from its industrial background and are completely different from its role as industrial capital. Why do economists fall into this error? In the case of the common people, two reasons can be mentioned. First: the inability to explain commercial profit and its characteristics, second: the vain struggle to introduce commodity capital, money capital, specific capitals of commodity or money transactions as entities derived from the production process!! Great economists like Smith and Ricardo focused all their attention on industrial capital as the basic form of capital. They considered current capital in the sphere of circulation, whether commodity or money, as a part of industrial capital. They failed to examine commercial capital as a form of capital with its own characteristics and functions. They did not realize that the laws of value formation, profit, and the like, which are true of industrial capital, do not apply to commercial capital. Under the pressure of this wandering, Smith, Ricardo, and others ignored commercial capital, contenting themselves with the fact that it was a form of industrial capital. If they did address it, as Ricardo did with foreign trade, they were satisfied with the fact that it did not produce value or surplus value. But what he says about foreign trade is true of all commercial capital.

So far, we have examined merchant capital from the perspective of capitalist production and within the confines of this form of production. But not only trade, but merchant capital is much older than capitalism. This capital is historically the oldest form of independent existence of capital. The development of trade and the specific capital of money transactions do not require anything other than the existence of large-scale trade and the specific capital of commodity transactions. First of all, let us examine the latter form of capital more closely. Merchant capital is confined within the four walls of the era, and its function is to mediate the exchange of goods. Accordingly, no other condition is necessary for its emergence and activity than the simple circulation of goods and money. To put it more clearly, its existence depends solely on the circulation of commodities and money. Every mode of production, from primitive commons, production by slaves, small peasants, petty bourgeois to capitalist production, wherever products have acquired the character of commodities and are being exchanged with each other, is a favourable environment for the emergence of commercial capital and its role. The only thing that matters is that there are two ends of the exchange of commodities. Whether commodity production is widespread or producers exchange only the surplus of their needs is of little importance. The flow of commodities itself is sufficient. It is clear that the volume of exchanges is a function of the degree of development of the mode of production, and this volume reaches its peak when capitalist production prevails. Commerce, based on whatever mode of production, leads to the allocation of more products to the exchange of commodities. Sometimes in order to improve the lives of the producers, sometimes in order to increase the accumulation of wealth. Merchant capital is only a medium for the exchange of commodities. This exchange should not be considered as an independent exchange of producers. In slavery, serfdom, and the tributary system of primitive commonwealths, it is the slaveholder, the feudal lord, and the tributary state who owns and therefore sells the goods. Buying and selling is concentrated in the hands of the merchant, and the link between buying and selling and the direct needs of the buyer as a merchant is severed.

Whatever form the social organization of production takes, the merchant’s property is always his cash assets, and his money constantly functions as capital. The form of his capital is always g-w-g’. The movement begins with money, or the independent form of exchange value, and ends with the increase of exchange value, which is the goal. The very exchange of commodities and transactions carried out by commercial capital, being separate from production and carried out by non-producers, is not only a means of increasing wealth, but also increases wealth in its social form, which is exchange value. The motive, the stimulus, and the goal are the conversion of money into more money. The money-commodity-more money, which characterizes commercial capital, is completely different from the movement of money-commodity-money, which embodies the exchange between producers and the exchange of use values. The more backward the level of production, the more cash assets are concentrated in the hands of the merchant; in other words, cash assets appear as a special form of merchant property.

In the capitalist mode of production, as soon as capital dominates production and gives it a completely transformed form, merchant capital assumes only a special role. In all previous forms of production, the more production has been directed towards the provision of the means of subsistence for the producers, the more clearly merchant capital has assumed the privileged form of capital. All this shows why merchant capital appears as a historical form of capital long before capital dominates production. Its existence and development are the historical preconditions for the emergence and development of the capitalist mode of production. First, in that the precondition is the concentration of cash wealth, and secondly, in that capitalist production presupposes production for commerce. Sales are no longer limited to small individual customers but are mass sales. Purchases are no longer solely for personal needs but are concentrated for large-scale transactions. With the development of merchant capital, production increasingly produces exchange values. However, it must be understood that the development of merchant capital is not in itself sufficient for the transition from one mode of production to another.

In the capitalist mode of production, commercial capital is reduced from its former independent form to a special component of investment. Its rate of profit is subordinated to the general rate of profit and becomes an average profit. Its role is reduced to being a productive factor of capital. The specific social conditions that emerge with the development of this capital no longer determine it. Wherever it prevails, it is evidence of the survival and dominance of the old conditions. This rule is also true within a country. Purely commercial towns bear more resemblance to the past than factory centres.

The meaning of the independent and dominant development of commercial capital is that production is not dominated by capital. The capitalist mode of production is not dominant. The independent development of commercial capital is inversely proportional to the general development of the economy of society. The independent development of this capital as the dominant form of capital implies the independence of the process of circulation from its origin and its end. At both ends of the process there are producers who exchange. Producers who are independent of the process of circulation and the cycle is independent of them. Here the product becomes a commodity through trade, it is commerce that makes the product a commodity, the products are not produced in the form of commodities. It is not the produced commodities that create trade. Capital as capital first enters the process of circulation. Money is transformed into capital. The product takes the form of exchange value, money and commodities. Capital can come into being in the process of the cycle and must, before it comes into being, dominate both sides of the cycle and the production environments associated with it. The circulation of commodities and money is able to link different production environments with diverse organizations. Environments that, according to their internal structure, continue to produce for consumption. The independence of the cycle process, within which the production environments are linked by a third factor, expresses a dual situation. On the one hand, production is not yet under the control of the cycle, and on the other hand, the production process has not yet transformed the cycle into a moment of itself. We see the opposite of these situations in capitalism. Here the production process relies on the cycle, and the cycle is only a simple moment of the production process. The products that are organized are produced in the form of commodities, the elements that are needed to produce these products are also produced in the form of commodities. Merchant capital as capital here is nothing more than a form of capital in the process of reproduction.

The inverse relationship between the independent development of merchant capital and the degree of development of capitalism is particularly evident in the history of intermediary trade. Among the Venetians, the Genoese, and the Dutch, trade with large profits was not achieved through the export of the specific products of their own countries, but rather through the exchange of the products of underdeveloped communities and the exploitation of the producers on both sides of the exchange. Here merchant capital is seen in its pure form, separated from the origin and destination of the exchange process and the production environments associated with it. This is one of the main sources of the formation of merchant capital. With the development of the economy of the communities that were on the side of the role of merchant capital and were exploited by it, the monopoly of intermediary trade began to weaken and decline. The situation prevailing in the middleman trade was not only the decline of a particular branch of trade, but also the decline of the domination of purely trading countries. This development can and should be seen as the process of subordination of commercial capital to industrial capital in the development of the capitalist mode of production. A clear example of the type and mode of operation of commercial capital when it directly dominates production can be seen not only in the colonial system in general but also in the economy of the East India Company in particular. The ancient trading tribes, like the gods of Epicurus, lived in the distance of worlds, or rather, like the Jews in the pores of Poland. The trade of the first developed trading cities witnessed the existence of merchants who exchanged the products of the barbarian tribes and acted as “workmen” between them.

In the early stages of capitalism, commerce dominated industry. In later stages, this relationship was reversed. Commerce gradually influenced the forms of production of the day wherever it operated, diverting production more and more from consumption and making it for sale, dissolving old relations, and increasing the circulation of money. Commerce no longer simply seized the surplus product of the producers, but swallowed up production, and diverse branches of production emerged. A process of dissolution, the course of which was strongly influenced by the nature of the producers’ associations.

When merchant capital exchanged the products of underdeveloped commonwealths, commercial profit was not only considered a bargain but was actually so to some extent. This capital fed on the difference in the prices of production of countries, and at the same time, by equalizing and stabilizing the commodity values ​​of the production of countries, it was able to appropriate the bulk of the surplus product. It played the role of broker between communes whose production was still within the sphere of use values, buying up at a bargain a part of their product, the sale of which at its value was of secondary importance in the organization of the work of the respective society and which somehow entered the circulation process. The said surplus product was usually in the possession of slave owners, feudal lords and states of the Byzantine type of dictatorship, and the purchase and sale of which yielded enormous profits. A fact that Smith also correctly states. All these points say that commercial capital, having a superior position, will establish a predatory system wherever it can. As its development among both old and new merchant tribes, looting, piracy, slave captivity, forced colonies to surrender. Events that were common among the Carthaginians, the Romans, the Venetians, the Portuguese, the Dutch. The growth of commercial capital often drives production increasingly towards the production of exchange value. It makes production vast, diverse and cosmopolitan, it evolves money into world money, trade always has a more or less dissolving effect on pre-existing organizations that are in terms of production for consumption. How far the aforementioned liquidation will go and how effective it will be depended above all on the stability, coherence and resistance of the old production method. What will be the result of this dissolution, which mode of production will disappear, and which will replace it, is a question that is answered not by commercial capital but by the nature of the previous form of production. In the ancient world, the product of the role played by commercial capital was the slave economy; in the modern world, the product of its development is capitalist production. It is quite important to note that the product of the process is not at all tied to the degree of development of commercial capital but depends on many other conditions and factors.

As soon as industry, especially its urban form, is separated from agriculture, its products are commodities from the very beginning. Their sale inevitably requires the mediation of commercial capital, the development of cities, the expansion of trade. However, how the degree of industrial growth adapts to this process depends on many factors. Ancient Rome, at the end of the republican period, witnessed a huge growth of commercial capital at an unprecedented and higher level than that of the ancient world, but it was not accompanied by the development of trades. The opposite is true of the Greek cities of Europe and Asia Minor. Here the growth of commercial capital was accompanied by the expansion of guilds. There is a completely false idea that the great revolution in commerce of the 16th and 17th centuries, together with the geographical discoveries of the time, which caused the growth of the volume of commercial capital, played the role of the driving force behind the collapse of feudalism and the transition to the capitalist mode of production. This is not the case. The sudden expansion of the world market, the enormous growth of circulating commodities, the competition of European countries for the products of Asian countries or the treasures of America, the colonial system, all played a role in the process of transition from feudalism to capitalism, but the capitalist mode of production in its early stages, namely workshop production, emerged in places where conditions had developed since the Middle Ages. Compare Portugal and India. In general, in the 16th and 17th centuries we see that the expansion of the world market has a decisive influence on the decline of previous forms of production and the development of capitalism. With the establishment of the new mode of production, changes occur, the very existence of the world market becomes the basis for the increasing expansion of capitalism, but the nature of the new production, which is the self-expanding production of capital, plays a fundamental role. It is no longer trade that revolutionizes industry, it is industry that revolutionizes trade, and the supremacy of trade is tied to the increasing growth of industry.

The comparison of England and Holland is instructive in this regard. The history of the decline of Holland as a commercial society is the history of the subordination of commercial capital to industrial capital. Pre-capitalist production places obstacles in the way of the liquidating influence of commercial capital, but the unity of small-scale agriculture and industry is the basis of the development of capitalism. In the trade of England with India and China we observe a different situation, the internal solidarity of the previous forms of production is a force of resistance in the way of the liquidating influence of trade, the native associations are disintegrated by the direct political power of England, the liquidating influence of English trade in this case is that, for example, spinning and weaving destroy this important need for the unity of industrial and agricultural production by the low price of English goods. This leads to the decline of the communes. It is worth considering that even in this transition the liquidating influence of English commercial capital is quite gradual and slow. This trend is also noticeable in China. Here too we witness the stubborn resistance of agricultural and workshop products linked together against the products of large-scale industry. Products whose prices entail a double cost of the circulation process. The situation is different in relation to Russia. Russian trade, unlike England, leaves the economic foundations of Asian production intact.

The transition from feudal production to capitalism has taken two distinct forms. First, the “revolutionary” form of transition, in which the producer has become a merchant, gradually taking the path of large-scale production and selling his products on a large scale. Second, the merchant has taken direct control of production. For example, the English cloth merchants of the seventeenth century brought together the weavers who had previously been separate and separate in their circle of control, sold them wool and bought their cloth. This method alone has not been able to bring about the transition from the old mode of production to the new mode of production. On the contrary, it maintains the old mode of production as a precondition for its own continuation and survival. In France and England, in the various silk, hosiery and embroidery industries, the manufacturers were only nominally manufacturers, in reality they constituted a group of merchants who brought together the separate independent producers and brought them under their centralized control. This transitional form is itself an obstacle to the development of capitalism. The capitalist mode of production tries to push it out of the way. It makes the position of the direct producers worse than before and makes their working and living conditions worse than those of workers directly subordinated to capital. It exploits and appropriates their surplus labour on the basis of the old methods of production. This method was also common in the London furniture industry. In all these areas the real capitalist is not the manufacturer but the merchant, and it is he who appropriates the greater part of the surplus labour. The transition to large-scale industry requires the technical development of the small associated workshops. If we take all the above points into account, we can say that the transition from feudalism to capitalism can take place in three forms. 1. The merchant becomes a direct manufacturer, as is seen in the luxury industries. The merchant imports both raw materials and labour from abroad, the old mode of production being preserved as much as possible. 2. The merchant makes his clients his intermediaries. At the same time, he allows them to remain small producers. 3. The manufacturer becomes a merchant, produces on a large scale and sells his products. The first analyses of the capitalist mode of production began from a mercantile perspective, a perspective that started from the external phenomena of the process of circulation and became independent in the movement of merchant capital, dealing only with appearances. First: because merchant capital is the first unconditional form of existence of capital. Second: because of the great influence of merchant capital at the time when feudalism was collapsing. Modern political economy began when the analysis turned from the process of circulation to the process of production. Interest-bearing capital is also an ancient form of capital. Why does mercantilism not start with it? This is a topic that we will see later.

Part Five

Division of Profit into Interest

and Profit of Enterprise. Interest-

Bearing Capital

Chapter Twenty-One

Interest-Bearing Capital

In the second part of this volume, when we discussed the rate of profit, we had not yet examined commercial capital and its related issues, including commercial profit, and therefore our study was limited to explaining the alignment of the rate of profit of industrial capital. Now I am in a different situation, we have also analysed commercial capital, we have spoken about the share of profit of this capital and its origin, for this reason we can state that wherever we speak of the rate of profit, we have both forms of capital in mind. We will not need to repeat whether it is industrial or commercial. Let us assume that the average rate of profit is 20%. A machine worth $100,000 is put into operation under normal conditions as capital. It yields a profit of $20,000, and its owner is therefore able to increase his $100,000 capital to $120,000. Let us assume the second assumption, that the owner of $100,000, instead of investing it himself, entrusts his money to another person, who advances the said amount exactly as capital, seizes the same profit of $20,000, achieves a rate of profit of 20%, gives $5,000 of this $20,000 profit to the owner of the capital and appropriates the other $15,000. What has happened? The answer is the method. The second person has put into operation $100,000 as capital, exploits the labour force by advancing it, gives the owner 25% of the result of the exploitation of the workers, and takes the rest for himself. We call this 25% or $5,000 interest. If it did not do this, the money would remain stagnant, would not become capital, would not be exploited by the worker, would not be valued, and would not accrue to either the owner or the active investor. In order for the $100,000 to be valued, it must be used as capital in an industrial or commercial form. If the owner of the $100,000 (A) had spent his money on personal expenses instead of passing it on to the second person or active investor (B), (B) could not have advanced it as capital. He would have consumed (A)’s capital, but he could not have done so without his consent. Therefore, it is (A) who first spends his money as capital. However, it is (B) who performs the entire function of a capitalist. First of all, let us examine the specific circulation of the capital of the usurer.

The starting point is the money that (A) provides to (B). This money is converted into capital in the hands of (B) and begins the movement of money – goods – more money. gΔ or the added money that returns to (B) is called interest. On this basis, the process can be depicted as follows. G – G – W – G’ – G’ where the first bold G is the owner’s money, the second G is the money transferred to the active investor, W represents the commodity, the bold G has the symbol Iprime of the total capital plus the profit made and finally the last faint Gprime represents the interest that has accrued to the capital of the usurer or the original owner of the money. In the movement of money–commodity–money, the single commodity is moved twice, and if the transaction is repeated, this may happen several times. In commodity–money–commodity, money is also moved twice, but in the case of interest-bearing capital, on the contrary, the change of the first place does not represent any stage of transformation, it is neither indicative of the transformation of the commodity nor a stage of the reproduction of capital. In the second form, the expenditure of money means that in practice the capitalist is active, who enters the reproduction stage with the advance in the form of productive or commercial capital. The double consumption of this money, whose first form is only a transfer from the owner to another person, corresponds to its double return. After it is consumed by the active capitalist as capital, it undergoes a process of appreciation, returns to the active capitalist in the form of money plus more money, and he gives the owner the principal of the money plus a share of the surplus value. What the owner receives is not all of the profit, only a part of it, which is called interest. The owner has entrusted the money to the second person solely for the purpose of consuming it as capital, and it is available to him as long as it fulfils the role of capital, when it must return to the owner.

Loan is a special case that money assumes as a commodity, or indeed capital as a commodity. In this case, capital enters the market in the form of a commodity. As soon as productive capital is transformed into a capital commodity, the buyer is also ready to play the role of a buyer. The product must organize the sale of its value in the course of the cycle. Whether the said commodity is consumed in the form of necessities of life or is used as a means of production is irrelevant in the present discussion. In the cycle, capital functions only as a commodity. The difference between a commodity-capital and a simple commodity is that, firstly, the commodity-capital is from the very beginning pregnant with surplus value, its organization is at the same time the organization of surplus value. Secondly, its being a commodity is a stage in the process of capital reproduction. Commodity-capital does not acquire this characteristic through sale, but through the dependence of sale on the circular or reproductive process that it leaves behind. This is also true of money-capital. Here too, money does not become money-capital by virtue of being a means of purchase or by actually purchasing investment instruments! It acquires this role from within the process of appreciation.

Capital never appears as capital in the process of circulation. It always takes the form of commodities or money. Commodities and money are capital here, but their being capital is not because commodities are transformed into money and money into commodities. Nor is it because they are bought and sold. The capital nature of these commodities arises from the process they undergo, the production process, the process in which labour power is exploited. The process in which surplus value is produced. Capital in the process of circulation is never capital, it is commodities or money; in the process of production, it is the process of exploitation of labour power that becomes capital.

The story is different with interest-bearing capital. Its special character lies in this difference. The owner of money wants to use it in the form of capital, a capital that increases in value but does not do so himself, he transfers it to someone else, he transforms money as capital into a commodity that is capital not only for himself but also for someone else. A value that preserves itself by increasing in value and when it comes out of this process returns to the owner. It is away from the owner for a while and then comes back to him again. The transfer here is neither a payment nor a sale but only a loan. It is transferred only on the condition that, first, it returns after a while, and secondly, it returns as organized capital, capital that increases in value and is organized.

What is loaned as capital can be fixed or circulating capital. Some goods, by their very nature, can only be based on capital loans. Real estate, ships, machines are of this type. Although the nature of loan consumption affects the type of repayment, borrowed money is a special form of money-capital. What is given a loan is a certain amount of money, and the interest is also calculated. If the loan is not money or revolving capital, the method of its return will be like fixed capital. The lender receives interest and part of the value of the fixed capital, which is equivalent to its periodic depreciation. At the end of the period, that part of the loaned and unused fixed capital will be returned to the owner in kind. If the loan is in the form of revolving capital, its return will also be in the same form. The type of return is a function of the type of reproducing capital. But in the case of borrowed capital, its return takes the form of repayment. The reason is that the transfer and advance payment is in the form of a loan.

The return of borrowed capital is twofold. It returns once to the active capitalist and again to the original owner. It was said earlier that capital always has the form of money or commodities in the course of time, but if we examine the process of reproduction as a whole, the matter is different. Whether we take money or commodities in their monetary form as the starting point, we see that a certain amount of money has been spent, and after a certain period of time its principal has returned with an additional amount. This money was originally advanced for this purpose, that of preserving its principal and at the same time increasing in value and bringing with it a greater value. All this indicates that the money in question has been spent in the form of capital and has fully and completely fulfilled the role of capital. The capital relation does this, it preserves capital and increases its value by exploiting labour power.

Let us turn to Proudhon. He says that a loan is bad because it is not a sale, a commodity is sold, it is continually sold to new people but the ownership of it is not transferred. Proudhon is wrong. When money is transferred in the form of capital, interest is not received on any equivalent. In every purchase and sale within the general process of exchange, what is sold is really transferred. What is not transferred and which Proudhon does not understand is the value of the commodity. In the exchange of things there is no change of value. The same capitalist always holds the same amount of value. But the surplus value that money captures as capital in the hands of the capitalist through the exploitation of labour power does not undergo any exchange. When exchange takes place, the surplus value is already embedded in the commodity.

Proudhon says that when the hatter sells the hat, he receives only its value, without any increase or decrease, but the moneylender receives the principal plus an additional sum or interest. Proudhon places the hatter as the capitalist producer in contrast to the capitalist lender. He does not understand that the owner of productive capital can sell the commodity at its value and at the same time make a profit. He is ignorant of how the price of production, the average profit, the relation of the value of the commodity to the price of production is formed. Let us suppose that the cost of production of 100 hats is 100 and their price of production is 115 pounds sterling. The capital of the hat producer happens to have the average social composition, and the value of the hats must necessarily correspond to their price of production. The average rate of profit is 15%. The value of the hats is 115. The capitalist producer sells the hats at their value and makes a profit of 15 pounds sterling.

If he is the owner of his capital, he will make the entire 15 lire of surplus value his share, but if he has secured his capital in the form of a loan, he will be forced to give, for example, 5 lire out of 15 lire as interest to the owner of the capital. We see that in these two different cases there is no change in the price of the commodity, only the way in which the surplus values ​​or profits are distributed changes. This is what Proudhon does not understand and that is why he says: In commerce, the interest of capital is added to the wages of the workers to enter into the composition of the price of the commodity. It is impossible for the worker to purchase the product of his labour, life with labour under the rule of interest implies a contradiction.

Proudhon adds: “Since money-capital returns to the owner after each exchange and before the next exchange begins, it is clear that the repetition of loans by the owner is always profitable for him.” It is clear that categories such as purchase, price, transfer of objects, the immediate form of surplus value in this exchange, the commodification form of capital, all have become a mystery to Proudhon and must be explained.

The return of capital to its origin is by no means a special characteristic of exploiting capital; the characteristic of capital in general is that it is in complete circulation. What distinguishes exploiting capital is the external form of the return and its separation from circulation. The owner of exploiting capital transfers his capital and receives no equivalent in return. He dispossesses himself, and this dispossession is no part of the process of the circulation of capital; his act is not a moment of the circulation but the preparation of this process for the industrial capitalist. If ownership is not transferred, it is because no equivalent has been received. The return of money from the industrial capitalist to the owner of money also only completes the act of alienating capital. Since the capital is advanced in the form of money, after the circuit it returns to the industrial capitalist in the same form of money. But the capital did not belong to the industrial capitalist at the starting point, and it cannot belong to him after the circuit. It must be given to the lender. Both the first and last transfers are only a legal act and are not links in the circuit of capital, and it is these two acts, surrender and return, that constitute the entire movement of the lender’s capital.

Lending money as capital or transferring it with the condition of repayment after a certain period of time implies the explicit principle that money will be used as capital and will definitely return to its origin. The actual circulation of money with the role of capital is a prerequisite for a certain legal transaction according to which the borrower must master the money to the lender. Whether the borrower does not use the money as capital is a separate issue that concerns him. The essential point is that the lender has lent the money so that it becomes capital, goes through the circulation process, increases in value and returns to the original owner. The lender does not use the money to buy goods. If this amount is in the form of a commodity, he does not sell it, he advances it as capital and as a value that will return to its point of origin at a certain date, he lends it instead of selling or buying it. Accordingly, lending is a form that corresponds to the transfer of money as capital. This does not, of course, imply that loans cannot be made in places that are not involved in the process of capitalist reproduction. The same amount of value changes form, being transferred once in the form of money and again in the form of a commodity, and what is transferred is only use value. With this explanation, the next important question will be what use value does the lender transfer to the industrial capitalist? The use value he transfers is the performance of the role of money as capital. Money can become capital. It can increase in value. Surplus value at the level of average profit into flour, while at the same time preserving its value. This is not the case in ordinary sale. The use value of the commodity is spent, and in this way the essence of the commodity and its value are destroyed. A commodity that is capital, on the contrary, not only preserves its value and use value by spending its value but also increases it. The money that is lent is in some ways similar to labour power. The industrial capitalist pays the value of labour power, and in the case of loaned capital, he also pays the full value. The use value of labour power for the industrial capitalist is that which, by consuming it, produces a value much greater than its own value. Loaned capital is also capable of being combined and increased. Labor power is a commodity whose use value is the source of its appreciation. The capital that is lent is also a commodity that gains value with its specific use value. The difference between the transfer of loaned capital and the simple sale of commodities is that in the latter, the use value does not serve as a means of preserving and increasing value, but in the former, on the contrary, the value is preserved and new value is added to it. Money that is loaned in the form of capital acquires the role of a loan and is assigned, acquires a use value that allows the industrial capitalist to advance it, exploit labour power, increase its value and achieve an average profit in accordance with the current general rate of profit. We do not observe this use value in the simple sale of commodities.

What does the industrial capitalist pay? What is the price of the loaned capital? In the exchange of ordinary commodities, what the buyer buys is the use value and what he pays is the value of the commodity. What the borrowing industrial capitalist buys is also the use value, but what he pays is not just the value. The use value here is the expenditure of money as capital, the increase in value, this exchange is fundamentally different from the first. The lender always remains the owner of the money, even when the money is not in his possession. In simple exchange, the money is always on the side of the buyer, in the transfer of money in the form of a loan and as capital, on the contrary, the money is always on the side of the seller. The buyer receives the capital as a commodity, but the basis is that the said money becomes capital, is advanced, is valued. It is organized as capital. It is to be repaid with interest or more money. Interest is only a part of the profit made by the borrower. The whole profit cannot possibly be made available to the lender. Otherwise, use-value would not be transferred. The application of the price of capital to interest is a completely incorrect assumption. This assumption implies that a commodity has a double value, distinguished by two prices, one corresponding to the value and the other not. Whereas price is nothing but the monetary expression of value. When a commodity is lent as capital, it is still only a certain quantity of money. It is not cotton as cotton that is transferred, but a certain quantity of value that is transferred. The price of capital is an incorrect assumption, because the monetary expression of the value of capital is capital in the form of money. It is by increasing in value that capital acquires the identity of capital. The degree of increasing in value of capital indicates the degree of its organization as capital. Interest also indicates the increasing in value of money that has become capital. Since price indicates the value of a commodity, perhaps this formal appearance has caused the incorrect perception of the price of capital as interest. The difference between money in capitalist production and previous forms of production is that here it is either spent or advanced as capital. Money and commodities are potential capital, like labour power, which is potential capital. First, money can be transformed into elements of production; second, the material elements of wealth have the potential to become capital. The reason for this last statement is clear. With the establishment of capitalism, the material elements of wealth are supplemented by a factor that transforms them into capital. This factor is wage labour.

Insofar as the division of profit into interest and other parts of surplus value, like market prices, is determined by supply, demand and competition, capital also appears as a commodity. But the differences here are no less than the similarities. In the latter case, the market price, whenever supply and demand compensate each other, this price corresponds to the price of production. In other words, with the equilibrium between supply and demand, the price of a commodity is determined without being influenced by competition and only under the pressure of the internal laws of capitalist production. Supply and demand are nothing but the deviation of the market price from the price of production; with their equilibrium, this deviation is eliminated, the general law of price determination exerts its powerful role and in this direction the market price and production coincide. This is also true of wages. With the elimination of competition, wages correspond to the value of labour power. But this is not the case with interest. Here competition does not determine the deviation from the law; there is basically no law for the division of profit into interest and other parts of surplus value; everything is determined by competition. We will see later that interest has no natural rate. What is called the natural rate of interest is something determined solely by competition.

In the case of interest capital, everything is externalized. The advance takes the form of a simple transfer of an object from the owner to the borrower; the return appears as a re-transfer of money with interest to the lender. In capitalist production, the rate of interest is calculated in terms of the ratio of profit to the capital advanced and the length of the return period or the profit that industrial capital yields in a given period. The same calculation is carried out in the case of interest-bearing capital in a completely externalized way. A certain amount of interest is paid to the lender for a given period of time.

The twenty-second chapter

Division of Profit. Rate of Interest

Natural Rate of Interest

The discussion of credit and the points raised in this chapter require a more complete explanation than we can do here. The competition between lenders and borrowers, the short-term fluctuations resulting from it in the money market, the interest rate cycle during the cycle of industrial capital, the higher or lower levelling of interest rates in the world market, are none of the subjects of our detailed examination in this chapter. What is to be more closely examined is the independent character of interest-bearing capital and the independence of interest from profit. Our first assumption is that there is a fixed ratio between interest and total profit. In this case, interest rises or falls with the rise or fall of total profit. If the average rate of profit is 20% and the ratio of interest to profit is 25%, then the rate of interest is 5%. If the rate of profit falls to 16%, the rate of profit also becomes 4%. If interest is a constant share of the rate of profit, then as the general rate of profit rises, the absolute difference between total profit and interest also increases by the same amount. This means that the active capitalist captures a higher share of the total profit. Consider this example. The ratio of interest to total profit is 20%. In this case, out of the total profit of $10 million, only $2 million in interest accrues to the lending capitalist, $8 million to the borrowing industrial capitalist. If the total profit is $20 million, the interest is $4 million and the active capitalist’s profit is $16 million. If the total profit reaches $25 million, the interest is $5 million and the industrial capitalist’s profit is $20 million. If the total profit rises to $30 million, the interest becomes $6 million and the active capitalist’s profit is $24 million. At different rates of profit, interest based on a single ratio can be expressed in quite different terms. In the example above, the figures of 2, 4, 5, and 6 million in interest are all a single proportion of the total profits of $10, 20, 25, and 30 million. All of these are equivalent to 20% in comparison with the total profit, but their ratio to the total capital, which represents the interest rate, is 2%, 4% – 5% – 6%, respectively, compared with the interest rates of 10% – 20% – 25% and 30%. It has been stated in previous chapters that the interest rate is inversely related to the degree of development of capitalism, and this statement is also completely true for the interest rate as long as the difference in the interest rate indicates the difference in the interest rate. The recent link or lock of the interest rate difference to the general interest rate difference is not necessary, but one thing is certain. The interest rate is always regulated by the rate of profit, and this type of regulation is also valid in the relationship between interest and the general rate of profit. With the occurrence of crises, the need for capitalists to borrow to pay their debts increases, which leads to a rapid increase in the interest rate. The increase in the interest rate causes the value of securities to decline. Owners of interest-bearing capital eagerly buy all these bonds, with the aim of compensating for the decline in interest rates by selling them at a higher price at the beginning of a boom period.

There is a tendency for interest rates to fall even in conditions without fluctuations in interest rates. The following reasons can be considered in this regard.

1 – Even if all loans are received with the purpose of advance payment as productive capital, the interest rate can still change without changing the general rate of interest, because although the capital and wealth of the whole society grow, a part of the population that has accumulated wealth based on the work of the past and lives by lending and interest on this wealth continues to increase. At the same time, groups of young and old people who are working and active also stop working and prefer to lend their existing assets and earn a living from their interest. Both groups above, with a strong tendency to earn a living through interest, are increasing in parallel with the increase in capital and the wealth of the whole society. Meanwhile, those who have started with moderate capital find it easier than those who have started with less capital to give an independent form to their property or borrowed capital. In old and rich countries, the part of social capital whose owners are not willing to make advances in the field of production forms a larger share compared to productive capital.

2 – The expansion of the credit system and the increasing growth of the facilities that bankers create for industrialists and merchants to take under their control the entire cash savings available in society, savings that can be used in the form of money-capital by accumulating them in large quantities. All this puts pressure on the rate of interest.

It was stated before that there is no such thing as “natural rate of interest”. Here, in the case of interest, the influence of factors such as the balance between supply and demand is meaningless. There is no reason that the average conditions of competition or balance between lenders and borrowers allow the lender capitalist to apply his desired interest rate, for example 3%, 5%, or to set a certain ratio between interest and total profit, interest rate and general profit rate. Even in cases where competition plays a decisive role in this field, interest rates are still determined randomly. Habits, customs and types of these, like competition, interfere in determining the average interest rate, but only to the extent that the said rate exists not only as an average rate, but as a real value. Why can’t the average interest rate be abstracted from general laws? The answer must be sought in the nature of interest. Interest is only a part of average profit. A single capital, by a single action, takes on two different forms of manifestation, as loan capital in the hands of the lender and as industrial or commercial capital in the hands of the active capitalist. This capital increases its value, and yields profit not twice but only once. It’s being loaned plays no role in the process of production and profit-making. How the two capitalists, the lender and the active, divide the profit from the exploitation of labour power between themselves is not a matter for which a definite basis of calculation can be established.

In the division of newly created values ​​into wages and surplus-value, two completely different and opposing factors play a role, the worker and the capitalist fight each other, and the existing arrangement of forces on both sides creates and determines the temporary criterion for the division of values, in given conditions and at a given moment. This rule also applies to the division of surplus-value into the profit of the active capitalist and the interest on land, but it is not true in relation to the distribution of surplus-value into the profit of the active capitalist and the interest on borrowed capital. A matter that will be explained later. The result of the discussion is that there is no “natural rate of interest”. The relationship between the rate of interest and the rate of profit is similar to the relationship between the market value of a commodity and its value. Insofar as the rate of interest depends on the rate of profit, this dependence always relates to the general rate of profit and not to the rates of profit of individual branches of production. Nor does this dependence depend on the extraordinary profit of this or that individual capitalist in a particular business environment. On this basis, the general rate of interest, as a certain factor, is involved as an empirical fact in determining the average rate of interest, but the latter rate is never an exact expression of the general rate of interest.

The rate of interest in each country appears to be a constant value for a long period. Why? Although the specific rates of interest of different areas are constantly changing, the current changes of these rates in different environments compensate and neutralize each other. The general rate of interest usually changes over a long period of time, during which it enjoys a relative stability, and it is this relative stability that appears in the more or less constant nature of the average rate of interest. In the money market, all borrowed capital is placed as a single mass against active capital. Therefore, the ratio of the supply of borrowing capital on the one hand and the demand for it on the other hand determines the interest market situation. The more the development of the credit system and the collection of money-capital connected with it increases, the more the loanable capital becomes stronger in general, the more the ability of this capital to enter the market at once and simultaneously increases, the indicator of the massive emergence of borrowed capital against active capital and the determination of the interest market situation by the supply and demand of this capital also becomes wider and more obvious. What is happening here is the opposite of what is known about the average rate of return. The general interest rate exists and works as a trend, an equalizing movement of special interest rates in different areas. The competition between capitalists, or the equalizing movement, exerts itself in such a way that it gradually pulls capital out of environments with long periods of low profits and transfers it to areas with higher profits. In this regard, it also gradually distributes additional capital among these areas. This is a gradual change of continuous entry and exit of capital from different areas, and in which we never witness the massive and simultaneous emergence of capital, as occurs in the case of interest-bearing capital.

Interest-bearing capital, even though it is a completely different category from commodities, becomes a special commodity whose interest plays the role of its price. Although the market rate of interest is constantly fluctuating, it is continuous and equal to the market price of goods at every moment. Owners of money – capital supply this product. Active capitalists create demand for it and buy it. This is not true of general interest rate alignment. There, whenever the market price of the commodities of a certain production environment is higher or lower than the production price, the work of equalizing the prices is done by expanding or reducing the capital advance in that area. Many capitals rush into that field or leave it. By aligning the average market price of commodities with the price of production, the deviations of the rates of profit of different sectors with the general rate of profit are eliminated and corrected. Industrial or commercial capital, concentrated and massive, never appears before a buyer in the form of a commodity, which is what happens in the case of interest-bearing capital. The rate of profit, as explained earlier in this volume, deals with several specific components. The surplus value produced by the total capital, the ratio of this surplus value to the total capital, and the competition between capitals are the most important of these factors. The role of competition is also clear, the distribution of surplus values ​​among the capitals advanced in different fields and fields in such a way that each individual capital or each capitalist enterprise captures its share of the total surplus value in proportion to the amount of its capital. All this proves that the process of formation of the general rate of profit bears no resemblance to the process of emergence of the average rate of interest. In the latter case, it is only the relationship between supply and demand that determines everything. Lenders and borrowers are confronted in the money market, a commodity in the form of money and only in this form is to be traded, money which is capital and capital which only has the form of money. Competition in different spheres does not exist at all. The entire sphere of production stands together as borrowers, and money-capital has acquired a position vis-à-vis all of them, the type and manner of its use being indifferent to it. Industrial capital, by competing and rotating between different areas of accumulation, establishes the capital of the entire capitalist class. In the case of interest-bearing capital, everything is summarized in the supply and demand of capital. This capital also appears in the money market with the face of a common element, but an element that is indifferent to the form of its use, offers and distributes itself between different environments, between the capitalist class, based on the needs of each environment and each capitalist. With the development of large-scale industry, money-capital, occasionally appearing on the market, puts aside its status as belonging to a capitalist and expresses itself in the form of a dense, organized complex. A complex that is under the supervision of bankers representing social capital. Something that indicates the entire class’s position against loanable capital. In the same way that loanable capital also appears as a whole against the class.

The interest rate is always presented as the general rate of interest, as a certain amount of money. The opposite is true for the rate of profit. This rate can vary even within a single environment of advance, with the same market price of the commodity, but with different conditions of production for the same commodity. The reason is that the rate of profit for the individual capitalist is not determined by the market price of the commodity, but by the difference between the cost price and the market price.

Chapter Twenty-Three

Interest and Profit of the Entrepreneurial Capitalist

Interest is a part of the surplus value or profit. It is the part that the active capitalist, whether a manufacturer or a merchant, is obliged to pay to the lender as long as the capital is not his own property. The owners of capital of any kind do not compete with each other to determine the rate of interest as long as the capital is in the process of reproduction. These points cry out that the category of interest or the rate of interest is not homogeneous with industrial capital and is alienated. The rate of interest is determined solely in the competition between the owners of loan capital and the industrial or merchant capitalists. As long as the capital is in the process of reproduction, even if it is not a loan but the property of the active capitalist, what he has at his disposal is not this capital itself but the interest which he can spend in the form of income. Capital, as long as it functions as capital, belongs to the process of reproduction. The capitalist is the owner, but his ownership does not allow him to remove his capital, which is exploiting labour power, from this state. The relationship of the lending capitalist to the industrial or merchant capitalist is the same. He lends his money – capital – and as long as this money functions as capital, he has only the right to receive interest. He is deprived of the right to influence the fate of capital. This is clearly and blatantly observed in long-term loans. In these cases, the capitalist receives only interest every year and is unable to obtain capital. Even the expiration of the term and the recovery of the capital do not solve his problem and does not bring about a change in the relationship between him and capital. If this capital is to earn interest, it must function as capital, it must be lent again. As long as it is interest-bearing, it is not in his hands, and as long as it is interest-bearing, it does not yield any interest. If interest were to become zero, the industrial or merchant capitalist would see himself as one who works with his own capital, appropriating the entire average profit. Whether money, borrowed or industrial capital, capital is only capital when it produces surplus value and profit. Meanwhile, the closer the interest rate approaches zero, the more homogeneous the borrowed capital becomes with personal capital. The question is, how does the merely quantitative division of net profit and interest become transformed into a qualitative division? What makes the capitalist, even when he employs his own capital and not a loan, still record a part of his net profit in the special column of interest? Why does every capital, whether borrowed or personal, distinguish itself by two distinct identities, one as interest-earning capital and the other as profit-owning capital? It is clear that not every random quantitative division necessarily leads to a qualitative division. Several industrial capitalists who establish a single enterprise together and divide the profits among themselves do not have their profits divided into different branches with different names. In other words, quantitative division does not take the form of qualitative division, in such cases we witness this change only when a number of legal persons own capital together.

To arrive at a clear answer to the above question, we must dwell further on the origin of the formation of interest. Let us begin by assuming that two capitalists, the lender and the borrower, meet. Not as different legal persons, but as persons who play distinct roles in the process of production, or as if a single capital were performing a completely different dual movement in their hands. One lends capital, the other employs it as productive capital. If the general rate of interest is known, the share of the profit of the active capitalist is determined by the rate of interest, and if the rate of interest is known, by the general rate of interest. The more the gross profit or the real value of the total profit deviates in individual cases from the average profit, the more prominent is the role of interest in determining the net profit of the active capitalist, because interest is fixed by the general rate of interest. The first and last goal of capital is profit, but for the active capitalist who advances borrowed capital, it is not only profit that is important, but profit minus interest. As long as the capital is in the process of appreciation cycle, it is net profit that is considered to him as the product of capital. He represents the personified capital which has borrowed to make a profit in the process of exploiting labour power or in the circulation of the social product of labour. Unlike the interest which he must pay on gross profit, his real profit is industrial or commercial profit.

If gross profit is equal to average profit, the amount of the entrepreneur’s profit will be a function of the interest rate. When gross profit deviates from average profit, the difference between the two, after deducting interest from each of them, is under the pressure of the factors involved in the emergence of this difference. Factors such as the conditions of the specific environment of production or the profit that a given capitalist in a specific field of production obtains as a profit higher than the average profit. Let us not forget that the rate of profit within the production process does not depend solely on surplus value. The purchase price of the means of production, the above-average productivity of the social productivity of labour, the economy in the advance of fixed capital, the price of production, transactions above or below this price and, consequently, the acquisition of greater or lesser amounts of surplus value by capitalists, even the specific agility of this or that capitalist in carrying out transactions are also involved in the process of emergence and formation of this rate. What is essential here is the transformation of the quantitative division of profit into its qualitative division. The importance of the issue becomes greater when we consider what is divided in the same quantitative division and how does the entrepreneurial capitalist act in this division?

Our assumption is that the active capitalist does not own the capital, he has received it from the owner in the form of a loan. The interest he pays to the owner is a share of the total profit. The rest of this profit he appropriates himself as the profit of the entrepreneur. Interest is the simple fruit of ownership; the owner has done nothing and has had no activity other than lending. While the profit of the entrepreneur originates from the process of production. This is a qualitative distinction, and this qualitative difference is based on objective facts. The fact that interest can only be referred to the ownership of capital, in contrast to the profit of the active capitalist, which arises from the process of production. With emphasis on the fact that both are unpaid surplus labour of the working class. The merely quantitative division of gross profit between two distinct legal entities, one of which is the owner of capital and the other advances capital, is practically transformed into a qualitative division. Part of it becomes interest and the other part becomes the profit of the entrepreneur. The one who employs capital, even if he works with his own capital and his capital is not a loan, is divided into two different personalities. In one place he is only the owner of capital and in the other place he is the one who has advanced capital. In the heart of this process, interest is consolidated. It acquires a solid and independent identity. It emerges from being the result of the random division of total profit into interest and profit of the entrepreneur, it becomes a part of total profit with a valid identity and consistency. The quantitative division gives way to a qualitative division. Profit is divided into two different categories, two categories that have different relations with capital in their different determinations. The occurrence of this process or the transformation of quantitative division into qualitative one stems from certain conditions. In this regard, we can mention the following factors:

1- Most industrial capitalists use personal and borrowed capital in their investments in different numerical ratios. This ratio changes in different periods.

2- The conversion of one component of gross profit into interest converts the other component into the entrepreneur’s profit. All research on the division of gross profit into interest and the profit of active capital converges on the question of how a part of the total profit crystallizes under the name of interest and acquires an independent status? It is worth emphasizing that historically, interest-bearing capital has existed as a traditional and ready-made form of capital. Interest, as a subsidiary and consequent form of the surplus value of productive capital, is older than the capitalist mode of production. In this regard, it is not without reason that the popular notion considers interest-bearing capital to be capital in itself or the most superior form of capital. According to the evidence, until the economist Massey, the dominant theory was that the remuneration of money itself, insofar as it is money, is paid in the form of interest. The idea that borrowed capital, even if not advanced, is still interest-bearing, in turn, is an indication of the belief in the independent identity of interest. For the first time, Massey and David Hume spoke of the origin of interest as a component of profit. This discovery itself is also evidence that the above assumptions about interest and interest-bearing capital were previously balanced.

3 – The industrial capitalist, apart from working with his own or borrowed capital, finds himself in front of a large group of capitalists who exist independently as owners of money-capital. A part of the capitalist class that appropriates interest or a component derived from surplus value and independent of it. Qualitatively, interest is surplus value that has taken the form of the “right” of ownership of capital, although the owner of capital stands outside the process of appreciation cycle. It is a part of the surplus value that capital captures separately from the process of production. If we consider the quantitative aspect of the matter, it is seen that interest has no connection with active capital, it deals with money-capital, it is measured and calculated in relation to it. Its rate also makes this connection more prominent and firmer. First, because the rate of interest is determined independently, despite its dependence on the general rate of profit, and second, because, like the market price of commodities and unlike the general rate of profit, which is intangible, it is quite tangible, has a known ratio and remains constant in the face of all changes. If all capital were in the hands of industrial capitalists, there would be no interest and no question of the rate of interest. The independent form that interest assumes with the quantitative division of surplus values ​​gives rise to the qualitative division of gross profit and the prominence of the distinct identity of interest from profit.

It is quite true that the individual capitalist has the choice of employing his capital in the form of interest-bearing capital or of advancing it in the form of active capital. But to generalize this to the whole of social capital, as some economists have woven together, is an extremely absurdity. It is the most ridiculous and meaningless statement to say that capital can be transformed into interest-bearing money capital without the relation of production of surplus value, without the function of productive capital, without the exploitation of labour power. This absurdity becomes even more vulgar when it is said that capital in the capitalist mode of production is capable of paying interest without taking the form of productive capital! Without producing surplus value, of which interest is a part, it will follow its path!! If a large part of the capitalists keep their capital only in the form of money capital, a huge decrease in the value of money capital and a sharp fall in the rate of interest will be inevitable. A large number of this group will have no choice but to direct their capital into the sphere of production, exploitation of wage labor and valorization. With all this, we emphasize that the individual capitalist can employ his capital in an interest-bearing or productive form. But even if he works with personal capital, he still considers that part of his average profit, which is equivalent to the average interest, as the fruit of his own capital, the fruit of capital outside the process of appreciation cycle and calls the rest the profit of the enterprise.

4 – So far, we have emphasized a few important points, first: the share of the profit of borrowed capital acquires an independent form with a special identity. A form and a part that every capital, whether personal or borrowed, sees under the name of its “right” interest. Its magnitude and smallness depend on the rate of interest. Second: The quantitative division of profit becomes a qualitative division. Interest acquires such an independent and solid position that it seems as if the division of profit were an essential and inevitable part of capital. As soon as one component of profit becomes interest, the other component acquires the identity of the entrepreneur’s profit. These two components are placed in conflict with each other, in such a way that their conflict hides their real origin from view. Neither is measured by reference to the surplus value that is the source and product of their sum; they are themselves measured in comparison with each other. Perhaps the only thing that brings their origin, that is, surplus value, to the fore is that the capitalist, if he himself owns capital, does not show any greed for competition over the determination of the rate of interest. “Ramzi” is right that interest is the net profit of the owner’s share of capital, the owner’s profit of capital. It accrues to the owner regardless of whether he is outside the process of appreciation cycle or whether he himself plays the role of an active capitalist. Even in the latter case, he owns a net profit equivalent to interest. Not because he has productive capital, but because he is the owner of money-capital. He is the person who, as a loan, lends the owner of capital the interest on his capital to himself as an active capitalist. In the same way that the conversion of money, the conversion of value into capital is a continuous process of capitalism, just as the existence of money as capital is a precondition for the process of capitalist production.

With the possibility of becoming capital and transforming into capital, money gains the power to take over unpaid labour. It turns the process of production and the circulation of commodities into the process of production of surplus value. Interest expresses that labour has become objectified in its social form. The value that it acquires in the process of production of the means of production lines up against labour as an independent, living power, and is able to appropriate labour without any remuneration. But this contradiction with wage labour disappears in the form of interest. Since it is interest-bearing, interest-bearing capital is in opposition not to wage labour but to the active capitalist. The lending capitalist in the process of reproduction is directly confronted with the active capitalist, not with the wage worker from whom capitalist production has deprived him of ownership of the means of production. Interest-bearing capital is capital by virtue of ownership, as opposed to capital that expresses itself as the index of the means of production, exchange, and exploitation of labour. Interest-bearing capital does not enter into conflict and confrontation with labour until it is advanced in the form of active capital. On the other hand, the entrepreneur’s profit is also in conflict with interest and does not directly confront wages. Let us pay attention to the following points:

First – If the average profit is known, the entrepreneur’s profit is not dependent on wages but is dependent on the interest rate. The entrepreneur’s rate of profit also rises and falls in inverse proportion to the interest rate.

Secondly, the capitalist entrepreneur does not derive his expectation of profit from ownership. He abstracts from the advance and function of capital in the process of appreciation cycle. He compares two different states of capital stagnation on the one hand and its use and profitability on the other. This becomes clear when there are two people, the owner of capital and the entrepreneur, and the total profit is divided between them in the form of interest and profit. The profit of the entrepreneur originates from the production process and is directed towards the activity that the capitalist carries out as a representative of industrial or commercial capital. This representation is not the same as the role played by the owner of capital as a profiteer. Here we are talking about capitalist production, that capital must be transformed into means of production and labour power, that labour must exploit, that unpaid labour, his surplus labour, becomes his surplus value. The capitalist entrepreneur sees his profit not as arising from ownership, but as arising from something other than that, from being a “worker”. In this regard, he falls into the abyss of the illusion that his profit is not only not in conflict with wages!!, nor is it the unpaid labour of others!! But he himself is also a wage earner and a worker!! He suffers from this ridiculous illusion that the surplus value he appropriates is the wage of enterprise, the wage of supervision of work!! And for this reason, it is higher than the wages of workers!! Under the mountain of such illusion, he also lists the reasons for this excess for himself. 1- His work is more complicated. 2- He himself pays his wages!! Drowning in the seven seas of this illusion, he escapes from the pure truth that the rial, the rial of capital and its profit are surplus labour, the unpaid labour of the working masses. He forgets that as the owner of interest-bearing capital, even when he does not own any enterprise, does nothing, he still receives interest, he still shares in the surplus value resulting from the exploitation of workers. Or, in its other form, when he is not the owner of capital at all, but only the entrepreneur, he appropriates a large part of the surplus value. In a word, his intellect fails to digest the obvious fact that both his profit and the interest of the owner of capital are both surplus values produced by the workers.

Neither of the two different components of surplus-value as interest and profit show any relation to labour. It is only their sum or their single origin, surplus value, which is in a mutually opposed relation to labour. It is quite indifferent to the workers whether the surplus-value resulting from their exploitation is swallowed up entirely by the capitalist-entrepreneur or whether a share of it reaches the capitalist-owner of money-capital in the form of interest. The causes which cause the division of profit between the two categories of capital imperceptibly replace the causes of the existence of profit. Profit, or surplus-value, which existed before any kind of division and was extracted from the process of production, from the exploitation of labour-power.

Interest capital is able to maintain itself when money in the form of loans becomes capital and increases in value, but this does not contradict the fact that interest, as a characteristic of money, grows independently of the production process. The workforce shows its creative value when it enters the work process and brings it to order. While this same force has the capacity to add value even without being present in the work process, it is a necessary condition for the production of value and added value. It is based on this capacity that it is bought and sold. It may be bought without being productively consumed.

Let’s take a closer look at the profit of the entrepreneur.

When the specific division of capital into different forms with specific roles is established in capitalist production, when ownership of a firm license dominates the labour of others and interest as a part of surplus value is established, then the other part of surplus value or the profit of the entrepreneur also reveals the secret of its existence. It admits that it did not emerge from capital as capital but was born from the process of production. The capital that gave birth to it was not capital with the form of life of previous periods, nor interest capital on pre-capitalism, but capital active in the process of appreciation cycle. A capital whose constant part does not create any new value and whose entire new value comes from its variable part, the unpaid surplus labour of the worker. The process of production, apart from capital, is only the labour process in general. In this labour process, the industrial capitalist appears not as personified capital but as the agent of the owner, the overseer of the labour process, the wage-earner. Interest in itself confirms the existence of the means of labour as capital, exposes the social contradiction of capital with labour and the transformation of capital as personal power against labour. It validates and exposes abstract ownership as a means of dominating the product of the labour of others. At the same time, it suggests a basis for this characteristic of capital outside the production process, interest plays all these roles and suggests that it itself (interest) was born outside the capitalist production process!!, as if the result of the ownership of capital is not an advance in the field of exploitation of labour power! And the surplus labour is not the worker! It shows that it is not the result of the relationship between the two capitalists, the owner and the industrialist! The story does not end here, this same interest gives rise to this inversion that the other part of the surplus value or profit of the entrepreneur is also the remuneration for taking care of the capital!!, the reward of being a capitalist!! As if the entrepreneur himself created the profit!! and it is his work that creates surplus value, profit, interest!! Here too, the real source of values, surplus values, which is wage labour, is removed from the reach of people’s consciousness and understanding, interest induces this inversion regarding both parts of surplus value. It gives capital a cover alien to the exploitation of the worker, lacking any essential contradiction with the labour force!! It creates an image of the exploitative and industrial capitalist as if they ultimately extract the profit, interest or the entire surplus value not from the surplus labour of the workers, but from the toil, resourcefulness, and performance of their own role!! It cuts off the real origin of surplus value or the source of interest and profit from the process of exploitation of labour power, denies the process of exploitation of the worker and induces the labour process in general in its place. It creates the illusion that work is work anyway, whatever the exploiter does is work, whatever the exploited does is also work, profit and interest, or surplus value in general, are the products of labour in general!! The social role of capital is understood as the relationship between the production of surplus value and interest and capital as interest on deposits, and everything is understood in reverse. A similar perception also sparks in the capitalist’s consciousness. In examining the process of forming the general rate of profit, we saw that different rates of profit are transformed into a single rate of profit and the surplus values ​​of different areas are transformed into average profit. The aforementioned process simultaneously plants the seed of this idea in the capitalist’s brain that what causes the redistribution of profits and the emergence of average profit is also the real origin of surplus value! In other words, if he has appropriated a greater share of surplus values ​​due to the higher organic composition and more favourable production conditions of his capital advance area, then this superior technique and higher organic composition are also the main source of the production of surplus value, profit! The theory of “supervision wages” emerges as a synonym for the profit of the entrepreneur in this space of opposition between interest and profit. The belief is formed that a part of the profit can be dressed as wages, separated and called supervision wages! This could also find an inverse expression, that a part of the wages in capitalist production could be considered distinct both from surplus value in general and from surplus value minus interest, and could acquire the title of profit of the entrepreneur or the wages of the supervisor and manager.

The necessity of management or supervision appeared and imposed itself in conditions when the process of direct production had left behind the isolated labour of individual producers and had acquired a socially composite form. This supervision was an expression of the dual character of this socially composite form of the production process. It indicated that on the one hand, in all activities in which numerous people cooperate, the continuity and unity of the labour process is linked to a will and a role that belongs to the whole workshop and is not specific to a specific part of it. Similar to the role of conducting an orchestra, the productive work that is natural to any organic mode of production. On the other hand, apart from commerce, supervision is an essential necessity in any form of production based on the conflict between the productive worker and the owner of the means of production. The more acute and profound this conflict is, the more pervasive and dominant the role of supervision becomes. It reaches its peak in the system of slavery. It is inevitable in capitalism. In authoritarian states, it becomes necessary in the form of distinct aspects of governance arising from the conflict of the state with the entire subjugated mass on the one hand and supervision over various affairs on the other.

As long as there is a contradiction between the worker who produces and the owner who consumes his labour, there will also be a duality of ownership, sovereignty, and supervisory labour. In all forms of production corresponding to the collective and continuous labor of numerous individuals and based on the contradiction between the worker who produces and the owner of the enterprise, the duality of ownership and management is normal. Meanwhile, if the role of management and supervision is not a real need for the continuity of the dynamic of labour but arises from the contradiction between the owner of the means of production and the owner of labour, this contradiction indicates the exploitation of the latter by the former. Now, it does not matter whether the parties to the contradiction are serf-slave or capitalist-worker. If in capitalism, labour is sold by the worker, and it is his unpaid labour that political economy dresses up as the capitalist’s wage bill!! In order to reveal the theoretical foundation of the justification of this exploitation in the ideological system of the ruling classes, let us pay attention to the argument of “Lawyer O’Connor” under the slogan “Justice” at the 1859 meeting in the United States. “The black man is a slave by nature, he has the strength to work, but he lacks the intelligence to manage and the desire to work. Nature created him like this and therefore, out of kindness and justice, has given him a master to force him to work. Therefore, forcing a slave to work and depriving him of any right is the same as justice”!!

The basis of the bourgeoisie’s perception of the worker is not only no more humane than O’Connor’s lawyer, but perhaps even more anti-human. Here, the foundation of the insight is that the worker is devoid of consciousness, incapable of thinking and managing himself, and needs a master. It is the capitalist’s mission to be his master. The worker’s duty is to produce surplus value several times his wages, to present it to the master!! To become the agent of his exploitation process!! The bourgeois consciousness says this, a consciousness that is inverted and incapable of understanding this naked truth that capitalism, while emphasizing its role of supervision and separation from property, also shouts and exposes the superfluity of the capitalist’s existence. Just as the capitalist called the existence of the large landowner parasitic and superfluous. The capitalist’s role is only the need for capitalism to be the process of labour. With the disappearance of capital, the objectivity of his being a capitalist is eliminated. It is not locked into the exploitation of labour, it does not arise from the form of labour as a social act, cooperation, solidarity of many people, so by discarding capitalism it acquires a character independent of capital. It returns to being human. It is true that the industrial capitalist appears as a “labourer” in comparison to the money-capitalist man!! But the “labourer” who is a capitalist is an exploiter, whatever he acquires is labour without any wages of the worker and has not been paid exactly in the amount of this work. If he “labours”!! It is the labour of exploiting others! It is the deprivation of others from the right to own their own work!!

The wages of the manager, whether in commerce or in industry, when it comes to cooperative centres, are completely separable from the profits of the enterprise. In these institutions, firstly, the separation of the two is permanent and not accidental; secondly, this wage is paid not by the capitalist but by the workers. In joint-stock enterprises, which expand with the growth of the credit system, the work of management is also increasingly separated from ownership. Simultaneously with the growth of credit, money capital also acquires a “social” character, leaves the hands of the individual owner and is concentrated in the banks. It is lent by the banks, and the mere manager, who is not the owner of the capital, does not perform the real functions of the active capitalist, but only fulfils the role of an agent. In a word, the individual active capitalist is practically eliminated from the process of production.

The identification of the entrepreneur’s profit with the “right” to exercise supervision and management is essentially due to the contradictory position that average profit minus interest takes in relation to interest. Political economy has induced this contradiction in such a way that it is as if profit is not the same surplus value, the same unpaid labour of the worker!! It is as if it is the wage that the entrepreneur receives in exchange for his labour!! This empty illusion was presented with more and more colour as time passed and with the emergence of a class of industrial and commercial managers, it also found a kind of theoretical consistency!!. At the same time, of course, with the development of technology and the upward trend of labour productivity, the supervision wage, like other costs of training the labour force, began to decline. The emergence of worker cooperatives on the one hand and capitalist joint-stock companies on the other hand removed the last pretexts for identifying the profit of the enterprise with the “management wage” and made the fact that profit is nothing but surplus value shine brighter than the sun. In parallel with these events, capitalist production invented a new trick to justify the management and supervision wage. In joint-stock companies, above the heads of managers and supervisors, he has brought into the field a crowd dressed in the garb of the board of directors and the supervisory board. The job of these gluttons is to devour with insatiable appetite the enormous surplus values ​​resulting from the exploitation of the workers.

Chapter Twenty-Four

Externalization of the Relations of

Capital in the Form of Interest-Bearing

Capital

The emergence of interest-bearing capital brought the fetishist nature of capitalist production into one of its worst phases of intensification. The phase of inducing this transformation of consciousness that money directly begets money!! In the functioning of merchant capital, we were faced with M – C – M’. There was a general movement of capital, even if this movement was limited to the arc of circulation. Profit appeared as the result of a social relationship, a relationship in which buyer and seller were on both sides of it and traded commodity with each other. In interest-bearing capital, we do not witness the existence of any of these. What we see is an amount of money, say, 10 million dollars, which is lent at a certain rate, say, 0.5%, and becomes 10+(10*.05) =10.5 million dollars (10,500,000). Capital appears in this capacity, with these characteristics, as a value that believes in itself. The formula that in merchant capital had the form M – C – M’ has here become M – M’. The fetishist nature of money is carried to its extremes, suggesting that interest, although only a part of the total profit or surplus value, is the specific fruit of capital. M – M’. We have here the original starting-point of capital, money in the formula M – C – M’ reduced to its two extremes M – M’, in which M’ = M + ΔM, money creating more money.

It is the manifestation of capital’s creation of value!! And profit is only a part of it!! Everything is reflected upside down, the role of labour or the sole source of surplus value is hidden under the rubble, it is pretended that capital, without any variable component, is a sufficient condition for reproduction and appreciation cycle!! A treasure trove for theoretical deception that political economy swallows up and makes into a business tool. The expression of capital with a constant rate of self-fertilization begins with money-capital. It is from here that capital finds its pure fetishist form. All forms of interest-bearing capital originate from money-capital. For here capital firstly constantly assumes the form of money, and this form dissolves all its characteristics in itself. Money is the form in which commodities as different use-values ​​lose their difference. In this respect, the difference between industrial capitals, which are composed of these same commodities, also disappears. This is the form in which capital exists as an independent value or exchange value. In the process of capital’s reproduction, the money form is a transitory state, but in the money market, capital always exists in the form of money. Secondly, the surplus value that capital creates also assumes a state in the form of money, as if capital had given birth to money.

In the function of interest-bearing capital, the circulation of capital is shortened. Intermediation is eliminated. As soon as capital is lent, it is certain that it will be returned after a certain period of time with a certain amount of surplus value. It is this appearance of the money-making of interest-bearing capital that led a priest like Luther to say in his naive polemic: “The demand for interest is just and rightful if the lender proves that he has suffered some loss during the period of the loan.” The myth of the predetermined and innate interest-bearing of interest-bearing capital has also been produced and reproduced by a large number of philosophers and economists specializing in this mythmaking. In the 1770s, Dr. Price discovered that lending a shilling in the year of Jesus Christ’s birth with compound interest could have accumulated a sum larger than the solar system with the diameter of Jupiter!! Price only saw the birth of money by money and, in our discussion, interest-bearing capital. What had no place in his calculations was the field and process in which these interests were produced. An area that had no other place than the decline of production and the exploitation of labour. In the final decades of the same century, the eighteenth century, the young British Prime Minister Pitt considered Price’s “interest-bearing interest” delusions to be serious calculations and, by expanding the faith in those superstitions, proposed that the government collect a figure exceeding one million pounds sterling by imposing heavy taxes on the people. “Accumulate” this figure and, with the help of the miracle of compound interest, pay off the entire national debt of England!! Pitt did this not once but in different forms on different occasions. He effectively transformed Smith’s theory of accumulation into “the theory of enriching a nation by accumulating debt.”

Chapter Twenty-Five

Credit and Fictitious Capital

In the first book we saw that the simple circulation of commodities gave rise to money as a means of payment. With the continuous growth of commerce and the development of capitalism, which produces only for circulation, the basis of the credit system was strengthened. Money no longer assumed the role of a means of payment. Commodities are not traded for money but are sold in exchange for a written promise at a certain date. We formulate these payment promises under the name of bills of exchange. Bills of exchange circulate as a means of payment until their maturity and practically constitute living and ready commercial money. Bills of exchange still have the role of money, insofar as they are settled by means of the balance of debts and claims, even if they are not converted into money. What constitutes the real basis of credit is the mutual payments of producers and merchants. Bills of exchange, acting as a means of circulation, also form the basis of credit money or bank notes. Banknotes do not rely on the circulation of government metal or paper money; they rely on the circulation of bills of exchange. In capitalism, most transactions between individuals, institutions, businesses, and governments are carried out continuously, repeatedly, in the form of commitments, credits, in a word, credit.

Another practice of the credit system is the development of the money trade, which in capitalism is fused with the development of the commodity trade. In Chapter 19 we saw how the maintenance of money reserves for businessmen, the technical operations of receiving and paying money, international payments, and, in this connection, the gold trade, were practically concentrated in the hands of the money capitalists. This event gives rise to the management of interest-bearing or money capital as another practice of the credit system. It makes lending and borrowing money the special business of this group. From these springs the business of banking. The banker concentrates money capital in large quantities in his hands, takes the place of all lenders, and in their place secures the loans required by the industrial capitalists and disburses them in large quantities. The banks centralize the business of receiving and disbursing loans on a world scale. They are on the one hand the representatives of all lenders and on the other hand the representatives of all borrowers. The bank guarantees its profit by borrowing at a rate lower than the rate at which it lends from the treasury of surplus value. 

The concentrated loan capital in banks comes from several sources. 1 – Industrial capitalists and merchants place their money capital at their disposal. 2 – Deposits of capitalists with interest-bearing capital also flow to them. Banks enter into business with these huge resources, accumulate, lend, and with the growth of the banking system, especially when they are able to pay interest on deposits, they also attract a significant volume of individual savings to their profit and in this regard become a great monetary power. The collection of these small amounts is a special function of the banking system and is distinct from their role as intermediaries between active money capitalists and borrowers. Alongside and in the context of all these activities, banks accumulate income that is to be gradually consumed in the form of deposits.

Bank loans take various forms. Including: First – discounting a promissory note or converting a promissory note into money before maturity. Second – advance payment of money based on the personal credit of individuals, pledging beneficial documents such as government bonds, stock exchanges, bills of lading, warehouse receipts, documents that certify ownership. Granting depositors the right to use more than the value of deposits. Bank credits can also take various forms. Transfers to other banks, bank checks, opening credit for individuals, special bank tickets with the same role as bank transfers are among these forms.

The easier it is to borrow money for unsold commodities, the more loans are taken. The temptation to produce goods or sell them at a lower price in distant markets with the aim of borrowing money increases! The history of English trade in the years 1845 and 1846 is the best proof of this. During these years the whole of English trade was involved in this kind of fraud. In 1842 the depression which had been constantly plaguing English industry since 1837 came to an end. A little later, in 1843, the Opium War opened the door of China to English trade, and the demand for British manufactured goods increased. A boom of which we have already seen an example in the case of cotton. At that time a Manchester manufacturer told me that we must clothe 300 million people. The excitement of increased production and the need for railways drove many to this area, and the thirst of merchants and manufacturers for speculation was somewhat quenched here in the summer of 1844.

Stock was subscribed as long as there was money to cover the first payments. Provision was made for the subsequent payments. But when the time came the commercial depression of 1848-57 had cast its shadow everywhere. The capital advanced in the railways amounted to £75 million. Recourse to credit was necessary, and the company had to bear the burden. The tempting astronomical profits made the operation unviable by the unstable resources available, but credit was plentiful, easy to obtain. It was cheap. The bank rate of interest in 1844 did not exceed 1.75 to 2.75 per cent. It did not rise above 3 per cent. until October 1846. It rose briefly to 5 per cent., fell again, and by December of that year was anchored on the shores of 3.25 per cent. The Bank of England had vaults full of gold reserves. The stock exchange was experiencing a golden situation. The markets of China, India, and elsewhere were sufficiently thirsty for English products. The appearance of the situation cried out that one should not delay a minute. The capitalists set to work with all their greed, avarice, and strength, mortgaged everything they had, borrowed against deposits, began to produce and export. This process was constantly deepened and widened, and soon a system of deposits arose whose sole purpose was to obtain advance payment. A system which inevitably became pregnant with a flood of goods in the markets and a kind of financial collapse.

A bad harvest in 1846 accelerated this collapse. England, and especially Ireland, had a desperate need to import wheat and potatoes. But the country could only deliver a small part of its industrial production to the supplying countries in exchange for these imports. The rest had to be paid for in precious metals. At least 9 million pounds sterling of gold left England, of which 7.5 million were in the bullion reserves of the Bank of England. The other banks whose reserves were held with the Bank were forced to reduce their facilities. The rapid and easy flow of payments to the banks ceased. The bank discount, which had been about 3 to 3.5 per cent. up to January 1847, began to rise, and by April of that year it had reached 7 per cent. This rate had risen to 10 per cent. In short, the opening of the Chinese market with the criminal Opium War, which had excited the industrialists to an unprecedented degree, and had delighted them with deposits, loans, overproduction of goods, and exports, was now bringing about a great financial collapse. The default of payments became general. Many companies went bankrupt. The Bank of England, with all its grandeur and power, was shaken and threatened with collapse. The disaster, as usual, led to very serious government intervention. The government repealed the fraudulent Banking Act of 1844. The bank was able to circulate its notes without hindrance. Notes whose validity was guaranteed by the government credit. This measure provided a great deal of monetary convenience. It removed some difficulties. The peak of the crisis was over. The bank discount was reduced to 5% in December. Bank bills, which were discounted at exorbitant rates, were in a better position. According to a report from the House of Lords, the depreciation of government securities and stock on the stock exchange in October 1847 amounted to a total of 114,762,320 pounds sterling. The Guardian newspaper, on November 24 of the same year, in an article about the fraud in the East India trade, explained that here a promissory note is not issued to buy goods, but on the contrary, goods are bought to issue a promissory note convertible into money!! Both the buyer and the sender of the goods earn money long before the price of the goods is paid, and this newspaper and many other companies and publications have published a large volume of reports and documents on this subject. (We will not quote the articles of these newspapers here. Marx himself has quoted a considerable number of these reports in the continuation of this discussion for the purpose of further explaining the matter, and the reader can refer to them if necessary.)

Chapter 26

The Accumulation of Monetary Capital and Its Effect on the Rate of Interest

Marx begins this chapter by quoting various reports and theories published in the newspapers and magazines of the day by various circles of the bourgeoisie and the British government on the accumulation of money capital and the rate of interest or related matters. After reviewing the documentary evidence of the absurd fabrications of the peddlers of money, he begins his critical examination and writes: This self-deceiving nonsense is worthy of the writers of the “Currency principle” column. The discoverers of this ingenious theory that banknotes or gold are not borrowed for their own sake, they are borrowed to be used in the purchase of something!! And when, in the face of this brilliant theory!! they are asked, “Very well, what is the basis for determining the rate of interest?” Their answer is that supply and demand!!

Amazing! We have so far considered supply and demand as the effective factors in regulating the market price of goods, let alone the fact that even though the market price of products remains constant, it is still possible to change the interest rate. In addition to all this, interest is paid on money, and this raises a serious question. This question is that the banker receives interest without the exchange of goods. So, what does interest have to do with supply and demand?! The next question is that do not manufacturers receive the same interest rate for the money they spend on products in completely different markets with completely different supply and demand? Considering all this, what is the purpose of your above claim, geniuses? The explanation of the high-ranking geniuses in response to this question or questions is: “If the manufacturer buys cotton on credit, the difference between the cash sale price and the credit sale price until the due date will be the basis for calculating interest”!

The opposite is true. The current interest rate is the measure of the difference between the cash payment and the credit price at maturity. Cotton is initially sold at its cash price, the price determined by the market. The price determined by supply and demand. Let us suppose that the price of cotton in the transaction between the manufacturer and the cotton dealer is 1000 pounds sterling. But a second transaction is added to this transaction. A transaction between the lender and the borrower in which 1000 pounds is given to the manufacturer in the form of a loan. On the condition that the said amount is returned to the lender after 3 months along with an additional amount of money, namely interest. Here the price of cotton is determined by supply and demand, but the three-month loan price of 1000 pounds sterling is determined by the interest rate. The fact is, but since in this transaction the cotton itself takes the form of money-capital, it gives the very intelligent Mr. Norman the illusion that if money did not exist at all, there would be interest after all!!

The value of commodities which enter the process of production and act as capital is expressed, in contrast to their commodity status, in the profit which is derived from their productive use. The rate of profit is always related to the market price of commodities and to the supply and demand for them, although it is determined in the face of various factors. There is no doubt that the rate of profit is the limit of the rate of interest in general, but Mr. Norman must clarify how this limit is determined? Also show that this limit is determined on the basis of the supply and demand for money-capital in view of its difference from other forms of capital. Let us put the question in this way: how is the supply and demand for money-capital determined? There is undoubtedly a connection between the supply of material capital and money-capital, and there is no doubt that the demand of industrial capitalists for money depends on the actual conditions of production. Instead of explaining these issues, Norman says very “wisely” and pedantically: “The demand for money-capital is not the same as the demand for money itself.” He expresses this stunning “wisdom” because he, along with Overstone and other “Currency” experts, finds himself tormented by a guilty conscience, the same torment that motivates their efforts to promote the artificial intervention of the legislative means of circulation with the aim of raising the rate of interest and the production of capital.

Now we turn to Lord Overstone (Samuel Jones Lloyd), a banker, economist, and member of the House of Lords of England, and ask him why he charges an additional 10% on his money on the pretext of a shortage of money capital in the country? He replies that the fluctuations in the interest rate are caused by one of the following two reasons.

“1 – It arises from changes in the value of capital” Very well! The value of capital is the same as the rate of interest. So, the change in the rate of interest is caused by the change in the rate of interest, the problem cannot be understood otherwise theoretically. A point that we have clearly explained and emphasized. The alternative to this view is that Overstone considers the value of capital to be the rate of interest, or in fact the rate of interest. Such a belief is very foolish.

“2. It is caused by the change in the total amount of money in the country, all important fluctuations in the rate of interest, regardless of their importance in duration or extent, clearly originate in the value of capital!! A striking practical example of the matter can be seen in the rise in the rate of interest in 1847 and also from 1800 to 1856. The insignificant fluctuations in the rate of interest, which are caused by changes in the amount of money in stock, are usually small in extent and duration. They occur frequently, and the more often they occur, the more effective they are.” The more effective they are, the richer they are, the richer bankers like Overstone.

We will talk about the effect of the interest rate on the quantity of money later, but for the time being, let us suffice it to say that Overstone is also a pervert. In 1847 it was the demand for money-capital that increased for various reasons. Before October no one was concerned about the shortage of money. The rise in the price of wheat, the price of cotton, the overproduction and unsold sugar, the profiteering on the railways, the effects of the overflow of foreign markets with cotton goods, the forced exports and imports in relation to India for the purpose of speculation, all together caused the emergence of surplus production in industry and agriculture. These same events increased the demand for money-capital, the demand for credit and money. But whatever the cause, what raised the interest rate, that is, the value of money-capital, was the demand for money-capital.

If “Overstone” means: the value of money capital rose because it rose!! This is just a simile. If he means that the rate of interest caused the rate of interest to rise, this view is fundamentally wrong. The demand for money-capital can also rise with a fall in interest. As soon as the supply of money-capital falls relatively, its value rises. Overstone insists that the crisis of 1847 and the rise in the rate of interest had nothing to do with the quantity of money in existence!! By insisting, he wants to prove that his proposed law of 1844 did not cause the crisis!! But the main problem is not that, but something else. At that time, first of all, there was a shortage of money, and this shortage of money caused an excessive volume of transactions compared to the available possibilities and a disruption in the process of reproduction. An incident that exploded with bad yields, excessive investments in railways, overproduction of goods, especially cotton, counterfeit transactions in China and India, profiteering, excessive imports of sugar, and the like. The fall in the price of wheat from 120 shillings to 60 shillings caused great losses to wheat traders. The reason for the unsold wheat here was not a shortage of banknotes. The same was true of the sugar merchants and their huge stock of unsold sugar, who had stagnated their circulating capital in the hope of receiving credit. Overstone links all this to the rise in the value of money-capital. He fails to understand and observe the fact that at the same time as the value of money-capital rises, the value of other forms of capital, including capital commodities, falls.

In the case of 1847, the bank interest rate rose because profits fell, and the money value of commodities fell to a great extent. Overstone’s claim that the rise in the interest rate was due to the rise in the value of capital is the result of the error that he summarizes and confines the value of capital in the value of money-capital!! The value of money-capital is nothing other than the interest rate, and here the cock’s tail sticks out from under Overstone’s cloak when he identifies the value of capital with the rate of profit. As for the high interest rate of 1856, we must also state that Overstone has not caught the scent of understanding the matter correctly. The rise in interest in this year was largely due to the emergence of new brokers. Brokers who paid interest not from profits but from other people’s capital. It is worth considering that a few months ago he had declared that “business is perfectly stable.”

Overstone claims: “It is a mistake to think that the capitalist’s profit is reduced by the rise in the rate of interest. The rise in the rate of interest is seldom prolonged, and if it is, it is evidence of an increase in the value of capital, which indicates a rise in the rate of profit.” He continues: “The rise in the rate of interest is the result of an increase in business in the country and a considerable increase in the rate of profit. The complaint that the rise in the rate of interest disturbs the two things that are its causes is logically absurd.”

These words are as logical as seeing the rising rate of profit as the result of the rise in the price of commodities produced by the stock market!! Only a usurer who is fed up with his high rate of interest can consider it absurd that the cause is destroyed by its effect. The greatness of the Romans was the cause of their conquests, and these conquests destroyed their greatness. Wealth is the cause of luxury, and luxury may well be the cause of the waste of wealth. No better sign of the extent of the stupidity of the bourgeois world than the disgusted respect of the various circles of the English capitalist class for this cunning, cunning usurer. Let us also consider that if the high rate of profit and the expansion of business are considered the cause of the rise in the rate of interest, it does not in any way mean that the high rate of interest is the cause of the golden profits. The fundamental question is whether if this high rate of profit falls into the abyss, will the rate of interest remain high, or will it also fall? The usurious banker “Overstone” adds:

“The increase in the value of capital has caused the rate of discount to rise. The reason for the increase in the value of capital is clear. During the thirteen years since the Banking Act was in force, the trade of England has increased from £45 million to £120 million. There are many things to be seen in this increase. The sudden demand for capital for the purpose of the enormous increase in trade, the enormous natural resources to meet this demand, the annual savings which have been spent for the last few years on an unprofitable war. I must confess that I am very much surprised why the rate of interest has not been higher than it is? Why has the pressure on capital not been more gigantic than we see it to be?”

Overstone thinks that the enormous expansion of real capital in the process of reproduction and the already existing capital for which the enormous demand has made world trade gigantic are separate and unrelated phenomena. But did not this enormous increase of capital come from the same gigantic expansion of production? If the increase in production created demand, would it not create supply, and would it not lead to an increase in the supply of money capital? If the rate of interest rose, was it only because the demand for money capital increased more rapidly than the supply? Let us not forget that this greater increase in demand than the supply of money capital implied that the expansion of industrial production was carried out on a larger scale of credit, and this increase in demand is what our banker refers to as the increase from £45 million to £120 million. Apart from this, when Overstone speaks of the cost of the Crimean War and claims that the annual savings of the country were spent on this fruitless war instead of creating a great demand for capital, he must answer, firstly, how could England have accumulated in the war of 1792-1815, which was far more costly than the Crimean War? Secondly, from what source could the capital flow if the natural resources had dried up? Thirdly, if there was only a volume of money capital, how could its efficiency be doubled at a high rate of interest? Overstone believes that the annual savings of the country have been converted into money capital only, and the question is, if there has been no real accumulation, no increase in production, no increase in the means of production, then what was the use of accumulating money claims on such production in such a situation? The usurious banker identifies the increase in the “value of capital” resulting from a high rate of profit with the increase resulting from an increased demand for money capital. But this demand may have arisen from causes quite independent of the rate of profit.

Overstone, in response to the question of what effect the discount rate has on the merchant and what he considers the normal rate of profit, states: “It is impossible to answer.” Then he continues that if the rate of profit is 7 to 10% and the discount is increased by 2 to 7%, it will obviously affect the rate of profit.” He does not realize that the question itself is evidence of identifying the profit of the enterprise (the manufacturer’s share of the profit) with the total profit or rate of the two. Overstone does not understand that the rate of profit is the common source of the rate of interest and the rate of profit of the manufacturer. The rate of interest can leave the rate of profit unchanged, but in that case, it affects the rate of profit of the industrial capitalist. But Overstone’s answer is that “businessmen will not accept a discount rate that is disadvantageous to them; instead, they will close their business.” In response to “What is discount and why do people discount promissory notes?” He says, “Because they want to make more money.” This is not an accurate answer. Businesspeople discount to benefit from the return on their stagnant capital and prevent their businesses from closing. They discount because they have to pay their due debts. The demand for more capital is when business is good. Discounting is by no means a simple and desirable means of expanding business. Overstone then faces the question, “Why do people want to become masters of more capital? The answer is that they want to employ more capital. Why employ more capital? To make more profit.” The first premise of this complacent logic is false. The average businessman discounts promissory notes in order to obtain the money form of his capital and thereby keep the process of reproduction alive. Discounting promissory notes is not for the purpose of forming additional capital or expanding business. It is to compensate for the credit he has given to others by the credit he receives.

Instead of seeing discounting as the conversion of promissory notes representing capital into cash, Overstone identifies it with the borrowing of additional capital, and when he is pressed by his own sloppy logic, he retreats. At the same time, he is faced with the question whether merchants are not obliged to continue their trade for a while after starting a business, despite a temporary rise in interest rates? His answer is that “of course, in the case of a separate transaction, it is more pleasant for him if he can obtain capital at a lower rate of interest instead of at a higher rate.”

Overstone sees under the name of “capital” only his bank capital, and he considers the discounter of promissory notes to be a person without capital because his capital is in the form of commodities or promissory notes. Let us consider a few other questions and Overstone’s answers.

Question: What is the relationship between interest rates and bullion, the relationship between the interest rate affected by bullion and the interest rate affected by the value of capital?

Answer: “I do not think it will be effective, but if it is, I think we should adopt strict rules from the 1844 Act. If an increase in the amount of bank bullion causes a decrease in the interest rate, the reserve of bullion must be increased infinitely until the interest rate reaches zero.”

Question: Suppose 5 million pounds sterling of bullion is added to the existing reserve of the Bank of England and the interest rate falls to 3 or 4 percent. In that case, why should we say that the decrease in the interest rate is due to a large decrease in the country’s trade?

Answer: “We said that the recent increase in the interest rate, and not the decrease in the interest rate, was closely related to the increase in the country’s trade.”

We see that Overstone’s answer has nothing to do with the questioner Kylie!! In fact, he has no answer.

Question by “Kylie” You see money as a means of acquiring capital, wouldn’t capitalists face a major problem in obtaining money with the reduction in the Bank of England’s bullion reserves?

Answer: “No, not just capitalists, because people who are not capitalists also seek money, they acquire through money the capital of capitalists for business.”

We note that Overstone does not consider manufacturers and merchants to be capitalists. He only accepts money capital as capital!! Let us not forget that he considers money to be a means of acquiring capital, while money is only a form of capital.

Kylie Questioner: Aren’t those who kill you capitalists?

Overstone: “Maybe they are and maybe they are not.”

This conversation continues, and since Marx examines the subject at the end of Chapter 32 of this book, we will avoid quoting the rest of the questions and answers and what Engels added to them in the course of compiling the book.

Chapter Twenty-Seven

The Role of Credit in Capitalist Production

The general considerations we have made so far about the credit system are as follows.

1- The importance of credit as a means of equalizing the rate of profit or helping to achieve this equalization, which is the basis of the entire capitalist mode of production.

2- Reducing the costs of circulation through the following channels:

First: One of the important costs of the era is money itself, because money has value and is saved in three ways through credit.

1. Money is set aside in a major part of transactions.
2. Acceleration of the circulation. This acceleration is on the one hand technical, in the sense that a smaller quantity of money is required for a constant volume of transactions of goods through credit. This is connected with the technique of the banking system. On the other hand, it increases the speed of change of commodity and accelerates the circulation of money. The average note in circulation of the Bank of France in 1812, when the circulation of money for the total of receipts and payments was 2,837,712,000 francs, amounted to 106,538,000 francs. In 1818 the amount of money in circulation reached 9,665,030,000, while the average note in circulation did not exceed 101,205,000 francs. (The Currency Theory reviewed) In Britain, from September 1833 to September 1843, about 300 banks were established, each issuing its own bank notes. This reduced the circulation of bank notes from 36,035,244 pounds sterling to 33,518,544 pounds sterling. (Ibid.) Before the establishment of banks, the amount of capital employed in the circulation of goods was always greater than the amount required for the circulation of money. (The Economist)
3. The replacement of money and gold by notes 

Second: Credit accelerates the process of reproduction and does this by accelerating the transformation of goods on the one hand and capital on the other. At the same time, it allows the distance between buying and selling to become longer, a problem that also follows the stock market. The contraction of the reserve base is another role played by credit in two distinct forms. On the one hand, by reducing the means of circulation and on the other hand, by reducing the volume of capital whose monetary form is the need of the reproduction cycle.

3 – Joint-stock companies, emergence and consequences.

The first consequence of the establishment of these companies was the enormous expansion of production and the remarkable growth of enterprises. An event that had not been possible for individual capitals before. With the emergence and development of these companies, state institutions also became joint stock.

The second consequence is the direct emergence of capital in the form of “social capital” as opposed to private capital. Capitalism is essentially a collective mode of production that is associated with the social gathering of the means of production and labour. This leads to the elimination of capital by arranging private property within the boundaries of the capitalist mode of production.

(Explanation: It should be noted that Marx does not mean here a change in the basis and essence of capital. The corporatization, co-operativities, state acquisition or any form of change in the ownership of capital does not in any way change the basis of its being capital. Contrary to some assumptions, the point Marx intends and emphasizes is precisely that the emergence and monstrous global expansion of joint-stock companies, the stock market or similar developments only give a different arrangement to the form of capital ownership. In other words, it replaces the individual ownership of small capitals with the joint ownership of capitalists or capitalist institutions over ever larger volumes of capital. Something similar to that, and of course with its own differences, occurs in the case of the change in the form of capital ownership from private to state.)

The third result of the development of joint-stock companies is the transformation of active and skilled capitalists into agent managers of other capitalists, capitalists who own money-capital, but what they receive is not the interest on the money of capital, as a part of the profit, but the total profit, including interest and profit of the entrepreneur. They receive this total profit as a reward for the ownership of capital, but an ownership that is completely separate from the active action in the production process and has the form of simple appropriation of the surplus labour of others, the surplus labour of workers who, with the capitalization of the means of production, are separated from their own labour, alienated from their own labour, and freed from any interference in the fate of their labour. In joint-stock companies, management and supervision, or the general work of managing the production of capital and profit, is separated from the ownership of the means of production. It is implied that the manager or entrepreneur is also a wage earner who receives special rights for his work!! The inverted idea that capital induces. He is the capitalist; he seizes a share of the surplus value produced by the workers. In exchange for playing the role of planner, manager, expert of capital and enforcer of the valuation order, he gets this share, which is more and more intense, more erosive, more crushing and more profitable exploitation of capital on the workers. This situation, which embodies the highest level of development of capitalist production, presents a transitional circle. A circle that is only a phase of the more complete development and unfolding of capitalism. All its developments and complications imply an ever more intensification of the exploitation of the working class, a deeper and more terrible separation of this class from its labour, an ever more painful alienation of the workers from their labour, and an ever more crushing and overwhelming domination of capital over the fate of their labour.

(Explanation: Marx calls the entry of capitalism into this stage a kind of elimination of capitalism under the conditions of capitalist domination. The core of Marx’s view of the process of capitalization or the development of joint-stock companies is simply the socialization of capitalist property, labour, and production under the domination of this mode of production. Both here, as we will see, and elsewhere, he shows with astonishing precision that the highest level of socialization of labour and property in capitalism not only does not harm its existence and survival, but that this survival only makes domination more mysterious. The essence of Marx’s statement is that the continuous and increasing transformations of capitalism can be used by the conscious anti-capitalist movement of the working masses as an effective mechanism to pave the way for the destruction of the system. The essence of his anatomy is essentially different and contradictory to the interpretation that Kautsky and Lenin later put forward of the role of joint-stock companies or the socialization of capital ownership and made it the era of the death of capitalism and the threshold of the emergence of socialism!! In Marx’s analysis, socialization, however ambiguous, it is not the nature of labour, property, and capitalist production that determines the survival or extinction of this mode of production. Only the conscious, organized, and inherently anti-capitalist movement of the working masses plays this role. Marx leaves no room for socialism to be understood as the state-isation (Nationalization of capital), corporatization, or co-operativities of capitalism, but the interpretations and narratives of Kautsky and Lenin do exactly that.)

Before continuing the discussion, let us mention another important point. We have seen that with the emergence of joint-stock companies, profit takes on a more completely the form of interest, even interest is the basis for the establishment and survival of enterprises. This component plays an important role in the challenge of the decline in the rate of profit. Because here the huge mountain of fixed capital rising up against the variable component of capital does not need to be fully involved in levelling the rate of profit.

Fourth point: Apart from joint-stock companies and their role in transforming individual ownership of industries into collective and joint-stock capitalist ownership, credit allows a capitalist to exercise his dominance over other capitals, the property of others and the labour of others within certain limits. Beyond this, it allows a specific capitalist to establish his dominance over social capital and labour. Credit causes capital, whether it belongs to a specific capitalist or to capital that the general public considers to be his property, to play only the role of the basis of credit. This is especially clearly visible and tangible in the case of wholesale trade, where the majority of the social product is traded in this way. The mountain of trade that occurs and the profit-hungry businessman risks his loss, capital is not his own property, but a social asset. In this regard, the absurd idea that capital boasts of the capitalist’s savings reveals its vulgarity more than ever. The merchant capitalist swallows the savings of others and adds to his capital. The deceptive myth of seeking the source of becoming a capitalist in contentment and austerity also lifts the veil from his face. The speculators gather up the pretence of avoiding extravagance, display their dazzling luxuries to the public in order to prove their competence in obtaining mountain-like credits. The expropriation of small producers is the starting point of capitalist production, but here it is no longer a question of the expropriation of peasants and small craftsmen, but a story of the abolition of the property of small and medium capitalists. A process that ultimately brings to mind the expropriation of the means of production from all individuals, but the realization of this process under the domination of capitalism has no further meaning. The fact that financial giants and giant joint-stock companies are gradually devouring their partner wolves and rival boars and continue to expropriate their competitors. The entire capital of the world, which is becoming more and more galactic at the speed of light, is being owned by an ever-smaller number of octopus trusts. This process does not weaken capitalism in any way, but rather makes its ownership, power, and rule more centralized and infinite.

Before the emergence and growth of joint-stock companies, the establishment of cooperative factories by workers was a kind of break from capitalism in the control of the government and the survival of this system. In a factory cooperative or production cooperative, the individual ownership of the capitalist was replaced by the collective ownership of the workers. This replacement did not change the basis of the capitalist mode of production; at best, a few dozen or a few hundred workers became their own capitalists and used the means of production to reproduce and create value for their labour. A factory cooperative within the specific four walls of a factory eliminated the conflict between the worker and the capitalist and showed that capitalism, in the process of its development, domination and domination, had provided the material grounds for the labour movement to overcome this system. It revealed the fact that the achievement of humans to a society based on the free, conscious, equal and socialist domination of all individuals over the fate of labour and collective production required overcoming capitalism. Just as the credit system could not have been formed and expanded without the emergence and growth of this mode of production.

The credit system extends the flexibility of the capitalist reproduction process to the utmost limits, making this entire expansion a smooth path to achieving overproduction and excessive profiteering. It allows giant joint-stock companies to take over ever greater volumes of social capital and capital belonging to other capitalists, to use all these capitals as collateral for an excessive increase in accumulation and profit-making. To do what the individual capitalists who own them, due to a multitude of limitations, including the inevitable prudential calculations of achieving the desired rate of profit, have not been able to do and cannot do. Let us not forget that a huge share of these capitals, as we have seen earlier, are content with a profit that is completely below the general rate of profit. Here another important secret is revealed. Under the pressure of its inherent contradictions, capitalism allows “free growth” to be realized only up to a certain limit. Capital itself is a solid barrier to its own expansion. A barrier that blocks the way to “free growth.” The credit system challenges this barrier and accelerates the cancerous growth of the productive forces. But this growth, spurred by the very contradictions inherent in capital, makes the boiling of crises more acute, the roar of each crisis more crushing, and the dimensions of the devastation of crises more monstrous.

(Note: Marx’s reference to cooperative factories refers to production cooperatives. It does not in any way encompass other forms of cooperation. Production cooperatives are still capitalist enterprises, even at their best. Workers, although not in direct opposition to individual capitalists, are exploited by social capital. The disappearance of the direct contradiction between worker and capitalist in no way negates the survival of the contradiction between workers and the capitalist system. The abolition of wage labour is not a limited factory operation and is not possible without the rise and fielding of an organized, nationwide, anti-capitalist Soviet movement.)

Chapter 28

Medium of Circulation and Capital;

Views of Tooke and Fullarton

 Thomas Tooke, John Fullarton, James Wilson, J. W. Gilbart and many others are confused about the distinction between money as money – capital in general or productive capital, on the one hand, and money as a means of receipt and payment on the other. Money is a medium of exchange, and in fulfilling this role it can assume two different forms. First, it is a medium of expenditure of income, acting as a medium of exchange between unproductive private consumers, whether capitalists or workers, and retail merchants. The second is that money plays the role of a means of transferring capital. In this case, regardless of whether it is used in purchases or performs the function of payment, it is still capital. Money is a means of circulation in both cases, and the difference in its role in the two cases mentioned is not at all that in one place it is a means of circulation and in another it is capital, on the contrary, in one place it is the monetary form of income and in another place it is the monetary form of capital. Political economy upsets this criterion and confuses everything. Tock carries out this confusion in three distinct ways: first – mixing the functions of money, second – introducing the quantity of money into circulation, alongside the different role of its functions, third – involving the quantitative ratios of the means of circulation in two distinct functions and two different areas of the reproduction process. Let us briefly examine each of them.

1- Mixing the functions

Tock believes that money is a means of circulation in one place and capital in another!! This is wrong. Money is, in any case, a means of circulation, but with two different roles. Where it has the form of money, it can assume the role of payment and can become a means of purchase. The important thing is that what is traded and money in the form of coins or banknotes becomes a means of exchange, are revenues. Revenues that can be the wages of workers and return to the capitalist-retailer in exchange for the purchase of the necessities of reproduction of labour power, or otherwise be part of the surplus values ​​produced by the working masses in the hands of capital owners, which are spent as income for their living expenses, pleasures, and well-being. Another situation is that money is the monetary form of capital. Here too, it does not matter whether it is a means of payment or purchase. Its role as the monetary form of capital in the process of circulation is important. The merchant deposits coins or sums of money he has earned from the sale of his goods in the bank and makes his purchases with this deposit. The money from the sale of his goods is part of his capital. Tock considers money only before it is advanced in the production curve of capital. He does not realize that the commodity-capital that has left the circle of production is also capital mixed with surplus values. The goods produced are not only capital now, but they were capital in the past. What the capitalist sells as commodity-capital is precisely the capital that has dissolved labour power in itself, transformed it into surplus value, made it part of itself, and now sells this increased capital. He also deposits the price received for this sale in his account as capital or advances it directly. With all these explanations, Tock’s talk of circulation and capital as distinct states of money is completely unfounded. What is true is that money is in one place the money form of capital and in another place the money form of income, and in both cases, it is a means of circulation.

2- Involving the quantity of money in circulation, alongside the different functional roles

The volume of money in circulation, regardless of whether it is a medium of receipt or payment, whether it is used in this or that environment, whether its function is to organize income or capital, in all these cases is subject to the laws that were explained in Volume I, Chapter III, in relation to the simple circulation of goods. There it was said that the volume of money in circulation is a function of the speed of circulation of goods and the number of reversal periods in a given period of time, the volume of purchases and sales, simultaneous payments, the sum of the prices of goods in circulation. Whether the money in circulation represents capital or income does not determine its volume.

3 – Quantitative ratios of the medium of circulation in the two distinct functions of money

The environments of capital and income circulation are intrinsically linked. The volume of income that is spent indicates the scope of consumption. The volume of capital that is advanced to play the role of circulation in production and trade also indicates the speed and dimensions of the reproduction process. However, the same factors can have different or opposite effects on the quantity of money circulating in the two environments (capital and income). Perhaps this is what made Tuck and his associates insist on the paper theory of dividing the different forms of money into circulation and capital.!! In a period of prosperity, accumulation develops, the reproduction process accelerates, employment is full, perhaps wages rise, and the incomes of capitalists grow greatly. Consumption becomes more widespread. Prices rise, at least in the essential branches of business. Under the influence of all these factors, the quantity of money in circulation grows, especially within certain limits. At the same time, the greater speed of circulation counteracts the increase in the means of circulation. It is clear that wages are from the beginning advanced by the capitalists in the form of variable capital. This advance increases in the period of prosperity and requires more money. The essential point is that this quantity of money should not be calculated twice, once in the form of the money required for the circulation of variable capital, and again in the form of the money of the means of circulation of the workers!! In the period of prosperity, it becomes easier for the capitalists to return money; this does not mean that they allocate more money to wages, but it implies that they require more money for the circulation of their variable capital. The general result is that in times of prosperity the volume of means required by the economy for the expenditure of income grows. In the case of the cycle of capital transfers, which take place only between capitalists, the velocity of circulation between capitalists is directly regulated by credit, the volume of means of circulation for payments, even cash purchases, decreases, if not absolutely, then relatively. Huge payments are made without the intervention of money. A given quantity of money, whether in the form of payment or purchase, increases its velocity. This same given quantity of money becomes the medium of the return of a much greater number of capitals. Credit makes the return of capital to the money form independent of the usual time of return, a phenomenon which is true of both industrial and commercial capital. Each of these forms of capital sells on credit, buys on credit, and in this way the value of its commodities returns to it before it has really been converted into money, before the price of the commodity is paid in due time. In the period of the supremacy of credit the velocity of circulation of money grows faster than the price of commodities. A credit crunch leads to a slowdown in the rate of price increases relative to the rate of inflation.

The components that we have discussed so far about the boom period are reversed in the crisis period. Circulation No. 1 (the income cycle) contracts. The speed of capital turnover decreases, prices fall. Wages fall; the number of employed workers is limited. The volume of transactions decreases, while in circulation No. 2 (the transfer of capital), the need for monetary facilities increases along with the reduction of credit. This is an important point that Fullerton misinterprets and analyses. He concludes from observing what happens in different periods of boom and crisis that it seems that the high demand for credit is the criterion that distinguishes these two periods from each other!! There is no doubt that with the slowdown in production and the reduction of credit, the volume of the cycle needed for income (No. 1) decreases, while the volume of the cycle for the transfer of capital (No. 2) increases. This is true, but Fullerton’s conclusion from these changes is completely incorrect. Let us explain this a little. We have said that with a boom, the volume of means of production increases, and consequently the demand for these means increases. The manufacturer withdraws more gold and banknotes from his bank account because he needs more capital in the form of money. But this does not mean that his demand for capital has increased! What is true is that his need for this particular form of capital has increased. To be more precise, the distinction between a boom and a crisis, as far as the present discussion is concerned, is that in a boom the demand for means of production among consumers in general, whether workers or capitalists, is greater than that of merchants, but in a recession the demand for means of production among capitalists is greater.

Fullerton observes the changes but is unable to properly understand and explain them. For example, when the promissory notes and collateral for loans to the Bank of England increase, the circulation of bank notes decreases. The opposite is also true and occurs, that is, a decrease in the aforementioned collateral causes an increase in the circulation of bank notes. The important point here is that the bank guarantees discussed represent the scope of monetary facilities, that is, discounted promissory notes. Fullerton believes that the securities under the control of the Bank of England have acted in the opposite direction to the circulation of bank notes. He continues in this vein and with the same argument that no bank can issue more notes than its customers need, and if it wants to issue notes, it has no choice but to pay the necessary credit from its own capital! For example, by liquidating its securities. With this explanation, Fullerton shows that he does not even have a proper understanding of capital. The question is what does capital mean here? It means that the bank cannot pay loans with its own notes, which it is responsible for paying and for which it does not incur any costs. The question is from which source it pays the loans; it is known that it does this by selling its existing collateral, for example, bonds, government stocks or other securities, the next question is what the bank receives in return for selling the collateral. Naturally, notes. The same notes that are now the bank’s capital.

Chapter Twenty-Nine

Component Parts of Bank Capital

Fullerton and others interpreted the difference between money as a means of circulation and a means of payment as the difference between money in circulation and capital. A turn in political economy around the narrative of capital, if economists had previously insisted that money was not capital, now all they insist on is that money is full-fledged capital!! From here on we will try to show that money capital has been confused by these gentlemen with monetized, (interest-bearing) or interest-bearing capital. They are not the same. Money capital in its former sense is nothing more than a transitory form of capital, distinct from productive and commodity capital. The components of bank capital are as follows.

First: Cash (banknotes and gold)

Second: Securities with the following classification:

A. Commercial papers, bills of exchange with fixed maturity and discount

B. National securities such as government bonds, stocks, all interest-bearing bonds, mortgages, treasury bills

Bank capital can belong to the banker himself or to the deposits of others. In the case of banks with the right to issue banknotes, banknotes can also be considered capital. In our study, whether the owner of the capital is the banker or other individuals is completely irrelevant and irrelevant.

It is assumed that every fixed and definite monetary income is the interest on a capital. Whether this is the case in practice or not, monetary income is first converted into interest and then into capital. For example, if the average rate of interest is 5% per annum, £500 is an interest-bearing or interest-producing capital which yields £25 per annum. In this respect, every fixed income of £25 appears as the interest on £500 of capital. But this is only an illusion. Unless the £25 is directly transferable in the form of a claim, a title deed, an actual element of production in the form of land. Let us consider the national debt as an example in this passage.

Every year the government receives a large amount of capital in the form of loans from individuals and pays interest to these creditors. The owners of this capital cannot withdraw their capital from the government, but they are allowed to transfer and sell their claim or title deed. The capital borrowed by the government itself has been spent and does not exist. The creditor has only a government promissory note. A promissory note entitling him to claim and seize a portion of the annual revenue of the government. Suppose A sells his £100 promissory note to B, and the right to receive the interest passes to B. In all these cases and twists and turns, the capital which is spent in the hands of the government is entirely illusory and virtual. It has no form of real capital life. It was not originally intended to be advanced as capital, the creditor or payer of the loan receives his interest as interest on capital, but his money is not spent as capital.

Interest-bearing capital is the “mother of illusions”, the mother of the most misleading and irrational illusions. The banker gives himself the right to consider his debt as a commodity – capital, wages can be considered interest!!, labour power is considered capital that has generated interest!! If the capital relationship is essentially a volcano of inversions, capital brings interest to this volcano to its peak. The bright day introduces the result of the direct exploitation of labour power (surplus value) as interest that has been assigned to a capital called labour power!! Political economy is so blind, stupid and deluded that it does not understand that the worker must first work in order to receive this so-called interest!! Secondly, he cannot convert the capital value of his labour power into money by transferring it to others. Thirdly, he produces his own wages and several or several tens of times it, that is, the capitalist’s profit, with his work. Another name for virtual capital is capitalization. Any periodic fixed income with an average interest rate can be converted into capital in this way. Let us assume that the interest rate is 5%. An annual income of £100 represents the interest on £2,000 of capital. Anyone with this £2,000 can obtain an annual income of £100. The person who receives this £100 practically acquires the position of a capitalist. A relationship full of misleading illusions with this message of complete deception that money produces money and profit without going through the process of appreciation cycle and brutal exploitation of labour power!!

The capital value of securities is entirely virtual and illusory. If the credit system creates share capital, then securities are also ownership documents that create and continue to create a huge mountain of virtual capital. Capital that is not real. Shares in the establishment and operation of mines, shipping, and railroads represent real capital. They represent capital that has actually been advanced, but the shares issued by these institutions with real capital owners can be used as a means of various types of exploitation. They become a mechanism for capitalization and generate virtual capital in large quantities. Let us pay attention to this point and reflect on it that the capital of these enterprises has been advanced once and the sale of their shares implies the meaningless meaning that it is going to be advanced once again!! A certain and known capital cannot be two capitals, once advanced in the form of real capital and once sold in the form of shares and ownership documents!! The share here is merely a license to share in the surplus value resulting from the investment.

The independent movement of the value of these documents of property, not only in the form of government bonds but also in the form of shares adorned with appearances and signs that give people the illusion of their reality. They are transformed into commodities; their prices fluctuate in a certain way and are fixed in a certain way. Their market value differs from their nominal value. To explain this a little, if the nominal value of the shares or the total amount allocated to the shares is 100 pounds sterling and the bank pays, say, 10% instead of 5%, all other conditions remaining constant, the market value of the shares rises and, as long as the shares are calculated at a rate of 5%, they represent a virtual capital of 200 pounds. A person who buys these shares for 200 pounds guarantees himself an income equivalent to 5% of his capital. The opposite is true when the income of the bank decreases, the value of the securities also decreases. These points are not true of real capital. There, if we fix the appreciation rate, which is the case with government debt, the annual return on capital is determined and fixed in the form of “legal approval”.

The price of securities rises and falls in inverse proportion to the rate of interest. If interest rises from 5% to 10%, a £100 security with an annual return of £5 sterling becomes worth £50. If interest falls to 2.5%, the same security represents £200 of capital. Taking all these factors into account, the pressure on the money market reduces the price of securities for two reasons. First, the interest rate rises, second, the said securities are converted into money in large quantities. When the storm subsides, the value of these securities returns to their former state. So long as these increases and decreases occur independently of the movement of the value of real capital (the capital of which the securities in question are the embodiment), they have no effect on the “national wealth,” and the volume of what can be considered under this name remains constant before and after the fluctuations. All securities are practically nothing more than a collection of legal ownership documents and claims to future production. Money or their capital value is absolutely not a manifestation of capital and is determined independently of the value of the capital they represent. In all capitalist countries (the entire world today) there is a very large amount of interest-bearing capital, moneyed capital, in this form. The accumulation of these capitals simply means the accumulation of claims on future production and the accumulation of the market price of these claims, that is, virtual capital. An important part of the capital of the banks is crystallized in these interest-bearing securities. A part that has the form of a reserve and does not play any role in banking transactions. The most important of these securities are the bills of exchange. Bills of exchange are the promises of industrial or commercial capitalists to make payments. These bills of exchange are interest-bearing securities for the bank. When the bank buys them, it deducts the interest for the remaining period until the time of execution as a discount from them and determines the amount of the deduction based on the interest rate of the day.

The last part of the banker’s capital is the monetary reserve in the form of banknotes or gold. Deposits are always waiting for the depositor, unless this right or possibility is blocked for a period of time by agreement with the consent of the parties. Otherwise, deposits are in constant circulation. If some depositors withdraw their deposits, others will take their place. Let us emphasize and repeat that a very large part of the banker’s capital is entirely virtual. Their savings in the form of bank notes, gold bills, have no intrinsic value. Bills of exchange, government bonds represent past capital, and stocks, future debt securities. The monetary value of these funds or safe deposit boxes is entirely virtual. Even if they all relate to reliable income, such as government securities or property and stock certificates. Securities whose monetary value is determined by the value of the real capital they represent. In all these cases their claim to future income and production is expressed in a virtual and constantly changing money capital. Let us leave aside all this, the virtual capital of the banker is to a large extent not a reflection of his own real capital but of the public capital deposited with him with or without interest. Public deposits consist of money, gold, banknotes or money orders. The only exception is the reserve fund. The balance of this fund, which is the need of the capital circulation, is contracted and expanded according to the extent of this need. Deposits are always used in the hands of industrial or merchant capital to discount bills of exchange or are lent by securities dealers, whether private or public. For this reason, they are not found in safes. In the accounting books, they are recorded in the column of depositors’ claims.

With the ever-increasing development of capital and the credit system, each part of the total capital appears in different ways in different hands in the form of different capitals. On this basis, capitals appear double or triple. Most of these capitals are virtual rather than real. A certain amount of money can make different purchases depending on the speed of circulation. The same money can be used for different loans. For the seller, money is the transformed form of commodities. These days, any value has the ability to appear in the role of capital. Money is also represented by different capitals in different loans, each of which represents the same money in a different way. In the credit system, any amount of value can appear two or three times in size and appearance. Find a virtual and illusion mode. The same thing happens with the reserve fund. Savings funds are finally dissolved in the Bank of England’s savings fund. These funds also have a double existence. In the banking sector, it is equal to the surplus of banknotes that the bank is allowed to issue in addition to the circulating banknotes. The legal limit for the issuance of banknotes is 14 million pounds sterling, for which no metal reserves are required. This figure is equivalent to the total debt of the government to the bank plus the total bank reserve of precious metals. If this reserve is equal to 14 million pounds, the government can issue 28 million pounds of notes.

Chapter 30

Money Capital and Real Capital (1)

We begin this chapter with a few questions.

First: To what extent is the accumulation of real money capital an indicator of real capital accumulation and the expansion of reproduction? To what extent is it so and to what extent is it not so? Is the term “capital surplus,” which is only coined by interest capital, another name for the same industrial surplus production, or is it a distinct and concomitant phenomenon? Are this abundance or excess supply of money capital on the one hand and the completely stagnant existence of the mass of money in the form of gold and bank notes on the other, coincident and aggregable phenomena? Is this surplus money indicative of loanable capital?

Second: To what extent does the monetary shortage or the shortage of loanable capital indicate a lack of real capital, that is, commodity and productive capital? To what extent is this shortage a real shortage of money as a medium of circulation? What we have said so far about the special advance of money capital or money wealth has made it clear that this advance is simply the accumulation of proprietary claims on labour. The accumulation of capital in the form of “national debt” indicates the growth of a class of state creditors with a privileged right to the tax revenues derived from the fruits of labour and the exploitation of the working masses. This fact that even the accumulation of debt is considered accumulation is the height of the distortion of the nature of capital. Promissory notes are issued for capital that has been borrowed and used up long ago. They are paper copies of destroyed capital. These papers play the role of capital for the holders if there is a commodity left for sale and can be converted into capital.

The ownership documents of economic enterprises, railways, mines, etc. are licenses for the right to participate in the profits of real capitals, licenses to withdraw the surplus value resulting from the exploitation of exploited workers by real capitals. They do not exercise any control over the capital of interest. They are not enforceable; they are only legal claims to a share of the surplus value that is supposed to be produced by real capitals in the sphere of exploitation of workers. These documents are in this way the paper form of real capitals. Capitals that exist and do not change hands by the purchase and sale of the said papers. Not only do they guarantee certain incomes, but the values ​​of the capital they represent are also repaid by their sale. In so far as the accumulation of these securities is connected with railways, mines, shipping, they reflect the expansion of the process of reproduction. Just as the lengthening and multiplication of the tax lists of personal property testifies to the expansion of these properties themselves. However, let us not forget that these documents, which can be exchanged as commodities and circulate as capital values, are entirely illusory. Their value rises and falls independently of the actual capital of which they are the subject. They rise with the fall of the rate of interest, provided that such a fall is independent of the specific movements of money capital and is due solely to the downward tendency of the rate of profit.

In view of all these factors, the imaginary and virtual mass of wealth, which, according to their value, gives their owners a proportionate share of the profits, grows under the influence of the downward tendency of the rate of profit with the growth of capitalist production. The profits and losses resulting from the fluctuations in the price of their property documents in the hands of the railroad magnates or other institutions are essentially the same as gambling. A gambling that takes place instead of work and arises instead of direct force. This imaginary monetary wealth is not only a very large part of the monetary wealth of private owners, but also a very important part of the bank assets. The accumulation of money capital can be the accumulation of wealth in the hands of the declining bankers as intermediaries between the private money capitalists and the state and local lending authorities involved in the process of reproduction. Let us add that the entire gigantic expanse of the credit system is exploited by the bankers as private capital. They hold their capital and income in the form of direct monetary claims. The accumulation of wealth by this group has a form completely different from real accumulation. They pocket a significant portion of this accumulation. Government bonds, stocks, and other securities are all investment areas for borrowed capital, i.e. capital created for exploitation, but these bonds and stocks are not themselves borrowed capital in the sense of their own reserve.

Trade credit

It is the name of the credit that capitalists in the field of reproduction give to each other and forms the basis of the credit system. Its manifestations are bills of exchange and promissory notes with fixed payment dates. The endorsement of these bills is simply the transfer of a claim from one to another. For example, a spinner gives a bill of exchange to a cotton dealer. The dealer endorses the bill and makes it available to the importer. The latter, who is also the exporter, can receive yarn from the spinner in return for the bill of exchange. Each of these pays the other’s claim with the bill of exchange. In the process of this transaction, only one place must be paid in money. Here, and in connection with this circularity, two points are important.

First: The settlement of mutual claims is subject to the flow of capital return, and the ability of each debtor to pay is also dependent on the collection of his claim from the other.

Second: The credit system does not eliminate the need for cash payments; an important part of expenses must be paid in cash. Wages and taxes are among them. Let’s not forget that if in the process of these transactions one of these people is unable to pay his bill of exchange, his creditor will also be unable to fulfil his obligation. In this regard, the chain of transactions and receipts and payments break down. An event that is not accidental but even routine in the process of transactions. In this respect, the need for money is still a given in the credit system. Accordingly, a reserve capital is always necessary for these payments. A reserve whose source is the assets of the merchant and manufacturer. Apart from these, the return time can be longer than usual. The price of goods may decline, and market saturation may cause goods not to be sold. All of this emphasizes the necessity of reserve capital and its adequacy. The importance of the issue does not end there. The more and more transactions are involved in stock market gambling or rapid price increases and decreases, the more uncertain the returns become. In addition to these problems and their effects, the ever-increasing growth of productive forces and the development of large-scale production, while expanding markets, make the destination of sales more and more distant. An event that necessitates the extension of the term of credit. All these factors, in a chain, cry out the importance of credit and point out the necessity of its growth. It is clear that credit, in turn, becomes the source of the expansion of the scope of industrial and commercial activities. If we separate credit from the banker, loan capital and industrial capital become identical. The capital that is made available to the merchant in the form of a loan is actually a commodity-capital that either reaches final consumption or becomes a fixed component of productive capital. In other words, what has been loaned is capital that is placed in a certain circle of the reproduction process and is transferred from hand to hand by sale. The cotton producer gives it to the spinner against a bill of exchange, the spinner takes the bill of exchange and delivers the yarn to the merchant, the merchant exports the yarn and delivers it to a merchant in India against a bill of exchange. The Indian merchant sells it, and it is in this process that the cotton finally becomes a complete commodity. The sale of the yarn is the beginning of the purchase of indigo, and it comes from India to England through a similar process. The various stages of reproduction are carried out everywhere with the help of credit, without the spinner, the farmer, or the merchant paying any money. The important point is that this reversal process consists of two distinct stages. In the first stage, credit mediates the actual transactions in the process of production of the commodity (farmer to spinner). In the second stage, there is a transaction from one merchant to another, which also includes transportation (operation (C – M). Let us not forget an important point. This second stage is also a circle of the reproduction process.

As long as the process of normal reproduction and capital turnover is unimpeded, credit grows, and this growth depends on the growth of the reproduction process. But as soon as the face of stagnation appears in a circle of the reproduction cycle, a volume of industrial capital accumulates that is unable to continue functioning. A mass of commodity capital arises that has no prospect of sale, a significant volume of fixed capital remains unused, and credit also contracts because 1- capital is trapped in stagnation and remains frozen in a stage of reproduction, 2- confidence in the continuity of the reproduction process has disappeared, 3- the demand for commercial credit has decreased. The spinner reduces the production of yarn because he has unsold yarn in stock. The same spinner does not need credit because he sees no reason to buy new cotton. The disruption of the process of reversal and the cessation of the expansion of accumulation also leads to a shortage of credit, the demand for credit also falls. With the onset of bankruptcy and crisis, goods are not sold, debts are not paid, not only does the unused fixed capital increase, but the total quantity of capital locked up in the process of reproduction reaches its peak. Capital previously employed remains idle, the process of reproduction is disrupted and stagnant. Factories do not work, raw materials are piled up and see no prospect of consumption, the market is flooded with goods without customers. Let us assume that the entire society consists of industrial capitalists and wage-earning workers. Let us ignore factors such as price fluctuations, fraudulent businesses, and the forced stock market gambling of the credit system. In such a situation, the crisis pushes itself out and shines through the disproportion between the different branches of production, the disproportion between the accumulation of capital and the consumption of the capitalists. A misleading thrust that deceives many. Such a degree of inversion and deception that it even makes “Marxists” delude themselves into believing that the root of the crisis is in this disproportion between the different branches of production or the inadequate consumption of consumers!! But Marx’s words are very decisive, explicit, revealing, and naked. The root of all capitalist crises is in the nature of capital itself, in the existence of capital, in the depths of the relationship of buying and selling labour power, in the depths of the relationship of producing surplus value. Capitalist production is the production of the development of the productive forces without any interruption or storm, the production of capital and more massive and gigantic capital. A form of production that is not in the service of man and his life, but whose only function is the massive slaughter of man on the threshold of galactic profitability of capital. This is where the crisis boils and it is no wonder that in this mode of production, the threshold of crises always appears as the forerunners of golden prosperity!!

Accumulation of monetary capital

Any increase in loanable money capital does not guarantee the real accumulation of capital or the development of the process of reproduction. In post-crisis conditions, the situation of concentrated loanable capital in the industrial cycle is evidence of the correctness of this statement. In this situation, the prices of goods are very low, entrepreneurship is stagnant, the interest rate is low, industry is paralyzed. All this, and especially the paralysis of industry, leads to the accumulation of loanable capital. This situation is not only not an indication of the development of production but also indicates the establishment of its opposite. Low prices of goods cause fewer transactions, a decline in wages, a decrease in the means of circulation. Discounting also decreases due to the abundance of bills of exchange ready for discounting. All this reduces the volume of demand for loanable money capital and leads to the accumulation of this form of capital. If the process of reproduction flourishes, commercial credit resumes a new round of rapid and increasing growth, an expansion which in turn is a solid basis for the speed of reversals and the development of production. In these conditions, the interest rate, although not at the perigee level, is still low, the low interest rate makes the relative abundance of loanable capital and the real expansion of industrial accumulation symmetrical. The ease of capital return along with the increase in commercial credit guarantees the supply of borrowing capital despite the growing demand and prevents the rise of interest rates. It is in such conditions that the stockbrokers without the necessary reserve of capital or even without capital enter the field. By relying on monetary credits, they expand their scope of action, stable capital starts to grow in various fields, interest starts to rise, the story continues, but with the rising of a new crisis crescent, credits suddenly dry up, payments stop, and the reproduction process is disrupted. The absolute lack of loanable monetary capital appears simultaneously with the surplus of unused industrial capital.

By reflecting on the above points, we can find that the movement of loan capital is firstly accompanied by fluctuations in the interest rate, and secondly, both of them move in the opposite direction to the movement of industrial capital. This rule is violated at one point, and we are faced with the combination of an abundance of loan capital and a significant expansion of industrial capital at the same time. At one point or in conditions where the interest rate is low but above the trough, especially on the average border. The growing confidence after the crisis also makes the advance of capital promising. It is under these conditions that the movement of loan capital and the interest rate on the one hand and the movement of industrial capital on the other come into conflict and assume a state of unstable consensus of opposites. In a production system whose articulation of the reproduction process relies on credit, if credit is suddenly eliminated and all transactions are postponed to cash payment, a crisis will occur in the form of scarcity of the means of payment, a crisis of money and credit. The crisis of converting bills of exchange into money, bills that generally represent real purchases and sales, but a significant proportion of them also represent fraudulent transactions. In addition to the insoluble problem of converting or cashing bills, commodity capitals are also prevented from being sold and are devalued. Here everything is reversed, the real price and the real elements of the price formation cycle disappear. Bullion, metal coins, banknotes, bills and securities fill the place of everything. The whole process takes on a cloak of mystery and magic, a situation that is somewhat milder and more moderate in the centres of production. As prices rise, the purchasing power of the unproductive or fixed-income classes declines. The widespread and continuous international export and import also makes the transmission of crises from one point to another or the epidemic of crises inevitable. Everywhere, with few exceptions, they fall into the abyss of crisis, the balance of payments becomes negative for everyone. The event, which is certainly not rooted in the balance of payments, is in the excessive production and massive and excessive transactions resulting from the accumulation of capital without any control, in the rate of accumulation exceeding the rate of production of surplus value. In this regard, let us not forget the effect of one point. Whether exports are based on credit or not can affect the course of this process or the form of the crisis. The crisis can begin in England, where it gives the most credit and receives the least amount of credit. Its balance of payments due, which must be settled immediately, is to its detriment. Although the overall balance of trade is in its favour. In 1875, the crisis suddenly broke out in the United States. It led to the outflow of gold from England and the migration of gold to America. The American bubble burst and the crisis reached England, the same transfer and transfer can occur in the relations between England and the countries of the continent. The basic and important point is that the trigger for the explosion of the crisis is in any case the rate of accumulation surpassing the rate of production of surplus value. Excessive production requires excessive imports and inevitably carries excessive exports. Imports and exports whose wheels turn on the gear of credit, a cycle in which in a ring of its realization chain, payments come to a standstill, the entire cycle is disrupted. It becomes a prisoner of the storm of crisis; the crisis becomes a pandemic and moves from one country to another.

Commodity capital in general, especially in times of recession, loses its capacity as a potential manifestation of money capital, and securities and virtual capital, insofar as they represent money capital on the stock market, suffer the same fate. With the rise in interest rates, their price falls, the lack of public credit forces the owners of these securities to sell them on a large scale, and finally their price falls in relation to stocks, partly due to the decline in the value of the shares and partly due to the fraudulent functioning of the companies. In times of crisis, virtual money capital and with it the power of its owners to borrow on the market fall. But the fall in the money value of these securities on the stock market has nothing to do with real capital but is only a function of the ability of their owners to pay.

Chapter 31

Money Capital and Real Capital (2) continued

The question remains to what extent the accumulation of loanable money capital is consistent with real accumulation or the expansion of the reproduction process. The conversion of money into loanable capital is much simpler than its transformation into productive capital, but in this analysis a distinction must be made between the simple conversion of money into loanable capital and the conversion of capital or income into loanable money. The latter is related to real industrial accumulation and can lead to a positive accumulation of loanable capital. Let us begin with the former.

1. Conversion of money into loanable capital

The accumulation of loanable capital occurs in inverse proportion to productive accumulation. A contradiction that is visible at two points in the cycle of reproduction. First, at the end of the crisis, when industrial capital, both its productive and commodity forms, is in a state of severe contraction. Second, when the situation is improving but commercial credit still requires bank credit.

In the first case, the money capital that was previously unused in production and trade is trying to transform itself into loan capital. In the second case, this capital has begun to work increasingly, but at a low rate of interest, because the industrial and merchant capitalists have created the conditions for its operation. The abundance of loan capital in the first case indicates the stagnation of industrial capital, and in the second case, the relative independence of commercial credit from bank credit. In the first case, the inflation of loan capital is accompanied by the cessation of real accumulation. In the second case, the inflation coincides with the resumption of the growth of the reproduction process, the concentration of loan capital is decreasing but still depends on demand. In both cases, the accumulation process is expanding because the low rate of interest is associated with low prices in the first case and with prices increasing at a low rate of increase in the second case. It increases a part of the profit that is converted into the profit of the entrepreneur. This phenomenon becomes more pronounced when interest reaches the average limit. A situation in which interest has increased but is relatively low compared to profit.

The accumulation of loanable capital can take place without any real accumulation, only by the concentration of the banking system, by savings in the circulation of money, or even by the savings of individuals, an accumulation which is called the accumulation of “floating capital.” An important point here is the distinction between the volume of loanable capital and the quantity of money in circulation. The latter is the sum of all the banknotes in circulation, of a given society, of all the metal money, including the precious metals in the form of bullion. The constantly changing reserves of the banks are also part of this quantity of money. To give an example, if £20 sterling is lent five times a day, a total of £100 of money capital has been lent. These £20 serve as a means of purchase and payment four times. If these four times did not serve as a means of payment, it would not create a capital of £100, but only five claims of £20 each.

In countries with an advanced credit system, all borrowed money capital is in the form of deposits at the disposal of the banking system and lenders. In such a situation, an important part of the circulating capital activities is carried out without the need for stock market gambling through easily available credits, without the intervention of metal or paper money. A situation in which the huge volume of bank deposits is consistent with a small circulating medium and is related to two factors: 1 – the number of purchases and payments made with the same amount of money and 2 – the number of withdrawals of capital in the form of deposits to the bank. To make the matter clearer, let us take the help of an example. A businessman gives 100 pounds sterling every week in the form of a deposit to the bank, the banker uses 100 pounds to pay part of the deposits of the manufacturer, the manufacturer pays the same 100 pounds as wages to the workers. In this way, 100 pounds takes on the task of paying the manufacturer, the workers, the businessman himself, and finally the businessman’s re-deposit. If this continues, at the end of the twentieth week, provided that the merchant does not withdraw his own money, his £100 will have effectively played the role of a £2,000 bank deposit.

The import and export figures are a measure of the accumulation of real capital, whether productive or manufactured. They show that the period from 1815 to 1870 was marked by these changes. The real declared value of British and Irish exports in the boom year of 1824 amounted to £40,396,300. With the crisis of 1825 the volume of exports fell, and their value lay at a cost of £35 to £39 million. The boom of 1834 raised this value above the previous peak, to £41,649,191, and in 1836 it reached a new peak of £53,368,571. In 1837 the value of exports fell to £42 million, but as we shall see this trough was higher than the previous peak. The return of the export boom of 1840 raised its value to 58,500,000, higher than the previous peak, and in 1846 it rose to a new high of 60,111,082. What we observe in the whole process is that the sequence of booms and crises each time registers a new peak, which indicates a continuous ascent to higher orbits. The troughs also show a higher figure compared to the previous one. The curve of these changes at the same time indicates the upward curve of real capital accumulation and the continuous development of capitalist reproduction.

2- The transformation of capital or income into money, which becomes loan capital

All moneylending capitalists directly and openly accumulate money. Real accumulation is carried out by industrial capitalists and appears in the increase of the elements of productive capital. Accordingly, the expansion of the credit system and the concentration of lending activity by large banks must intensify the rapid growth of loan capital as a separate form of real capital accumulation. The important and important point to emphasize here is this very rapid and very extensive growth of loan capital as a necessary and inevitable necessity of the development of real accumulation, the continuous expansion of the reproduction of real capital and the capitalist mode of production. The rapid development of the real accumulation of capital brings with it a flood of surplus-values, which must and do become additional capital, and in the meantime a considerable part of the surplus-values ​​inevitably finds its way into loan capital.

It was explained earlier that in unfavourable conditions of the valuation of industrial capital the rate of interest rises, and this rise can continue until the entire share of profit is swallowed up by interest. At these moments the banks and loan capitalists buy and store depreciated securities on a huge scale, with the prospect that their price will soon rise and their sale will yield a golden profit. These capitalists first convert their money into loanable money-capital, and in this direction a very large accumulation of money-capital is carried out by the bankers and loan capitalists. Accumulation that occurs completely apart from real accumulation as the accumulation of this particular stratum of the capitalist class. This accumulation grows and accelerates with every expansion of the credit system associated with the process of reproduction of real capital. If the interest rate falls, the loss will be borne by depositors, and the banks will remain immune from losses.

Explanation: The content of the two chapters 30 and 31 of the third volume, the explanation of the role and position of virtual capital, is of utmost importance in many ways. Above all, it is worth pondering and learning that Marx here anatomizes all aspects of the functioning of financial and virtual capital, carefully explores and exposes its effects on the process of self-expansion and the dynamics of the valuation of the entire capital, but unlike the famous economists or social democratic and “Marxist” experts!! of the type of Rudolf Hilferding, Kautsky, Lenin, Bukharin, Trotsky, he does not bring forward the controversy of the historical emergence of financial capital, he does not consider this form of capital as a newly emerging entity of a certain era of the process of capitalist expansion, let us not forget that Hilferding, in the days when he was leading the Social Democratic Party, at the “Kiel” Congress of the Second International, was intoxicated by the dawn of a new prosperous era!! The great tidings of “the victory of capitalism over free competition and the blind laws of the market” resonated in the ears of the world. A few mornings later, Lenin, by compiling Hilferding’s data, figures, and information, and with exactly the same anti-Marxist understanding of the events of the day, declared the new conditions of capitalism to be the solid, prosperous, and iron threshold of socialism. Finance capital and joint-stock companies, with all their octopus-like expansion in the last years of the 19th century, were for Marx a form of capital alongside other forms of social capital, which at the same time developed at a stunning pace. With his own scrutiny, depth and insight, Marx saw the monstrous speed of growth of this part of capital, but he absolutely did not put forward the argument that capitalism had entered a new historical phase with indicators, components and characteristics alien to the capitalist mode of production!! He did not say a word about the threshold of this form of production entering the era of imperialism and the rule of finance capital. He did not at all enter into the argument that capitalism would enter an era in a few years when the anti-capitalist campaign of the workers of a part of the world would give way to the anti-imperialist struggle, the alignment of the throat and the people, the democratic revolution paving the way for the growth of independent and national capitalism!! Marx, on the contrary, stared more and more radically at the nature of capital as a whole and at the real role of this component in the system of accumulation, reproduction, and organization of the social capital of each country and of the whole of international capital. He showed how the giant capital institutions, by selling their own shares, take possession of ever greater mountains of capital in virtual form, profit from these capitals to the extent possible to open up new fields of advance in each society and throughout the world, brutally exploit more and more workers, pay a small share of this raging sea of ​​surplus values ​​to the owners of these shares in the form of interest on shares, and use the rest as a means of increasing the rate of profit on their capitals and as a weapon to challenge the downward trend of the rate of profit. In this passage, Marx cracked, revealed, and made available to the workers the secret that the surge of virtual capital produces an ever-stormier intensity of the exploitation of workers. Unlike the camp and Leninist bourgeoisie (in later years), he did not start theorizing about Mars, he did not build a high pulpit of “Marxism” to sit on and preach that: “Finance capital has stymied the growth of capitalism, imperialism must be removed from the path and this development must be made independent, national, democratic, anti-imperialist”!! (Quoted in context) Marx not only did not do this, but with the most precise dissections, explanations, and illuminations, he paved the way for the birth of every possibility for these poisonous perceptions of capital, reactionary, anti-worker, anti-socialism of the proletariat. He made it clear that the ever-increasing and cancerous concentration of finance capital, while increasing the degeneration, putrefaction, and barbarism of capitalism a hundredfold, also makes the path to the spread of this mode of production throughout the world and the comprehensive domination of capital over the far reaches of the universe smoother and easier.!!

In these two chapters of the third book (chapters 30 and 31), Marx sufficiently radically analysed the place, role and influence of the exploitative, financial, joint-stock, virtual capital, blocking the way for any misinterpretation and interpretation of their fetishist, magical, mysterious state. Despite all this, history witnessed that social democracy on the two peaceful parliamentarianism fronts on the one hand and the militant overthrow on the other, used this same role and place of financial capital as the basis for their work to dig the most disastrous swamps and overthrow the world labour movement in the depths of these swamps. In one place, they proclaimed the emergence of monopolies and the gigantic rebellion of joint-stock companies as the end of the era of free competition, the end of the anarchy of the capitalist mode of production, the era of capitalism entering the centralized planning of the entire country as a ready palace for socialism, and they called the dominance of the party claiming to represent the proletariat over this edifice of wage slavery the very essence of socialism. In another place, they again called financial capital evidence of the rise of a form of capitalism that, due to its opposition to the expansion of capitalist production, it is laying mines on the path of the socialist revolution of the proletariat!! The workers of the world must rise up against this monster that is hindering the growth of capitalism!! And the enemy of the conditions for the socialist revolution should rise up, abandon the struggle against capital and the system of wage slavery, and take the path of the anti-imperialist democratic revolution!! For this, unite the “national bourgeoisie”, the “people”!! the “petty bourgeoisie” and a host of other forces. Make sure that they never return to the track of the anti-capitalist class campaign anywhere. Another important point emphasized by Marx in these discussions is the effect of the galactic expansion of the volume of financial capital on the increasingly catastrophic crisis of capitalism and the distribution of the burden of these crises on the lives of the working masses of the world. According to some estimates, at this very moment the value of the virtual and financial capital of the world is 500 to 700 trillion US dollars. This enormous amount of capital must reap its share of profits from the exploitation of the international proletariat, several billion workers on the planet must create such a surplus value that it meets the profit required for the cancerous self-expansion of this mountain of capital, the necessary labour or the cost of reproducing the power of the global working class must be subjected to such bombings and slaughters that, in addition to the annual profits of all other sectors of capital, it will also saturate the fields of golden profits of these capitals. By explaining the role, position and function of virtual capital, finance capital and profit-making capital, Marx opened the way for the proletariat to understand contemporary capitalism more radically and deeply. His dissection could have become a very effective and effective weapon in the hands of the working class to counter the Leninist and social democratic strategies of class struggle, but unfortunately it did not. The proletariat was unable to use this weapon and paid the price for this inability in the most catastrophic way possible.

Chapter Thirty-Two

Money Capital and Real Capital (3) Conclusion

The mass of money that is transformed into capital is the result of a process of reproduction on a gigantic scale, but the whole of this enormous volume of money or loan capital is not necessarily capital in the process of reproduction. The income of the capitalists is composed of two components. One component routinely takes the form of additional capital, the other component, which is allocated to consumption. Although this component appears in the form of the accumulation of money capital, it is fundamentally different from real accumulation. It is not capital in principle, it replaces capital, it makes possible the organization of the capitalists’ fixed capital in the production of means of consumption. It is money that embodies income and acts merely as an intermediary for consumption. For a certain period, it assumes the appearance of loanable money capital, but it is not capital, neither in the form of wages nor in the form of the capitalists’ income, it does not represent the real accumulation of capital. The whole of the money into which industrial capital is transformed in the process of its circulation acquires the status of money, which the actors in reproduction borrow; they do not actually lend, they receive loans.

Capital can free up some of its own resources by reducing the cost of production. In such a situation, if the industrial capitalist fails to expand the accumulation process, a part of his capital will actually leave the circuit and assume the form of loanable money capital. The same thing can happen to the merchant capitalist. The interruption of some transactions will cause a part of the money of the merchants that is surplus to the needs of the circuit to become loanable money capital. As for the other part of the profit that is allocated to the additional capital, different situations can also occur. This part can also be unable to make routine and direct advances for two different reasons. The first reason is that its specific field of valuation and reproduction is saturated and does not have the capacity to accumulate this volume of new capital. The second reason, on the contrary, is that the amount of this capital for advances is insufficient with respect to all the components of investment in this field. In the latter case, the current amount of capital usually becomes a reserve in order to be gradually replenished and acquire the conditions for advances. The important point is that the anticipated additional capital, in both its forms, becomes loanable monetary capital as long as it is unable to meet the conditions for valuation.

If the accumulation of new additional capital is hampered by the lack of necessary territories, the accumulation of loanable money capital, devoid of the possibility of advance, is clear evidence of the collision of capitalist production with the limits of its own living and present-day valuation. The conditions that are pregnant with the rise of credit frauds, with the emergence of mountains of loanable money capitals, see no limits before them for obtaining a greater share of profit, but capitalist production is struggling with its own solid and unshakeable limits. Limits created by the inherent laws of capital, limits within and between which capital can only be valued. However, the abundance of money capital does not necessarily and in itself indicate surplus production. The accumulation of loanable capital is simply the dense sediment of loanable money and is clearly different from the real accumulation of capital. This money can be transformed into capital, but this is only one possibility among others. he dense sedimentation of loanable capital can to some extent be the result of the increasing expansion of real accumulation, but even then it does not guarantee its conformity with real accumulation. This dense sedimentation can also indicate a completely opposite situation. That is, it is the result of the blockage of natural and real accumulation. The very fact that the accumulation of loanable capital assumes the form of a dense sediment of loanable money capital, but distinct from real accumulation – even if it results from this form of accumulation – again shows that the capitalist cycle of production is inevitably exposed to a continuous, regular and explosive abundance of money capital. This abundance, on the one hand, strengthens the credit system, but at the same time it also brings with it the process of production beyond the boundaries of capitalism, such as excessive trade, excessive credit and excessive production.

The industrial capitalist does not save his own capital; on the contrary, he appropriates the savings of others in proportion to the capacity and needs of his capital. The opposite is true of the money capitalist. He makes the savings of others his own capital, he transforms the credit that the reproducing capitalists give to each other, what others entrust to this group, into his own private wealth. A function that uproots the last illusion of the existence of capital as the fruit of the capitalist’s labour and savings. What this form of capital does is to cry out that not only is profit the direct result of the appropriation of the labour of others, the appropriation of the surplus labour of the working masses, but that the capital employed by the capitalist is also fundamentally the result of the labour and exploitation of the workers. Capital placed at the disposal of the industrial capitalist by the money capitalist. The former not only exploits the worker but also takes a greater share of the fruits of the exploitation of the working class out of the hands of the latter.

Whether a unit of money can play the role of loan capital multiple times depends on various factors. Among them: 1- How many times it realizes the values ​​of commodities in payment or sale and transfers capital or income, a matter which in turn is a function of the scale and volume of transactions.

2- The extent of the restrictions on payments, the degree of development of the credit system and the extent and quality of organization of this system.

3- The connection and speed of operation of credits. In such a way that, for example, if money is deposited at a point in the form of a deposit, it can be immediately ready for payment in the form of a loan.

Even if the accumulated loan capital in its present composition consists of real money, i.e. gold and silver, the greater part of it is not real capital but certainly virtual capital. It is the right of ownership. Money, when in the process of capital circulation, certainly becomes money-capital at some point, but capital never becomes loanable money. Conversely, if money becomes loan-capital and plays this role repeatedly, it is quite clear that it has the form of metallic money only in one place and in other cases it is simply a kind of claim on capital. Our assumption is that the accumulation of these claims results from real accumulation, i.e. the conversion of the value of commodity capital and the like into money. Nevertheless, the accumulation of these claims or property rights is still very different from the real accumulation from which it arises or from the future accumulation based on borrowing.

Loan capital is initially money. Later it takes on the form of a demand for money because it is in the hands of the lender, and this is where it becomes real money. Money that plays the role of a demand for money or a document of ownership for the lender. In this way, a single quantity of money represents very different quantities of money capital. In an advanced credit system, pure money, whether it represents realized capital or realized income, assumes the role of loan capital by the simple act of lending and becoming a deposit. For the depositor, a deposit is money capital, but for the banker, it is only potential money capital that temporarily remains unused in a safe and spends a waiting period. As material wealth increases, the number of money capitalists increases. The number and volume of wealth of those who, by virtue of ownership, share in the surplus value resulting from the exploitation of the working class increases. As material wealth increases, the class of money capitalists, composed of rentiers and retired capitalists, grows. The credit system develops, the expansion of the credit system leads to a multiplicity of banks, brokers, money lenders. At the same time, money capital, the volume of interest-bearing bonds, government bonds, stocks, etc., grows enormously. At the same time, the demand for money capital increases. Because speculators play a more active role in the money market. If the buying and selling of bonds represented real investment, there would be no change in the volume of demand for loan capital, because capitalist A would withdraw the same money by selling his securities that capitalist B paid for those bonds. But this is not the case, the capital representing these bonds does not exist externally. The bonds exist, but our capital in exchange for them is imaginary and virtual. Nevertheless, what A now has is a volume of money capital that B previously had.

With the development of the credit system, the banker capitalists bring the entire money capital of the public under their control. Huge money markets arise. London and similar cities have already become important centres of securities trading. We have already shown that the rate of interest over periods of several years, all other things being equal, is determined by the average rate of profit. In this connection it is worth noting that commercial interest (the interest that moneylenders charge in the commercial sphere for loans paid or for the discount of promissory notes received) can rise to the level of average profit with the increase of profits. A change which is also true of the industrial cycle and of loans in this sphere. Two important points must be noted here.

1. The high interest rate for long periods is primarily evidence of the high rate of profit during this period. Here we must distinguish between the high rate of profit and the rate of profit of the entrepreneur. Entrepreneurs who work with their own capital and not borrowed capital capture the high rate of profit in that they do not pay interest or in fact pay it to themselves. The high rate of interest is achieved over a long period with a high rate of profit, but this high rate of profit will become a low rate of profit if the high rate of interest is deducted. An entrepreneur who is forced to pay excessive interest will witness a contraction in the rate of profit of his enterprise despite the continuation of the high rate of profit. This is quite possible because industrial projects, if they have already started, must be continued and in such a situation, receiving loans from them becomes inevitable.

2. Between the statement that the increase in demand for money capital and the increase in the rate of profit is the result of the rise in the rate of profit and the statement that the demand for an increase in industrial capital causes the increase in the rate of interest. There is a clear difference. With the occurrence of crises, the demand for loanable capital increases and the interest rate increases. At the same time, the demand for industrial capital decreases by the same amount. Everyone borrows to pay off their debts and obligations. When the crisis subsides, the demand for loanable capital remains high. During this period, efforts are focused on converting money capital into productive or commercial capital. It is the industrial capitalist or merchant who applies for money capital. The former spends this money on the purchase of means of production and labour. Several points are worth emphasizing.

1- An increase in the demand for labour does not lead to a rise in the interest rate as long as the interest rate is determined by the rate of profit.

2- Higher wages do not lead to higher profits. Even if we witness this consequence in a special phase of the industrial development cycle.

3- The demand for labour increases because the conditions are favourable for the exploitation of labour by capital. But the increase in the demand for labour and variable capital alone does not only not increase profits but also decreases them proportionately.

4 – The demand for variable capital and money capital can increase, which raises the interest rate, as a result of which the price of labour rises above the average, and the employment of workers also exceeds the average. At the same time, the interest rate can also rise because the demand for money capital is high. The increase in the demand for labour raises the price of this commodity, without increasing profits. In conditions of shortage of money, the demand for loanable capital is limited to the demand for means of payment, and the demand for purchases falls into a state of stagnation. The interest rate can also increase. Regardless of whether the amount of real productive or commodity capital is high or low, as long as the collateral of producers and merchants is insufficient, the demand for means of payment takes the form of demand for money exchange. Or the loan itself will be a means of payment in the form of money or currency.

The fundamental option of capitalist production is that money is placed as an independent form of value against commodities, or that exchange value acquires an independent form against money. This is possible when a specific commodity becomes a material that fulfils the role of measuring the value of other commodities, in other words, it becomes a full-fledged commodity in comparison with all other commodities. This appears in two ways. First: In advanced capitalist countries, where credit operations and fiat money replace money on a very large scale, when there is a monetary shortage, contraction or drying up of credit, money suddenly appears as the only means of payment and the only real form of value in comparison with goods. In the meantime, the general value of goods declines and their conversion into money becomes difficult or impossible. Second: Fiat money is money only to the extent that it fully embodies real money at the level of its nominal value. With the elimination of gold as a general equivalent, determining the value parity of fiat money with real gold becomes complicated. It is at this time that factors such as legislation enter the field. Factors whose role is played by bankers of the “Overstone” type and to the detriment of the common people. The devaluation of credit money disrupts all existing relations. The value of commodities is sacrificed to their imaginary and independent existence in the form of money. The value of money is guaranteed only when money itself is valid, which is why the value of millions of units of commodities becomes equivalent to several millions of moneys and falls into the abyss of sacrifice. This is inevitable in capitalism and constitutes one of its tendencies. A tendency that did not exist in previous forms of production. Because credit and credit money could not develop. As long as the social character of labour, identical with the monetary existence of commodities, appears as something outside of actual production, monetary crises are inevitable, independent of real crises or in their role of aggravating them. It is also clear that banks, if they maintain their credibility, can alleviate the state of economic panic in such conditions, while the contraction of credit increases this panic. The entire history of modern industry shows that if domestic production is organized, the use of metal money will be limited to creating a foreign trade balance. The suspension of cash payments by the so-called national banks clearly shows that even now metal money is not needed by the domestic market.

In a transaction between two people, if one of them is unable to pay all of his debt when settling the account, he will inevitably remain in debt to the extent of his lack of money. This is not true for the exchanges of countries. The balance of payments of societies can be positive or negative. While the balance of trade must be balanced on a specific date. The occurrence of crises and the pressure of payment deadlines greatly compress the time for payments. As the crisis intensifies, some tasks are accelerated. Sending precious metals abroad, forced sale of trust goods, exporting goods with the hope that they will be sold cheaper or that their export will be a vehicle for obtaining loans at home. Cancelling credits, reducing the value of securities, forced sale of these securities and finally declaring bankruptcy, which can be the end of the story. Sending gold and silver to a country caught in a crisis is also a common method. The reason is that remittances have become unreliable, and paying with gold can solve this problem. Perhaps we can transform the contradictions and confusion of “Overstone” about identifying the supply and demand for money capital determining the rate of interest with the supply and demand for real capital, or identifying the supply and demand for loan capital with the supply and demand for capital in general, into a correct statement and precise description of what is real in a few simple sentences below. Commodities are for the industrial capitalist or merchant only a form of representation of his capital. They never demand capital in themselves, on the contrary they need specific commodities, such as grain, cotton, iron, which they consume in the cycle of appreciation or trade as capital. These industrial capitalists or merchants want loan capital or borrowing money capital for this, but if there is no one to lend and instead of paying the loan, they lend or rent machinery, raw materials and tools, just as they rent, for example, buildings, in such conditions the supply of loan capital will be the same as the supply of elements of the production cycle to the industrial capitalist.

Chapter Thirty-Three

The Medium of Circulation in the Credit System

All means of saving in the means of circulation end in credit. Consider a £500 note. A gives it to B as the price of a bill of exchange. B deposits it with the bank on the same day. The bank uses it to discount P’s bill. P transfers the same note to his bank account; the latter bank lends the money received to the bill broker. A single £500 note sets in motion a cycle of various transactions, each of which requires an equivalent amount of money to carry out. The chain of transactions could be much longer than this, and what is most striking in this is the vast saving made in money as a medium of circulation. The essential point, however, is that the existence of all these bills of exchange is tied to the existence of credit which industrial and commercial capitalists make available to each other. The decline in this credit, the reduction in the number of bills of exchange, especially long-term bills, and the simultaneous decline in the efficiency of this method will lead to a decline in this savings. The economy of the means of payment by means of credit, in so far as it is evidence of the settlement of outstanding debts with a smaller quantity of money, is the efficiency of the means of circulation. The following table shows the average annual amount of Bank of England notes in the hands of the population.

Year	5-to-10-pound notes	200-to-1000-pound notes	Total banknotes
1844	9263000	5253000	20241000
1846	9918000	4590000	20286000
1848	8732000	4037000	18085000
1850	9164000	4646000	19398000
1852	9839000	5856000	21856000
1854	10565000	4234000	20709000
1856	10680000	3323000	19648000
1857	10659000	3241000	19467000

(B. A. 1858, p. XXVI.)

The total amount of banknotes in circulation has decreased during this period. While the country’s exports and imports have doubled. Small notes of 5 to 10 pounds sterling have increased from 9,263,000 pounds in 1844 to 10,659,000 pounds in 1875. Large notes of 200 to 1,000 pounds have decreased from 5,856,000 pounds in 1852 to 3,241,000 pounds in 1847.

According to the testimony of W. Newmarch before the Bank Committee 1857, No. 1741, other factors played a role in the economy of the means of circulation. The cheap postal system, the telegraph, the railways, in a word, advanced means of communication, are among these. With the help of these facilities, England can reduce its money in circulation for a given volume of trade by 80 to 85 percent and reduce it to 20 to 15 percent. The amounts of banknotes in circulation are subject to the needs of trade, and the surplus returns to its issuer. Since in England only Bank of England banknotes enter general circulation as legal tender, the very limited volume of banknotes in circulation issued by the county banks can be ignored.

As long as there is a business boom, loans are regularly returned and credit is unimpaired, the expansion and contraction of circulation is a function only of the needs of the industrial capitalists and merchants. Gold, at least in England, is not used for large-scale trade, and for this reason its quantity, apart from seasonal fluctuations, remains almost constant for a relatively long period. In the depression following the crisis, transactions are at their lowest level; with the revival of demand the need for circulating medium begins to increase; with the return of the boom the quantity of circulating medium reaches its peak, and speculation reaches its peak. The renewed crisis puts an end to the abundance of banknotes in the market, and at the same time the discounters of bills, the payers of loans against securities, the buyers of commodities disappear. In such a situation the banking system may come to the rescue, but its capacity soon begins to decline. Just when society is waiting for bank notes and the owners of goods are unable to sell them at a loss, the banks are reducing the circulation of their notes. With the outbreak of the crisis, access to means of payment becomes of utmost importance, but the problem is that the access of each capitalist to these means is dependent on the access of other capitalists. At the same time, no one is aware of the position of others in terms of their access, what happens is that each person tries to grab more notes. As a result, notes disappear from circulation at the very moment when the need for them is at its peak.

Although the volume of banknotes in circulation is a fixed figure, only a part of it is in circulation and the other part plays the role of reserves. Both components are constantly changing. If the money in circulation is low and the reserves are high, the money market considers it as an excess of money in circulation, and the opposite is also true. If the reserves are low and the other part is high, from the point of view of the money market we are faced with a shortage of money in circulation. The real expansion, contraction of circulation, apart from its industrial-circulation component, where the volume of banknotes required remains constant, has a technical origin and arises specifically from the maturity of the payment of taxes or interest on national bonds. The payment of taxes leads to an increase in the volume of gold and bank notes. The circulation process then contracts. The opposite happens when the dividends on national bonds are paid. The banks begin to lend to meet the payments. The interest rate of private banks begins to fall due to the temporary growth of reserves. This does not concern the entire circulation of money, but rather the banking institutions that circulate it. If the influx of gold increases the number of banknotes, discounting outside the banking system will flourish. The repayment of loans will cause the return of banknotes, and the absolute volume of banknotes in circulation will temporarily increase.

Chapter Thirty-Six

Pre-Capitalist Relationships

Usury and merchant capitals existed in different socio-economic formations in the long periods before capitalism. The first needed only the commodification of part of the product of labor and the circulation of a small amount of money to emerge and play a role. In ancient Rome, although workshop production was at a low level, even lower than the average of that historical period, both forms of merchant and usurious capital were on a high trajectory of development. Accumulation flourished when it was accompanied by usury. In all forms of slavery, money became a weapon for the appropriation of the labour of others as a means of purchasing slaves, land, etc. Due to the role it played, money acquired the status of value-added and interest-bearing capital.

The characteristic form of usurious capital appeared in the pre-capitalist periods in two ways. Both forms are visible in the capitalist era, but only as consequences of the new mode of production, which no longer has the character of usurious or usurious capital. These two manifestations were:

First. Usury through making loans to the rich and spendthrift and above all the landowners.

Second. Usury by giving loans to small producers who own means of production and work, artisans and especially peasants

Usury by bankrupting the landowners and making poor and petty owners thirty days led to the concentration of money capital in a large volume. But did the high concentration of this capital contribute to the deterioration of the previous form of production and the growth of capitalism or not? The answer should be sought at the level of material development of the society in question. Expropriation of capital, as a characteristic form of exploitative capital, was compatible with the exploitation of micro-production by artisans, peasants, and master workers. The emergence of capitalism as a mode of production and the ever-widening confrontation of the conditions of labour, the means of production, and the product of labour in the form of capital with labour power shake the foundation of this domination and drive it rapidly towards complete destruction. With the expansion and establishment of capitalist production, any interest, any form of rent, interest on capital, interest on usury, absolute and differential rent of land, rent or interest on land, all become interconnected components of the surplus value produced by the sellers of labour power. During this process, in different periods, in different regions, in different economic and social conditions, it occurs with ups and downs, sometimes fast and rapid, sometimes slow and spiral, and in contradictory forms.

When the usurious capitalist is still not satisfied with all that he inflicts on his victim and the terrible swallowing of the surplus product of his labour, he tries to completely expropriate him. But let us not forget that even the mere complete and complete expropriation of the means of labour by the petty producer does not yet indicate the establishment of capitalism. This is the beginning of the path, the preconditions, the background for the emergence of capitalism. The wage slave in this form is again, because of his position, not considered as a real slave or a debt slave, he is considered a producer and a consumer. Predatory capital in this form practically appropriates all the surplus labour of the direct producer, without bringing about any change in the mode of production. Up to now, capital has not directly subordinated labour to itself. It has not confronted it as industrial capital. It has only brought it into formal subjection. This predatory capital disrupts the current mode of production. Instead of growing, it drives the productive forces into the abyss of extinction and makes the inherent contradictions of the prevailing relations more rebellious. It collapses feudal wealth and property. It destroys small-scale peasant production and craftsmanship.

The separation of the worker from the means of production, the conditions or product of labour in advanced capitalism, is in organic correspondence with a revolution in the nature of the mode of production. Here capital forcibly and inevitably brings together a large mass of workers under one roof to carry out specialized, interconnected, and organic activity; the instruments of labour give way to the machine; the worker himself becomes the cog in the machine of production; the mode of production destroys the possibility of dispersion of labour power that previously existed in petty production; here it is no longer the extortionate capital that separates the worker from his means of labour, for this separation has already taken place completely. Usury, in conditions of dispersion of the means of production, concentrates money wealth, without bringing about any change in the mode of production; on the contrary, it clings like a parasite to the same mode of production, feeds on it, depletes it, and renders it impotent. It does this continuously, and each time more and more often becomes the cause of the disruption and weakening of the existing mode of production. Accordingly, in ancient Rome, where the producer’s ownership of the tools and equipment of his work determined the basis of the independence of citizens and the ruling political relations, hatred of usury was rampant.

In the conditions of the domination of slavery and the consumption of surplus produce by slave-owning, feudal lords, serfs and feudal lords, the latter were usually in the trap of usurers, but the current mode of production maintained its stability. The slave-owning, feudal lords spread all their usurious debts on the lives of workers and small producers. The living conditions of these layers became increasingly worse. Perhaps the feudal lords and slave-owners also gave way to usurers and lost their ownership of land, slaves and serfs. The knights of ancient Rome met such a fate. They were an exploitative force based on the political power of the patriarchate, and under the pressure of indebtedness to usurers, they lost their position, but the mode of production remained unchanged. The only active role of usurers in pre-capitalist forms of production is the effect that it left on the process of destruction and decline of the current forms of property or the basis of the stability of the prevailing social relations. In Asian economic formations, it has also contributed to the decline and corruption of these forms of production. Where all the conditions for the growth of capitalism were present, it has played a role in paving the way for the growth of the new mode of production by destroying feudal lords, destroying small-scale production, and concentrating the means of production for capital. Usury, unlike wealth that is entirely devoted to consumption, is historically significant. It is a process of the emergence and development of capital. Usury and commercial capital have played an effective role in the formation of monetary wealth, independent of landownership. The less the product has been of a commodity nature and the less the scope of exchange value has dominated the length and breadth of production, the less money has played the role of real wealth, wealth in general, instead of being responsible for representing the value of consumer goods. For example, it has been hoarded and appeared in the form of accumulation.

Apart from being hoarded or playing the role of universal money, money is above all a means of payment that takes on the absolute form of a commodity. In this form it is the means of payment that creates interest and at the same time money capital. What the owner of wealth wants for extravagance and luxury is money as money, as a means of payment to buy everything. Small producers also need money as a means of payment through which they can obtain the means of their labour and production. An important point in this is the role of usury in the emergence and growth of hoarding. It is only through usury that hoarding becomes a reality and emerges from the state of a dream. What the owner of hoarding desires is not capital, but money as money. Through interest, he transforms this hoarding into capital. It transforms it into a tool whose use makes it possible to appropriate part or all of the surplus labour, even the means of production itself. The less a commodity form has achieved the general form of the product, the more difficult it is to obtain money.

Money as a means of payment creates the fundamental and specific domain of usurious activity. Every monetary obligation, interest, tribute, tax, rent, and the like, which has a definite maturity, requires monetary payment. That is why, from ancient Rome to modern times, we witness the parasitism of the usurer alongside the tax-paying farmer, and later the money capitalist, even the fusion of the usurer and the merchant. Usury itself is even the cause of the expansion of the need for money as a means of payment. Because it sinks the producer ever more deeply into debt, it destroys his usual means of payment. It deprives him, under the rubble of interest, of the routine reproduction of his means of labour. Usury grows out of money as a means of payment, and develops the very function of money, which is the fundamental domain of its development. The development of the credit system plays the role of a reaction against usury. But any interpretation of this reaction to the conflict between usury and capitalism is fundamentally illusory. What occurs is not a confrontation but simply the complete subordination of usurious capital to the capitalist mode of production. Usury not only continues to exist in the new mode of production, but even in the most advanced societies, it removes the previously existing “legal” obstacles from its path. Usury capital in these countries takes on and plays the role of usurious capital in some cases, including: in areas where the conventional form of capitalist borrowing is not prevalent, such as mortgage firms, where the producer is not a large capitalist, but has small capital and is therefore unable to use low-interest loans.

What distinguishes usurious capital as a pillar of the capitalist mode of production from usurious capital is not at all the nature or characteristics of this capital. On the contrary, it is the changed conditions that govern its functioning on the one hand and the position of the lender on the other. In the heart of the new conditions, the conditions resulting from the expansion and domination of capitalism, even if a person without previous wealth, but in the form of a factory owner or merchant, gains access to credit, the very credit and claim may well bring him into the circle of capitalists. The granting of credit to him implies that he is worthy of becoming a capitalist!! He is able to exploit labour power and appropriate the surplus labour of many workers. This is the judgment that capital makes the birthplace of his role as a potential capitalist. A judgment that becomes the language of thinkers, theorists and through it the common people. Capital constantly cultivates a new group of armies thirsting for profit, property, and capital accumulation, and of course at the same time dispossess some people.

In the 12th to 14th centuries, important credit institutions emerged in Venice and Genoa, whose work was to respond to the needs of maritime and wholesale trade, and they were trying to free themselves from the domination of usury. The owners of the institutions, statesmen, were influential elements of the governments, they wanted to save themselves and the government from the evil of the usurious crowd. In this regard, they used the government as a lever to exercise their power. In England, when the Bank of England was established, the Tories protested and declared that banks were republican institutions, and banks were also established in Amsterdam and Hamburg. The reputation of the French and Spanish banks reached less attention. The Bank of Amsterdam was not as much of a turning point in the development of the credit system as the Bank of Hamburg. It played the role of a savings bank. However, commercial credit, industry, and monetary transactions in the Netherlands experienced significant growth. It was this growth that subordinated the capital of the exploiter to industrial capital. In the 17th century, the Netherlands was considered a model of economic development, a role that was later achieved by England. The fierce struggle against usury and the struggle for the subordination of usurious capital to industrial capital were among the preconditions that capitalism provided in the form of a modern banking system. On the one hand, it prevented usurious capital from monopolizing itself, and on the other hand, it limited the monopoly of precious metals by creating credit money.

The banking system, by its degree of centralization and organization, is the most complex, the most organic product of the capitalist mode of production. The extensive and magical domination of the Bank of England over the industry and commerce of that country is the best proof of the truth of this statement. The real cycle of English commerce and industry is entirely outside the sphere of bank domination, but the bank provides the form of bookkeeping and the general distribution of the means of production on a national and social scale. The performance of this role, even in a formal sense, is very important and worthy of reflection. We have already seen that the average profit of an individual capitalist or of any given type of capital is determined not by the initial surplus-labour accumulated by this capital, but by the total surplus-labour created by the total capital. This distinctively social character of capital is realized only by the continuous development of the credit and bond system. Furthermore, the system in question brings into use all the capitals which are not actively in the hands of industrial and commercial capital. In other words, neither the lender nor the depositor of capital owns or produces it. A kind of abolition of private ownership of capital, which of course has nothing to do with the abolition of its real existence. With the role played by the banking system, the act of distributing capital is taken out of the hands of private capitalists and usurers and becomes a form of social business. Banking and credit in this regard become the most powerful lever for pushing capitalist production beyond its limits and one of the most important carriers of crisis, corruption and rebellion of the inherent contradictions of capital. Apart from all this, the banking system, by replacing money with various forms of credit in circulation, shouts that money in its essence is nothing other than a specific manifestation of the social nature of labour. The last point in this transition is that the credit system will undoubtedly be used as a powerful lever in the process of transition from the capitalist mode of production to the collective mode of production, but only as an element and in conjunction with the uprooting and transforming factors that will shake and destroy the very foundation of this system. What is most fundamental and obvious among all is that any kind of speculation about the miraculous power of the banking system in the process of socialist transformation of capitalism is the greatest fabrication, the most misleading illusion and lie. If the founders of this illusion are not among the most ruthless, predatory and deceitful guardians of capitalism, they are certainly among the most depraved and brainwashed of this system.

We have already clarified that merchant capital and interest are the oldest forms of capital. The nature of interest capital is such that most people consider it to be a full-fledged form of capital. In commerce, we are at least faced with an intermediary activity, but in the case of interest capital, this is not observed either. What everyone sees is this imaginary and illusory relationship that money itself creates money and increases value!! This very characteristic has caused even scholars of political economy in many parts of the world, especially less industrialized countries, to consider exploitative capital as the basic form of capital, for example, they see land rent as another form of existence of this capital because it involves lending. All this is evidence of the enchanting and magical power of exploitative capital that depicts and interprets the entire capitalist mode of production in the most inverted and distorted form. The harsh reality that here capital and land are only rented to capitalists and what is received in return for this rent is merely a part of the surplus value resulting from the exploitation of workers. A borrowed capital that can take the form of machinery, buildings, and business premises instead of its monetary form, and in this case the cost of depreciation of these tools is also added to the interest. The decisive factor here is whether this money or machinery, building, land is lent to the direct producer or placed at the disposal of the industrial capitalist and merchant. In the first case we are faced with pre-capitalist relations and in the second with the capitalist mode of production. Another important point needs to be remembered here. Nothing is more irrelevant than the question of renting a house for personal use to be linked with the question of renting capital in various forms!! There is no doubt that even in this very tenancy a part of the worker’s labour is robbed from him and his exploitation is intensified. But this is of the same kind of intensification of exploitation that we also witness, for example, in the relationship between the small businessman and the worker. The difference between selling and lending or renting is not much of a discussion here. Usury capital, like merchant capital, exploits a certain mode of production without playing a role in its creation. Both capitals are externally connected to the mode of production. Usury capital tries to protect it in order to continuously exploit it. Usury is a deeply conservative practice and, with its parasitic role, makes the given mode of production miserable. The fewer means and elements of production enter the production process, the more they emerge from the labour process in the form of commodities, the more their concentration at one point by money takes on a specific and discrete form. The less important the role of circulation in social reproduction, the more usury flourishes. The usurious capitalist plays the role of a very powerful lever in forming the background for the growth and development of industrial capital, firstly by providing the merchant class with a mass of money wealth and, secondly, by bankrupting the owners of the old means of production.

Part Six: Transformation of Surplus-Profit into Ground-Rent

Chapter Thirty-Seven

Introduction

The various and historical forms of landed property are not the subject of our discussion. What we are dealing with is the share of the surplus value that capital produces by exploiting workers and that goes to the landowner. On this basis, it is assumed that agriculture is a factory dominated by capitalist production, the tenant of the land produces wheat, beans and vegetables, just as the factory owner produces cars and washing machines. Capitalist domination of agriculture also implies the domination of capital over the entire cycle of production and the economy of society. An important discovery of Smith was that he traced the origin of the land rent for any capital advanced in the production of products such as linen, livestock, and dye to the land rent derived from the capital accumulated in the production of basic food products. The premise of landed property is that certain individuals of the earth’s inhabitants, at the cost of depriving all other inhabitants of the world, have the right to make certain parts of the globe their exclusive domain of ownership and to exercise their oppressive will. In view of this, the discussion now turns to the development of the economic value of this monopoly in the process of capital’s appreciation cycle and the domination of the capitalist mode of production. The mere legal power of individuals to exploit a particular territory or natural wealth does not clarify much. This legal power is a function of economic conditions, and its effect is that the landowner can do with his property the same thing as he does with any other commodity in his possession. The legal burden of private landed property in the ancient world is sometimes the collapse of collective production, and in the contemporary world it manifests itself and exerts itself with the development of capitalism.

In the description of “primitive accumulation” we saw that the direct productive liberation from serfdom and slavery, together with the expropriation of small proprietors, were the preconditions for the birth of capitalism. This means that the monopoly of landed property is a basic and necessary condition for the growth of capitalism, but this precondition is not consistent with the cycle of capital’s appreciation and the development of the new mode of production. What is consistent is not the subordination of agriculture to capital. A form created and enforced by capital itself. Tribal, small-peasant, communal ownership all change and change their nature in accordance with the needs and requirements of the cycle of capital’s appreciation. Capitalism, by establishing itself, takes agriculture out of its traditional form and equips it with techniques, management, progress, and productivity based on scientific advances. It separates the land ownership of the day from feudal and lord-serf relations. It separates the land as a means of labour and a necessity of the value-added cycle from the ownership of the land or the landowner. It makes the rent of the land part of the surplus value resulting from the exploitation of the worker. It makes everything land and its rent an organic capitalist reworking. In such conditions, the labour force in cultivation is wage labourers hired by the capitalist tenant of the land. The tenant farmer sees agriculture as a field of capital advance like other fields of accumulation; he pays the landowner a sum of money at the end of certain periods of time in order to be able to re-invest his capital in this particular territory. This sum of money is called ground rent. An important point is that we see here all three active classes of contemporary society, composed of the working class, the capitalist, and the landowners, in opposition to each other, three classes which of course actually constitute two fundamentally opposed and hostile classes, the worker and the capitalist.

Capital can be combined with the land in various ways, short-term or long-term, the use of chemical fertilizers is an example of short-term combination, and the creation of irrigation or drainage facilities is an example of the long-term combination of capital and land or, in fact, the transformation of land into “land-capital”. The first type is usually carried out by a capitalist who rents land. Now suppose such a person borrows his advanced capital. The interest on this borrowed capital mixed with land may be paid by the tenant to the landlord, but this is not landing rent. In this case, it is necessary to explain a little. Capital that is mixed with land in the short term, for example, for chemical improvement of the soil, or in the long term, as part of fixed capital for drainage, construction of irrigation networks, and the like, if it does not destroy the land and does not destroy its minerals, nutrients, and quality, causes a noticeable or even a drastic increase in the value, price, rental price, production efficiency, and market position of that land. The piece of land on which these works have been carried out, and this volume of capital is mixed with it, enjoys a higher quality and market price at the end of the lease term. The capitalist who benefits from the owner of the land, sometimes re-rents it to the next tenant or the same previous tenant, demands a higher rent. This higher rent is added to the current rent of the land and causes it to inflate. If he sells the land, he will sell it at a higher price than the previous price. A significant price difference for which the capitalist landowner-usurer has not paid a single riyal and has not incurred any costs. This issue is important because, on the one hand, it is a weapon in the hands of landowner capitalists to transform the ongoing economic and social development process to their own benefit and quench their insatiable thirst for profit-seeking and capital accumulation, and on the other hand, it is a strong barrier to industrial expansion and mechanization of agriculture. Landowner capitalists, having felt the harsh reality that the results of their investments in short-term and especially long-term land improvement will not be their own but will go to the exploiting landowners, do not show much interest in investing capital in the field of improving agricultural affairs and increasing labour productivity in agriculture. A fact that plays the role of an effective obstacle to the modernization of agriculture. The phenomenon discussed in the field of construction is much more acute and more visible and effective than in agriculture. Here, the tenant capitalists are forced to construct buildings and construct some premises on the land they rent in order to carry out activities related to the accumulation and cycle of appreciation of their capital. At the end of the lease period, all these buildings and facilities, which have been built at a considerable cost, become the sole property of the landowner. From now on, the landlord receives not only the previous rent of the land, but also all other income consisting of the fixed capital remaining from the tenant’s investments, the significant increase in the rent of the land, and the like. Some writers inclined to defend landed property, in response to the attacks of economists who sanctify “harmonious capitalism”!! “inconsistent”!! such as “ Henry C. Carey “, have tried to compare and equate landed rent, this specific economic embodiment of landed property, with interest, in this regard, to show that there is no difference or contradiction between capitalists and landowners. A struggle whose reverse course we witnessed in the period when capitalism began to flourish. At that time, landed rent was still considered justified and honourable, while capital interest, as usury, had the stamp of gross condemnation on its forehead. In those conditions, people like “ John Locke “, “Dudley North” and others, in order to reduce the ugliness of capital interest, considered it to be on a par with landed rent. Anne Turgot even saw the latter as the basis and originator of the former. Later writers reverse this false purification by a new, more shameful forgery, trying to reduce ground rent and the further ugliness of commercialism and profiteering in the process of land-renting by homogenizing it with exploiting capital. They are not even prepared to hear the resounding siren of the brute fact that ground rent exists separately, distinct from the income from the tenant’s investments in the leased land, that the landed capitalist does not receive only the latter income and profits. He seizes all of these together and appropriates them for himself.

Land rent is also incorrectly compared to interest in another way!! The basis of this incorrect analogy is that, for example, the rent from a leased land of 4,000 pounds sterling is compared to the 5% interest on this amount of exploitative capital and they are judged to be identical. They argue that the owner of 4,000 pounds of exploitative capital or securities receives interest equivalent to 200 pounds sterling based on an interest rate of 5% throughout the year. The owner of land of the same price also receives this interest in the form of rent. This analogy is completely different, because: First – land is not a product of labour, it does not carry any value and presenting it in this irrational way as capital is a veil over the real relationship of value production.

Secondly – the starting point in these calculations is not capital, interest, interest rate, land as capital. On the contrary, it is ground rent, the annual amount of this rent, its purchase and finally the length of time over which the purchase price of the property is repaid. The landowner who receives £200 as ground rent every year thinks that after 20 years, he will have acquired the entire purchase price of the property through the ground rent received or the purchase of this rent. To put it more clearly, he does not start from capital and the annual interest rate and the land as a borrowed capital, he starts from a ground rent of £200, by receiving it annually after 20 years the total price of £4,000 has been acquired.

If the ground rent is assumed to be a constant amount, the price of land will begin to rise or fall in inverse proportion to the rate of interest. For example, if the rate of 5 per cent falls to 4 per cent, £200 of annual rent will represent an increase in the value of a capital of £5,000 instead of £4,000. In the case of the price of land, £4,000 will give way to £5,000. Here the fluctuation of the price of land is due to changes in the rate of interest and has nothing to do with ground rent. On the other hand, we know that the rate of profit tends to fall with social development and the growth of the productivity of labour. The rate of interest also begins to fall insofar as it is a function of the rate of profit. We have already said that even ignoring fluctuations in the rate of profit, the rate of interest can fall due to the high concentration of loanable capital. All these factors give rise to a clear fact. That the price of land tends to increase, even independently of the fluctuation of land rent and the price of land products, of which rent is a part. Equating land rent with exploitative capital is a deeply unfounded and erroneous analysis that can lead to the worst and most incorrect conclusions.

The form of land ownership has determined the dominant form of ownership in all ancient societies, and the purchase of land has been considered one of the safest investments. In this regard, the interest rate on which the price of land rent is determined is generally and to some extent lower than the rate of return on long-term investments. The buyer of land may receive 4% in rent by renting his property, while if he lends his capital, he will earn 5%. In this case, he must spend more capital on the purchase of a larger plot of land so that the rent he receives is equal to the 5% interest on borrowed capital.

Thiers in a book full of fallacies, apparently the text of his speech in 1848 in the Critique of Proudhon,  Adolphe Thiers claimed, by referring to this kind of baseless calculation, that land rent is low! He was unable to grasp the fact that the issue was not the low land rent but the high price of land. The very important point is that capitalist land rent appears in the form of the value or price of land. In such a way that land is also a commodity and is inevitably bought and sold like any other commodity. This has become the basis of a false and justifiable argument in defence of land ownership. A false and hollow narrative by which one can consider slavery as a type of capital interest and argue that the result of the slaves’ labour is also the interest of the capital that was advanced to buy them!! It is absolutely important to scientifically analyse land rent, or a special and independent form of land ownership based on capitalist production, and to refine this analysis as thoroughly as possible from misleading distortions and ambiguities. In this regard, recognizing the practical effects of land ownership, and even theoretically understanding the components that violate the true concept of land rent, are all important.

All that the tenant capitalist pays to the landowner under the name of rent in order to obtain permission to use the land for agriculture for a certain period of time, independently of the composition of its constituent parts and without regard to the real origin or source of these parts, appears as ground rent as a whole. But if we dissect this composite body called ground rent, we find two distinct components, one which constitutes the pure or original and real nucleus of rent, and the other which has its roots in the investments made on the land. The first component which did not exist before and which, by its own birth or realization, has become the cause of inflation or completion of the main part. At the same time, there are two decisive features in common between these two components.

1. The accessory component of ground rent, or the component resulting from investment, is, like the principal component, the exclusive right or right of ownership over a piece of land which enables the owner to lease the land as his own property.

2. The latter also plays a prominent and quite effective role in determining the price of land. A leasehold may, under certain circumstances and for certain reasons, be reduced in its usefulness, until the main nucleus of ground rent disappears altogether, and all that remains is its accessory component, a component which is really the interest of the capital mixed with the land. This component, instead of being the average profit of the industrial capitalist or the wages of the worker, accrues to the landowner. An interest or income which is not ground rent but is in practice the result of the monopoly of the land and the landed property of the landed capitalist. To clarify the matter, let us refer to the conditions in which capitalism has not been established. The tenant of the land is not a capitalist but a small peasant, a direct producer who, by paying rent, has been able to work on a certain piece of land and earn a living. Here the tenant peasant may lose not only a part of the total product of his labour, but even what is equivalent to the normal wage of a worker. The landowner, by collecting a high land rent, causes his bankruptcy and deprives him of the same small income. Just as any other usurer would do to him or his peers. The difference is that the usurer would risk at least his capital, but the landowner does not face such a risk. Let us now return from pre-capitalist conditions to the period of the dominance of the new mode of production. Here too, landed property is a plague that is everywhere in motion, although it apparently knocks on the doors of the small capitalists, but all its losses fall on the heads of the wage-earners. The tenant capitalist must pay a heavy ground rent to the landowner at the end of the lease. By paying this rent, he witnesses the fall of his profits, and in order to escape this fall, or at least to compensate for a share of what he has surrendered to the landlord, he begins to slaughter the wages of the workers. The agricultural workers are the targets of this slaughter in large measure. The upward trend of ground rent and the simultaneous rise in the price of land during the anti-Jacobin war were largely due to this very fall in the wages of the workers, even the fall of wages below the usual limit. With the vicious fall of the wages of the workers, the ground rent of the capitalists rose and the share of the profits of the tenant capitalists was protected.

The rising trend of land rent led to a large-scale migration of wage-earning workers, and the tenant capitalists complained that they were unable to pay the high rents. At the same time, they tried to rid themselves of being the cause of the fall in wages and the migration of workers. In this regard, when “Count Shaftsbury” from the landed aristocracy raised the banner of “criticism” of the low wages of the working masses!! and tried to use this controversy as a stepping stone to his rise and ascension to the seat of workers’ representative in Parliament, he was faced with extensive revelations from the tenant capitalists against him. In these revelations, the tenant industrialists showed with abundant evidence and documents how the aristocrat, human rights activist, defender of “workers’ wages”!! and owner of vast lands, grabbed a heavy share of his annual land rent by slaughtering the wages and livelihood of the working masses.

Among the unfounded definitions and interpretations of the reality of land rent, one is to confuse it with surplus labour or surplus product in general. A gross error that, like all other misconceptions, is very misleading.

The basis for the emergence of surplus labour in general, that is, the conditions whose absence eliminates the existence of surplus labour, is that the necessary means of life, whether in the form of the product of the land or in the form of hunting, are the result of spending a certain amount of labour time and not the entire daily labour. This narrative of the necessity and surplus of labour can also be generalized to the whole of society. The labour that reproduces the cost of living and the means of living of the inhabitants of a society is necessary, and what is beyond the reach of the inhabitants becomes surplus labour. Necessary and surplus labour has nothing to do with whether the work is agricultural or industrial, the products in exchange for necessary labour can come from the process of cultivation and labour, fishing, residential buildings, food containers or tools of labour and production. The other part or surplus labour is also in a similar situation.

The fundamental point in this part of our investigation is that land is not essentially a product of labour. As long as work has not been done on it, it cannot be considered surplus labour or surplus product. What the land-owning capitalist receives under the name of ground rent does not at all imply that the land carries with it any value in itself; it is certainly devoid of any value because it is not the crystallization of human labour. For land is not a commodity with a definite volume of crystallized human labour. What here gives the land-owning capitalist the “right” to receive ground rent, to appropriate a share of the worker’s surplus labour, is simply his ownership of the land or his exclusive right to possess the land. There are three gross errors in the path of dissecting land rent. These three errors are:

1– All forms of land rent have one thing in common. Their appropriation is conditional on ownership and monopoly over a certain piece of land. The landowner may be a representative of a community or commune, a slaveholder, a serf landowner, a feudal lord, an agricultural capitalist, an industrialist, a merchant, and so on. What allows all of these to appropriate land rent in various forms is merely their economic possession and monopoly of ownership over a certain area of ​​land. It is this commonality that completely conceals all the fundamental differences and distinctions between the types of land rent and makes them inaccessible to human sight and understanding.

2– If the authorization to receive land rent is the monopoly of land and ownership over a piece of land, what is received under this name, or rent itself, is nothing other than a share of surplus value, surplus labour, or surplus product. Even its most primitive, immature, and undeveloped form, or sexual property interest, is the surplus product of the direct producers. With the development of capitalism and the dominance of this mode of production, rent is always a part of the surplus value, a part of the unpaid labour of the workers, and of course a part in excess of the share of the profit of the industrial capitalist and productive capital. Land rent is evidence of the emergence of these conditions in which, with the growth of the productive forces and the development of the instruments of labour in agriculture, industry, or any other field, the direct producer has been able to live on a part of the daily labour and provide for the basic necessities of life for himself and his family. Only in such a situation can a part of his labour take the form of surplus labour, become surplus value, and be appropriated by the capitalist, the landowner, or any other owner of wealth. This is also true of society and can be precisely generalized. In a society, too, a part of the labour of the producers is responsible for the livelihood of the entire population, and the rest of the surplus labour, surplus value, becomes the profit of the industrial capitalist, the merchant, the exploiter, or the rent of the landowner.

3– The distinctive feature of land rent, its development or the economic appreciation of land ownership, is that its amount has nothing to do with the behaviour, effort, personality, qualities, thoughts, intelligence or unconsciousness of the recipient. Any change in its amount is simply a function of the growth of social labour, the more socialization of labour, social development, and is carried out independently of the role and existence of the landowner. This same index makes it clear why what is a general and common feature in all branches of commodity production, especially capitalism, is simply considered as a special feature of rent and a “special feature of agricultural produce.” The amount of land rent and with it the value of land grew in the course of social development and as a result of social work. With the further expansion of the commodity economy, especially the development and dominance of capitalism, the market for the sale of goods and the demand for agricultural products became larger, and at the same time the demand for land soared. Because land is an indispensable need for production in all branches of business, with the increase in demand for land, its price also rose, and this rise continued. The more gigantic capitalism became, the more extreme production became, the more it grew, the more universal trade became, the more the volume of money in circulation became mountainous, the more all this grew in chains and interlinks, the more rapidly land rent also flourished. Its value and the value of land also rose more and more.

Land rent was based on commodity production, more precisely, capitalist production, which became money rent. It evolved and the scope of its evolution reached the point where agricultural production became commodity production. The more commodity production grew, the more the landowner’s ability to seize an increasing share of the surplus value, the surplus product, relying on the monopoly of the land, increased. In this direction, the value of rent and the price of land also exploded. In none of these developments has the landowner played and does not play any role. But each of these events provided the most effective grounds for the most violent exploitation of the surplus labour of the landowners and direct producers. Let us not forget one point. If instead of explaining rent we explain only surplus value and, worse still, surplus product, we will make a mistake. This mistake is to consider what is not specific to agricultural products and is related to the whole of commodity production and capitalist production as specific to agricultural products!! This is a grave mistake; it must be avoided.

Chapter Thirty-Eight

Differential Rent

General Remarks

Ground rent is a share of the surplus value produced in commodities which are sold in the process of exchange at the price of production. This rent is a part of the total surplus value contained in these commodities and therefore a part of their production prices. The price of production is composed of the price of the constant and variable capital employed in the commodity plus the average profit which has accrued to it. The average profit is not the same as the surplus value which one or more workers in a single sphere of accumulation have produced for a given capitalist. It is a share of the total surplus value produced by the workers of a territory, country, or world, which each individual capitalist receives in proportion to his capital. The price of production is also not composed of the cost of production of the commodity and the surplus value produced in a particular sphere but is the sum of the price of the fixed and variable parts of capital plus the average profit which has accrued to that capital. The production price arises in the process of capital circulation and competition in the domestic and global capitalist market under the influence of determining factors such as the production conditions of different sectors of social capital, supply, demand, and the like. Let us return once more to land rent. To illustrate the general characteristics of this form of rent, let us assume that the majority of the factories in a city are operated by steam engines, but that a few also draw their energy from natural waterfalls. The cost of production of each unit of a commodity produced in the first work centres is $115. Of this figure, $100 is the constant and variable capital employed in the product, and $15 is the average profit that accrues to the capitalist through the distribution of the total surplus-values, following the organization of the social product, during the process of competition, the formation of the general rate of profit, and the determination of the price of production. In the factories of the second category, the situation is different. Here, the cost of production of each unit of the same commodity is only $90 instead of $100. The owners of these establishments sell their commodities at the same price of production formed in the process of competition, i.e., $115 per unit. The difference between their cost of production and the selling price is not $15 but $25. These earn an interest in excess of the average interest. In this regard, two very important points need to be explained.

First: The achievement of surplus profit by the capitalists of the second group is not the result of random fluctuations, an unexpected event in the process of circulation or the sale of commodities at a price exceeding the current market price of production but is a natural result of the operation of the inherent laws of capitalism. The reason why these capitalists achieve a profit higher than the average profit is that they have produced their commodities at a lower cost. All other capitals that have been advanced under similar conditions enjoy this surplus profit. The value of goods produced by the cascade force is lower. A smaller amount of labour has been spent on their production. Less constant capital or objectified labour has entered them. Less variable capital or labour is also allocated to the production of commodities. If the price of coal becomes cheaper, the volume of this surplus profit will be smaller because the difference between the cost of production and the price of production changes to the benefit of the capitalists of the first group. In this passage, let us not forget three things.

1 – The price of production itself is changing under the pressure of all its constituent components.

2 – The entire surplus profit, corresponding to the difference between the cost of production and the price of production of commodities in factories with the energy of waterfalls, goes entirely to the capitalists, and not a single riyal is added to the necessary labour or the wages of the workers.

3 – The surplus profit does not arise at all from the sale of goods at a higher price, but only from the difference between the general prices of production and individual prices, from the difference between the general rate of profit and the individual rate of profit of individual capitals.

Second: The surplus profit of the capitalists who have access to water power has not been distinguished in any way from surplus profit in general. The basis of the argument is that all surplus profit, except for the purely accidental cases of specific transactions, arises from the difference between the general price of production and the price of production in a single sphere of accumulation, from the difference between the general rate of profit and the specific rate of profit in a separate sphere. But this general rule concerning surplus profit also covers, within its scope, distinctions and differences which must be carefully examined.

Let us begin with the question under what conditions does the manufacturer become the owner of surplus profit? The answer, referring to the above example, is that in the conditions of using the natural force of the waterfall, the force created by nature, is not the product of labour and no price is paid for it, unlike coal, which has value, its use requires labour, costs money and must be paid. But that is not all. The owner of a coal-fired factory also employs certain natural forces for which he pays no rent. He pays the price of coal, but he pays nothing for the property of converting condensed water into steam, for the traction and energy-generating capacity of steam. The steam engine here monopolizes important natural forces that are the source of the enormous productivity of labour. This monopolization in turn is able to change the balance between surplus and necessary labour, between surplus value and wages in favour of the former. In doing so, it also raises the rate of profit, without creating any “surplus profit.” The reason is clear. The source of surplus profit is simply the difference between individual profit and average profit. This line, of course, has a long way to go. The cascade force produces surplus profit, but the increased productive power of labour and the production of surplus profit are not merely the natural cascade force. Other moderating factors are involved. The mere application of natural forces in industry reduces the volume of labour required to produce the means of subsistence of the worker, raises the general rate of profit of capital, but does not produce any particular deviation from this rate. This question requires serious discussion. The differences between the individual and primary rates of profit in different spheres of production, which arise from technical progress, the upward trend in the productivity of labour and the reduction of the labour required to produce a given volume of commodities, sooner or later tend to be neutralized under the pressure of the competition of capitals for inventions, new technologies, superior production conditions, a more effective role in the formation of the price of production and the average rate of profit. This causes the surplus profit of an individual capital in a particular sphere of production to also tend to be neutralized and to be neutralized. The origin of this surplus profit here is in the capital itself, composed of constant and variable, in view of the role played by its variable component, as the sole source of the production of new values.

It is capital that, in the struggle for greater profit, strives to produce the maximum with the minimum of labour, making the surplus labour burden increasingly heavier and the necessary labour burden lighter and less. It becomes scientific and knowledge-loving!!, it paves the way for inventions and discoveries, it increases the productivity of labour, in the midst of this process some capitals or areas of investment surpass the rest, they lower the cost of production compared to others, they lower and make the cost of reproducing the labour power of the exploited working mass lower and more insignificant, they appropriate a greater share of the surplus values. For a certain period, they monopolize these technical achievements and the results of these discoveries, but this period begins to decline from the very moment it rises, because other capitals are also trying with all their might, rapidly, to master new, more modern technology, to achieve superior production conditions.

This is not the case with the surplus profit of the manufacturer who owns the natural waterfall. The increase in the productivity of the labour he exploits does not arise from the mere capital composed of two constant and variable components, nor from the mere natural force of the waterfall. On the contrary, it arises from the increase in the organic productivity of labour which is tied to the use of a natural force separate from capital.

This natural force is not available to all capitalists of a production area. It is not of the flexibility of water and its property of turning into steam. The recent natural force is available to all capital owners and can be placed, but the waterfall is not like that. Using it to increase work productivity does not depend on the existence of capital composed of fixed and variable components. Its mastery depends on the ownership of a certain piece of land where the waterfall is located. In a place where it does not exist, it cannot be created with advance capital, just like machines.

The waterfall can certainly be manipulated, its water path can be changed, its driving force can be used as fully as possible, a turbine can be installed instead of a water wheel to exploit it. But all this depends on the ownership of the land where the waterfall is located. This is a “monopoly” that is attached to the land, not the product of a specific investment. The capitalist who owns the land with the waterfall is able to block the way for others to use this resource. He prevents the connection between capital and this natural force and prevents other people from investing in it. The additional profit that is obtained in the light of the use of the waterfall does not arise from capital, but from the nonenolizable natural force and the binding of this exclusive right to capital. It is in such conditions that the additional profit takes the form of land rent and goes to the capitalist who owns the waterfall. If the manufacturer himself does not own the waterfall, he can enter into a contract with the landowner for its use and pay a sum in return for the use of the waterfall. The important and thoughtful issue is that even in this case he will earn an additional profit than the profit of the capitalists who do not have the right to use the waterfall. Because what he pays to the owner of the waterfall is merely a share of the total excess profit or profit above the average rate of profit that he has earned. Let us consider a few points below.

1 – This rent is always and without exception differential rent. It does not participate in the formation of the price of production but is the difference between the general price of production and the price of production of the individual capital that owns the monopoly.

2 – This land rent does not arise in any way from the improvement of the productivity of labour in the field of capital advance. The labour force that exploits lower the value of the commodity, but this reduction in the cost of production and the fall in the price of the commodity do not originate from the increased productivity of labour. It arises from the application of a natural force by a given capital, which on the one hand lowers the value of the commodity and on the other takes away the ownership of this monopoly from other capitals.

3 – Natural force is not the source of surplus profit, it is a natural factor for the exceptional increase of the productive power of the labour force active in the creation of this surplus profit or land and differential rent. Every use-value is the bearer of exchange-value. But it is not its cause. If this use-value were obtained without the expenditure of labour, it would have no exchange-value but would retain its natural utility. An object cannot have exchange-value without containing use-value. If the various different values ​​in the price of production of individual capitals or individual fields of investment did not come together in the process of forming the general price of production, then the increased productivity of labour-power exploited by the cascade-owning manufacturer would only lower the cost of production, would reduce the price of reproduction of labour-power, but would not affect or increase the profit produced and contained in these commodities.

4 – The ownership of the waterfall has no involvement in the production (surplus profit), the part of the surplus value that becomes surplus profit or the formation and determination of the price of the commodity produced with the help of the waterfall. This surplus profit exists in the absence of ownership of the land. If the manufacturer himself owned the land on which the waterfall is located as property without a claim to ownership, this component of surplus value would still exist. The surplus profit is produced as a component of surplus value. The ownership of the waterfall authorizes its transfer from the manufacturer to the owner of the land.

5 – The price of the waterfall, or the price that the owner can obtain for the waterfall by selling the land, is not initially included in the general price of production of commodities. Although it is hidden in the individual cost price of the manufacturer. The price of production of commodities in the market is determined under the pressure of competition between all capitals that do not have the exclusive right to use the waterfall, and it is this price of production that becomes the important basis for the formation of the general rate of profit. Let us leave aside the question of the price of the waterfall. Because a waterfall, like the earth, like all other natural forces, is not fundamentally a product of labour. For this reason, it has no value. The price of a waterfall must be its value expressed in money. When there is no value, it cannot be expressed in money. What is called the price of a waterfall is nothing but the profit of capital. The point is that the ownership of land enables the owner to capture the difference between the individual profit and the average profit. This profit is renewed every year and has the capacity to be invested. Capital which appears as the price of natural force. If the additional profit that the manufacturer pays to the owner of the waterfall is £10 per year, and if the rate of interest is 5%, then this £10 is the profit on a capital of £200. For the owner of the waterfall, this £10 is the result of a 20-year investment of £10 per year. It is as if the £10 per year, in its accumulation, has become the owner of the waterfall’s capital of £200. A capital which entitles him to share in the manufacturer’s 15% profit and to keep 5% of it for himself. The waterfall has no value in itself, but it has now taken on the form of capital. It is earning the equivalent of a capital of £200. This is where its price comes from.

Chapter Thirty-Nine

The First Form of Differential Rent (1)

David Ricardo considers differential rent to be the only form of rent and defines it as “the difference between the products of two equal quantities of capital and labour.” What he means by two equal quantities of capital is actually two equal quantities of land because his subject of study is not surplus profit but merely land rent. Surplus profit, under normal and not accidental conditions, is always the difference between the product of two equal amounts of capital and labour. If two equal amounts of capital and labour on an equal area of ​​land produce unequal profits, this surplus profit will be ground rent. But this does not mean that excess profit is necessarily the result of unequal amounts of capital. Unequal capitals can also be used in different investments; this is the conventional assumption. Meanwhile, the important issue is that equal amounts of these investments in different areas, for example 100 pounds of each of these investments, can bring unequal results. What is the general premise for the existence of additional profit in any territory. The second point is the conversion of this additional profit into land rent and the special conditions of this conversion. Ricardo also understood this correctly that: “Whatever inequality of produce resulting from the advance of capital on equal lands reduces rent, and vice versa.” What Ricardo did not pay attention to is that these factors are not only natural components related to the location of the land or factors affecting soil fertility, but also other determining factors. Including:

1- How taxes are distributed and whether they are equal or not in different exploitations,

2- Inequalities resulting from different degrees of agricultural mechanization,

3- The heterogeneous way in which capital is divided among land tenants,

I now turn to my specific analysis of differential rent, and in this analysis, I shall concentrate on the following different cases.

First: Unequal produce of equal capitals on equal areas of land

Second: Unequal produce of equal capitals on equal areas of land of different sizes

The inequality of produce in the above cases is due to two factors. First: the different aspects of soil fertility and second, the geographical location of the land. These two factors sometimes have opposite results and act to counteract each other. A given piece of land may be in a favourable geographical location but not in a favourable one in terms of fertility. The reverse is also true. This is important because it explains why in the cultivation of the virgin lands of a country, we proceed from the most inferior to the most desirable, or vice versa. In this connection, why does the expansion of social production lead to the levelling of the spatial location of lands as a certain basis of differential rent? The increasing expansion of the scope of social production leads to the emergence of markets, transport systems, or the emergence of facilities that improve the spatial location of the land. At the same time, it causes the separation of agricultural production from factory production and the isolation of the villages. For the time being, we will leave aside spatial location and focus specifically on the fertility of the land.

The factors that make up the fertility of the land are diverse. Apart from the climate and the natural quality of the land, the chemical composition of the soil, the relative volume of nutrients in the land, the absorbability of these materials, the use of chemical fertilizers, drainage and everything related to the level of chemical and mechanical development of agriculture fall into this category. Considering all this, let us take a certain level of agricultural development as a basis. Let us assume that at this certain level we are faced with different degrees of quality of the land. In such a situation, we will be dealing with an ascending and descending curve of rents. Let us present the data more vividly and concretely. Let us stare at the four types of land A, B, C and D. Let us also calculate the price of each quarter of wheat as 3 pounds sterling or 60 shillings. 3 pounds is equal to the price of production, that is, the average capital and profit of each quarter of wheat on the worst land.

Let A be the worst land, which has yielded 10 shillings profit from a quarter of wheat, consisting of 50 shillings capital. B. It has yielded 2 quarters of wheat worth 120 shillings. Of which 50 shillings is capital and 70 shillings profit.

C. It has produced 3 quarters of wheat worth 180 shillings, of which 50 shillings is capital and 130 shillings profit.

D. It is the best land, which has yielded 4 quarters of wheat worth 240 shillings. (50 shillings capital and 190 shillings profit)

Capital A has realized a rate of interest of 20 per cent. and has made a profit of 10 shillings, which is the average rate of interest of the day. Capital B has acquired 60 shillings of additional profit. Capital C has obtained 120 shillings of additional profit, and finally capital D has obtained 180 shillings of additional profit. The total rents are 360 ​​shillings. The share of the four lands in this volume of rent decreases from D to A, from 180 for D to zero for A. It is assumed that initially land D, with a yield of 4 quarters per year, meets the entire demand for wheat. In such a situation, the 4 quarters produced on this land at a price of 15 shillings per quarter, bring a total value of 60 shillings.

Table 1

Land (Soil)	Product quarters	Price per quarter	Total value shillings	Capital shillings	Profit shillings	Rent shillings	Total demand
D	4	15 shillings	60	50	10	0	4 quarters

Then the demand increases and rises to 7 quarters. The price of wheat also rises and reaches 20 shillings per quarter. It is here that land B is brought under cultivation and its owner can harvest 3 tons of produce without suffering a rate of interest lower than the average profit. At the same time land D receives a rent of 20 shillings.

Table 2

Total demand	Rent shillings	Profit shillings	Capital shillings	Total value shillings	Price per shillings	Product quarters	Land (Soil)
7 quarters	0	10	50	60	20	4	D
	0	10	50	60	20	3	C

The increase in demand continues for 9 quarters. At the same time, the price of wheat rises by 30 shillings per quarter. Conditions are also created for the cultivation of land B.

Table 3

Total demand	Rent shillings	Profit shillings	Capital shillings	Total value	Price per quarter	Product quarters	Land (Soil)
9 quarters	60	70	50	120	30	4	D
	30	40	50	90	30	3	C
	0	10	50	60	30	2	B

The demand increases again. This time it reaches 10 quarters. The price of wheat also rises, and a quarter is sold for 60 shillings. Time is prepared for the cultivation of land A.

Table 4

Total demand	Rent shillings	Profit shillings	Capital shillings	Total value shillings	Price per quarter	Product quarters	Land (Soil)
10 quarters	180	190	50	240	60	4	D
	120	130	50	180	60	3	C
	60	70	50	120	60	2	B
	0	10	50	60	60	1	A

We see that the rents for the four lands decrease from D to A. Now let us consider the reverse process. Let us suppose that land A, with an annual yield of one quarter of wheat, meets the entire demand for the day. But this demand increases and land B is also cultivated. Here we will not see an upward trend in prices because land B enters the competition process with its two-quarter yield, a land of the same area that yields two quarters instead of one quarter and, by selling it at a price of 60 shillings per quarter, obtains a rent of 60 shillings. The same calculation applies to lands C and D. As the demand increases, land C and then D enter the process of cultivation. he first, by producing 3 quarters and selling one quarter, earns a rent of 60 shillings, equivalent to 120 shillings, and the second, by producing 4 quarters, increases this rent to 180 shillings. The rents here, unlike in the first case, do not decrease, but increase. While land A does not earn any rent, lands B, C, and D earn 60 shillings, 120 shillings, and 180 shillings, respectively. The price of each quarter of wheat, which was constantly increasing in the first case, remains constant here and does not change. In both cases, we witness a trend of decreasing rent from better to worse lands.

Let us continue this study with other assumptions. The demand for wheat increases from 10 quarters to 17 quarters. The worst land (A) is replaced by a land whose production price per quarter of its produce is 45 shillings, and therefore 60 shillings for the whole land, for various reasons, including more rational cultivation, and the change of crop type from wheat to clover. The capital allocated to each of the lands is the same 50 shillings, the profit is 10 shillings, and the rate of profit is 20%. Leaving aside the changes that have occurred in land A, other lands have also come under cultivation, for example, sub-A, sub-B, sub-C, sub-D, which have different degrees of fertility from A, B, C, and D. Let us see what the result will be?

Table 5

Total demand	Rent shillings	Profit shillings	Capital shillings	Total value shillings	Price per quarter	Product quarters	type of land (Soil)
17 quarter Total demand for all land	0	10	50	60	45	1 and one third	A
	15	25	50	75	36	1 and two thirds	Sub A
	30	40	50	90	30	2	b
	45	55	50	105	25 and five sevenths	2 and one third	B Sub
	60	70	50	120	22 and a half	two and two thirds	Subsection 2
	75	85	50	135	20	3	c
	120	130	50	180	15	4	d
	345	—-	—–	—–	—-	17	the whole

Table 5 shows that: First, the cost of production of a quarter of wheat has fallen from 60 shillings to 45 shillings, and as a result, seven types of land with different fertility from the worst to the best receive 60, 75, 90, 105, 120, 135, and 180 shillings in return. The value of the capital allocated to each of the seven lands is 50 shillings. The profits from the worst land to the best are 10, 25, 40, 55, 70, 85, and 130 shillings, and the rents are in the same order: 0, 15, 30, 45, 60, 75, and finally, in the case of land D, 120 shillings. Another point worth considering in the table is that the rents of two lands C and D have decreased compared to the previous tables. But the downward trend in rents from the best to the worst land and vice versa has remained constant.

And finally, if the same four lands A, B, C, and D, are cultivated in the same way as before, but land A produces 2 quarters instead of 1 quarter, and lands B, C, and D produce 4, 7, and 10 quarters respectively, then the total yield increases from 10 to 23 quarters. In this case, we will see the following result.

Table 6

Rent shillings	Profit shillings	Capital shillings	Total value shillings	Price per quarter	Product	type of land (Soil)
0	10	30	60	50	2	A
60	70	15	120	50	4	b
150	160	8 and four sevenths	210	50	7	c
240	250	6	300	50	10	d
450	—–	—-	——	—-	23	the whole

In the table above, the change in the volume of the four types of land can be caused by various factors. Development and the attempt to increase the yield of agricultural land is the most important reason. If this is the case, then development will be carried out first on more fertile land. An assumption that, if realized, will increasingly reduce the chances of obtaining rent on poorer land. However, the opposite is also possible and possible, although rare. Less fertile land is also possible and can become the pioneer of development. A process that in turn will change the data involved in the calculations. Let us explain a few very important points, as a summary of the studies in all cases, with all the different assumptions. These points are:

1 – In the analysis of rents, we always start from the most fertile and highest-rent land and proceed towards the land with no rent. For this reason, the rent curve is always downward sloping.

2 – The production price of the worst land, the land that is not capable of capturing any rent, always regulates the market price. Unless the production of the other three lands exceeds the total demand, in which case the worst land will not determine the price.

3 – Differential rent arises from the difference in the natural fertility of different lands at different levels of agricultural development, the role of the location of the lands in relation to this form of rent will be explained separately.

4 – Differential rent can be explored and calculated in both its descending forms from the best to the worst land or vice versa.

5 – If the production price of the product decreases, the total product and the total rent can increase. In this case, land that was not previously eligible for rent will receive rent. If the decline in prices is directed towards the development of agriculture, it can be accompanied by a decline in the yield and price of production of the worst land, in which case the rent of some of the better lands remains constant, and finally, differential rent can be accompanied by rising, falling or constant prices of production. Another important point about differential rent is that the market value of the products is always higher than the price of production of the whole product. The reason is also clear, look at Table 4. The total product is 10 quarters. The total value of the products is 600 shillings, but the production prices of each quarter for A – 1 x 60 equals 60, B – 2 x 30 equals 60, C – 3 x 20 equals 60 and finally D – 4 x 15 equals 60, a total of 240 shillings. Let us explore the issue more precisely and radically. The production price of commodities in the capitalist mode of production is determined under the pressure of competition and various factors such as the value of commodities produced under different conditions of production, with capitals of different organic composition in various spheres of production, the amount of supply and demand, etc.

Now let us assume that the number of cultivated acres is doubled in every category. We then

have:

Let us assume two more cases. Suppose in the first case production expands on the two poorest

types of soil in the following manner:

And, finally, let us assume an unequal expansion of production and cultivated area for the four

soil categories:

TABLE Ic

In all tables the rent per acre has remained the same.

In 1 each acre from A to D was 0 – 3 – 6 – 9 in the order and for a total of 4 acre it was 18 pounds sterling.

In 1-A each acre in the order above is 0 – 3 – 6 – 9, the total of 8 acre is 36 and for 4 acre it is the same 18 pounds.

In the case of 1-B and 1-C the following points are important.

First: The total cultivated area of ​​the two lands has tripled compared to 1 and has increased from 4 to 12.

Second: In Table 1-B land A has no rent. Land B also has the lowest but has witnessed the largest increase in rent. It has increased from 3 and 6 pounds in Tables 1 and 1-A to 12 pounds. The important reason for this increase is that the area under cultivation of land A has increased significantly, while it receives no rent. Lands C and D, which receive high rents, also have a small area under cultivation.

Third: The tripling of the cultivated land 1-B compared to 1 does not imply a tripling of the yield. The latter has only changed from 10 quarters to 26 quarters.

Fourth: In 1-B, unlike field B, field C does not witness an increase in rent.

Fifth. In Table 1-B, we see that field A has quadrupled on the one hand and has not received any rent due to its poor quality. A significant part of the increase in rent for field B comes from here.

Sixth: In 1-C, the land without rent has not increased compared to Table 1. The land with the minimum rent has also grown slightly. Instead, fields C and D have increased in area. The total cultivated land has tripled compared to Table 1. Production has increased threefold and has reached 36 quarters. Although the total land area is 12 acres as in case 1-B, the better rent-bearing land has gained a much heavier weight, and as a result the total rents have increased from £18 to £72.

Rent rate

If we consider the total land area as 4 jeribs and the total rent as 18 pounds sterling. The average rent, considering that its amount is zero in land A, will be 4/18 equal to four and a half pounds sterling. However, to calculate the rent rate, we must proceed in a different way. The fact is that 18 pounds of rent is the result of the advance of a capital of 10 pounds in 4 jeribs of land of different qualities. If we divide the latter by the former, that is, 18 by 10, we will find the figure of 180%, which is the same as the rent rate.

The above rent rate applies to both tables 1 and 1-A. In the latter, the cultivated area is twice that of the former and the amount of rent is also doubled. The capital advanced in the latter is also twice that of the former. Accordingly, the average rent in both cases is 4 and a half and the rent rate is 180% each.

The above calculations do not apply to Table 1-B. Here 12 acres of land under cultivation with an advance of £30 brought in a total of £42 in rent. The average rent here is three and a half and the rate of rent is 140%.

And finally in Table 1-C the total rent for 12 acres of land and an advance of £30 is £72.

The accuracy of the above data indicates that:

Firstly – the total rent increases with the expansion of the area under cultivation and therefore with the increase of the advance. There is one exception. If the expansion occurs on land that is not eligible for rent, this equation will not be valid.

Secondly – ​​the average rent and the rate of rent can change in different proportions if they move in the same direction. If we leave aside the factor of “growth rate only on rent-free land,” the average rent and the rate of rent of capital employed in agriculture will be a function of the share of different cultivated lands with different degrees of fertility. If we consider the average rent per acre of the total cultivated land and compare and examine this for all countries in the same period or for all different historical periods of a country, we will see that the level of the average rent per acre or hectare, as well as the total rent, corresponds to a certain degree of absolute agricultural fertility and not to the relative fertility of a country. This ratio tends to increase, because the greater the share of mechanized and more fertile land in the total cultivated area, the greater the total volume of products. The average rent per acre will also increase. Let us mention another point that is quite important for future research: the relative level of average rents (the result of dividing the total rent by the total acres of land) and the rent rate (the result of dividing the total rent by the total capital advanced in all types of land) can increase and decrease even if factors such as prices, the difference in fertility of cultivated land, the rent per acre, the rate of rent of capital employed per acre with each type of rented soil remain constant simply by expanding the area under cultivation. Other points are also important in completing the discussion related to the first form of differential rent, even its second form, which are:

First, with the establishment of capitalism, the dominance of this form of production over agriculture is a given. As soon as this dominance reaches a certain level, the price of fallow lands of different qualities, if there is differential rent, is determined by cultivated lands of equal fertility and location. The price of land is nothing other than the rent delivered to capital. The rent of the land for many years to come, calculated from time to time by buying and selling, takes the form of the price of the land. In this case, there is no difference between fallow and cultivated lands. The price of the former is determined by the price of the latter. This is precisely the dominance of capitalism over agriculture and the fact that capital has been able to impose its laws on this sphere. It is in this situation that the differential rent of land increases in proportion to the amount of capital advanced and the corresponding cultivated lands. All lands except the worst receive rent. The price of cultivated lands determines the price of fallow properties. Land is becoming a commodity, and the overall price of land is rising.

Second, the expansion of cultivation may take place on the most inferior lands or on lands of varying degrees of quality. There is no doubt that the cultivation of the worst lands is not optional. Assuming the dominance of capitalism, this is simply the result of rising prices. But this is not all. Bad lands may be relatively preferred to better lands because of their geographical location. Sometimes these lands are cultivated or exploited only because they are surrounded by good and fertile lands. In such circumstances, the worse lands find a more favourable geographical location compared to the better and more fertile lands in the distance, and their cultivation becomes the order of the day.

Third – The assumption that colonies, due to their higher soil fertility, have sufficient capacity to export grain at low prices is not at all correct. What is decisive here is not the necessary fertility of the land, but the special position of these societies in the global capitalist division of labour. These countries are producers of food and agricultural commodities. They export these commodities and receive in return the necessary clothing or industrial products. Materials and products that they would like to produce themselves, due to the low level of economic growth and labour productivity, require higher costs. Accordingly, they are forced to produce as much as possible what is needed by the market of industrialized countries and export in as large a volume as possible. It should not be forgotten that in these societies, when the less fertile lands are first cultivated, they are anyway rich in nutrients in their upper layer, which reduces the need for fertilizer. It lowers the cost of production. Aside from the fact that more and more land is being cultivated in these countries, all of this is evidence that their high grain exports are not due to greater soil fertility but rather to the cultivation of more land and their special economic position in the global capitalist division of labour.

Chapter Forty

The Second Form of Differential Rent (Differential Rent 2)

So far differential rent has been considered as the different product of equal investments, on lands of equal size but of different quality. We have considered lands of equal area with different degrees of fertility in various respects. We have looked at the equal capitals advanced in them; we have taken into account the obvious differences in the volume of produce and the values ​​produced. We have made the price of the produce of the most inferior land the criterion of measurement and the basis of price regulation, and finally we have calculated the surplus profit of other lands by reference to the value of the produce of the worst land. Here a question arises. If all equal capitals are invested simultaneouslyand side by side on equal lands with different degrees of fertility, or if the same equal capitals are invested alternately and in succession in time on the same lands with the same different degrees of productivity, will there be any difference in the result? The answer to this question, so far as it concerns the calculation of the surplus profit of the different investments, is negative. The result is the same in both cases. Rent is nothing but a form of this surplus profit. However, the latter case creates problems in the area of ​​converting surplus profit into rent. The source of the stubborn resistance of land tenants in England to any kind of official agricultural census, the struggle of land tenants with landlords over the assessment of the real return on investment, is also here. Rent is determined when renting out the fields, and the surplus profits from successive investments reach the tenant when the lease agreement is in force. Because most often it is the activities carried out by him, such as drainage, land improvement, and the creation of an irrigation system, that increase the yield of the crop. In this regard, tenants demand a long lease period, while landlords insist on a short one. They try to make the costs borne by the lessees the basis for raising the rent, an action that deprives the lessees of the recovery of their investments and expenses. According to these explanations, if the two distinct cases above do not cause any difference in the formation of surplus profit, they have completely different effects in the conversion of surplus profit into rent. In the second case, the lessee is usually the loser and the oppressed, while the landowner is the winner and the prosperous. In the study of differential rent 2, several other points are also important and need to be emphasized.

First: The starting point of this form of rent is not only in terms of historical origin but also in any period of history the same differential rent 1 with the index of different exploitations of equal investments on equal areas of land with different fertility. In the settlements each group of immigrants needed only a very small amount of input. It was land and labour that constituted the basic factors of production and in this regard different degrees of fertility played an important role in the rate of harvest.

Second: In Figure 2, differential rent, the factor of the amount of investment or the difference in the distribution of capital, is added to the factor of land fertility. A certain amount of capital is accumulated, the condition for entry into the Jirga, and each individual or household that invests more capital will have a more significant additional profit. The capitalist mode of production gradually, unevenly, dominated agriculture. A fact that is quite evident in England, the cradle of the classical development of this mode of production. As long as there was no grain import or it had little effect, the market price of grain was determined by the producers who cultivated the worst lands. If the capitalist mode of production were to carry out its process of domination in agriculture in the same way as industry, the surplus profit of the tenant capitalists would be eliminated or at least would lose its current form. It is worth recalling that differential rent 2 is, in any case, a different expression of differential rent 1, and that the inequality of the product of equal investments in lands of different levels of fertility is the presupposition of the calculations, regardless of whether the capitals are advanced simultaneously in four lands of different degrees of quality, or whether their advance takes place alternately in a single land. In Table 1 of the previous chapter the price of production per acre of land was £3. This figure includes the average profit which every two and a half pounds of capital reaps in the market of accumulation and valuation of the capitalist day. The profit which the worst or restless land reaps. The other three lands each capture a smaller or larger additional profit in proportion to their greater fertility. This was the situation there. Now, if the same £10 capital is invested in four investments of £2.50 each, not simultaneously, not in four plots of land of different degrees of fertility, but only in one acre of land D, successively or in chronological order, the same result will still be obtained, For the agriculture in question takes place within the sphere of capitalist production. The price of production of the product is still £3, this £3 includes the average profit of capital, and the product of each £2.5 investment of land D is determined not by its own price of production but by the price of production of the worst or rent-free land. Let us bear in mind that the last point, namely, the determination of the price of the product of the four successive investments in land D by the price of production of the worst land and not by the price of production of the land itself, is the key point. Here, and in view of the important point above, the surplus profit here will also be the same as that which we observed in the investment of £10 in four fields. If the first accumulation of £2.50 on an acre of land D yields 4 quarters of wheat and 3 quarters of rent. The second two and a half pounds, on the same land D, will yield only one quarter of the crop and will be devoid of any surplus profit. A point which is also true of the other two investments. So far and in all these cases the price of production and the average profit remain constant and are not affected by the different differential rents. Now suppose that the surplus product constituting the surplus profit increases, so that, for example, land A loses its object of cultivation. Land B falls into the position of the worst and rent-free land, the price of production on it being equal to the price of production on each investment of £2.50, and the average profit on its share becoming the average profit of the day. In such a situation, the fall in the return on the periodic investments of land D lowers the price of production. Suppose it falls from £3 to £1.50, with this event the rents also undergo a change. Land D, which in the example of a season ago gave only 4 quarters of produce, now, with the periodic advance of £4 capital of £2.50, yields 4+1+3+2=10 quarters, the difference with land B, which has produced only 2 quarters of produce, amounts to 8. (10-2=8) Multiplying these 8 quarters by one and a half, or the price of production per quarter, we find a rent equal to £12, a rent which was previously only £9. This means that the rent per acre has risen by about 33 per cent, and this has happened while the other two investments of £2.5 each have suffered a fall in surplus profit. The differential interest of 2 in successive investments corresponding to the fall in the fertility of the land will only suffer a rise in the price of the produce and a fall in the return if all four investments are made on the worst land. If an acre of land A, which previously yielded 3 quarters of produce with a capital of £2.5 at a price of production of £3, now yields only 1 quarter and a half with a capital of £5, its price of production will be £6, or £4 per quarter. What happens in the meantime is a relative fall in the produce per acre, which for fertile land is merely a fall in the surplus produce and a fall in the rate of surplus profit. Diminishing returns to successive investments are natural or more or less inherent in agriculture under the capitalist mode of production. It is not simply a question of the continuous improvement and improvement of arable land. Here the better lands are constantly being cultivated and exploited. In England, after the repeal of the Corn Laws, the inferior lands were increasingly converted into pasture, and the more fertile lands were drained, improved, and subjected to activities that guaranteed higher yields. In the context of these developments, we have a new form of surplus profit. The surplus profit, which is not a component of the profit allocated to differential rent in the old way, is the surplus profit that arises from the transformation of lands by investment and becomes land rent. Under these conditions, whenever the demand for a product such as wheat increases so much that the market price exceeds the price of the produce of the worst land, the decrease in the yield of each land will cause the price of production and the market-regulating price to rise. If this situation continues, it will affect the price of means of subsistence, leading to a struggle to increase wages. If the increase in wages is not accompanied by an increase in production and supply, it will put pressure on the rate of profit and push it towards decline.

The factor of reduced return on capital in cultivated land can also cause a rise in the price of production, a decrease in the rate of profit and, consequently, the creation of differential rent for the capital invested in the land. This situation is similar to the situation where a completely inferior land of level A or worse than the previous worst land becomes the market price regulator and all other lands are therefore able to obtain rent. The very important point here is that the new forms of rent and the regulations mentioned in the present discussion are not based on the mechanism of rent 1, in this case, of course, there is an exception. Insufficient cultivated land, in the same way as in rent 1, causes the market price to rise above the price of production, and as long as new inferior land is not cultivated, and as long as more products with higher production prices do not put pressure on the balance of supply and demand, this situation will continue. Apart from these, a few other points are also important and need to be remembered.

1 – If the additional capital invested in the four lands A-B-C-D has a rate of interest that matches the rate of interest on the investment of the worst land, no additional profit, no rent will be generated.

2 – If the additional capital of these lands produces more surplus produce, it can generate new rents, but this is subject to the condition that the additional product of the lands does not remove land A from the competitive and agricultural cycle. If this exit occurs, if we witness a decrease in wages or if the elements involved in the formation of fixed capital in the areas become cheaper, each of these factors will affect the outcome of the matter, and the formation or non-formation of rent and its possible amount.

3 – If additional investment in the lands is accompanied by a decrease in additional profits, but the products are a surplus more than the equivalent product of the advanced capital in land A and the new supply does not cause land A to be removed from the competitive and agricultural chain. Then a new combination of surplus profits arises. Profits occurring simultaneously in A-B-C-D. Now if the worst land is eliminated, the price of production of the regulating land falls. The increase or decrease in the monetary form of surplus profit or differential rent will be a function of the ratio between the reduced price of each quarter and the number of quarters constituting the surplus profit. What is essential here is that the price of production falls with the reduction of surplus profits. This seems surprising at first glance. Now, after all this analysis and discussion, let us return to the central issue of the distinctions between the two forms of differential rent and summarize these distinctions.

In differential rent 1, assuming the differences and the price of production to remain constant, the average land rent per acre or the average land rent per investment can rise by the total rent. But the average here is only an abstraction. The actual amount of rent per acre or per investment usually remains constant. At the same time, it can increase even if the rate of rent remains constant in terms of the capital advanced. Consider the following example.

Let us suppose that the investment of £2.50 in each of the four lands A-B-C-D is increased to £5, and the total capital is increased from £10 to £20. The relative fertility of the lands remains unchanged, as if two acres of each type of land were cultivated instead of one, but the cost of production has not changed. In this case the rate of profit and its ratio to surplus profit or rent remain constant. The produce of each land has doubled, but the price of production per quarter is still £3. Why? Because the doubling of the produce of the lands is not due to a doubling of the return on the previous capital (£2.50). It is due to a doubling of the capitals, or an increase of each from £2.50 to £5, and a total from £10 to £20. The profit per land has doubled simply because the capital has doubled. The rents B-C-D are double what they were, and their total has increased from £18 to £36. In this regard, the price of land has also doubled.

Land type	Acre	Production price	Capital	Product Quarters	Grain rent quarters	Money rent
A	1	£3	£5	2	—	—–
B	1	£3	£5	4	2	£6
C	1	£3	£5	6	4	£12
D	1	£3	£5	8	6	£18
Total	4		£20	20	12	£36

But if we do this calculation for the rent rate based on the capitals advanced, everything will be different, the rents have not changed, and their formal change is due to the increase in capitals. The ratio of the money rent of each land to the capital advanced in it has also remained constant. All this is evidence of the correctness of the statement that with the price of production, the rate of profit and the difference in yields remaining constant, the amount of rent in both its grain and money form, as well as the price of land, can increase. This statement is also true about the decrease in the additional rate of profit or the rent rate. With the decrease in the productivity of the additional capitals that still enjoy rent, if these investments increase less than what we saw in the table above, their differential rent will also decrease, whether grain or money.

Chapter 41

Differential Rent 2 – Continued Review

First Case: Constant Price of Production

It is assumed that the market price is regulated by land capital (A), in which case the following situations are conceivable:

1 – The additional capital in the three lands B-C-D is equal to the capital A, that is, the land is rent-free and regulates the price of productive production, in such a situation it will have no effect on the amount of rents.

2 – Additional capitals produce more products in proportion to their quantity, the volume of production increases in proportion to the fertility of each land and the volume of additional capital. (Refer to Table 2 of Chapter 39) Let us also consider the following two tables.

This is now transformed into:

We see that all changes in the amount of produce, the price of land, the grain rent, the money rent on rentable land, are a function of changes in the amount of added capital. In such a case, if we consider simple numerical changes instead of relative changes or differences, the differential rent of the types of land can be changed.

Suppose the additional capital is advanced only in the fields of B and D. Then the difference between D and A, which was previously 3 quarters, will become 7 quarters, and the difference between B and A, which was 1 quarter, will become 3 quarters. The difference between C and B, which was previously 1 quarter, is now minus 1 quarter. This kind of numerical difference was important in the case of rent 1, insofar as it reflects the difference in productivity of the same investment, but it does not play a role here.

3 – More massive additional capitals generate more products and more additional profits, but the rate of increase of additional profits is not directly proportional to the amount of capital but has a decreasing trend. In this regard, it is not clear whether investments are made simultaneously in all fields or in some other way, whether the downward trend of additional profits is realized in an equal proportion or not? Whether the investments are made on one piece of land that is rent-bearing or on several pieces of land that are rent-bearing, and the nature of these distinctions are essentially irrelevant. The only important point here is that all additional investments on all kinds of land are capable of yielding rent, of yielding additional profit, with the emphasis on the fact that the ratio of additional profits to the volume of newly added capital will not be equal but will be decreasing. These decreases will take place in the interval between 4 quarters or 12 pounds of the product of the first investment on land D and 1 quarter and 3 pounds of the return of the same accumulation on land A. What is the law here is the absolute growth of rent on all kinds of land, although this growth will not be proportional to the increase in added capital. The rate of additional profit for all added capital and the total capital advanced falls, but the absolute amount of additional profit on capital rises. Just as the falling rate of profit in capitalism is accompanied by an absolute growth in the amount of profits.

4 – Whether increased investment in more fertile land yields more produce or more surplus rent is a clear matter and does not require further discussion. What is conceivable in this case is the equal or even greater return of completely smaller additional capitals compared to larger additional capitals in the same case. A phenomenon that is different from the previous figure. Let us consider that a capital of £100,000 under certain conditions yields a profit equivalent to £10,000 of flour and a capital of £200,000 yields a profit exceeding £40,000. In the previous figure, we were talking about an increase in produce and additional profit or rent in proportion to the volume of additional capital. Here, we are talking about the same amount of capital with double the profit. In one place, higher profits are the result of a greater advance of capital. In another place, higher profits are not the result of an increase in capital but of a higher productivity. A form which involves the liberation of living or objectified labour and its exploitation elsewhere.

Let us assume that a capital is advanced and its product is 10,000 yards of cloth. The price of each yard of cloth is £100, and therefore the product, composed of fixed, variable, and profit, will be a total of £1 million. If this capital could have produced 20,000 yards of cloth instead of 10,000 yards, the price of each yard would have fallen from £100 to £50. The capitalist would have been able to obtain the same amount of product, 10,000 yards, with half the previous capital. In this way, he would have liberated the other half of his capital and advanced it elsewhere. So far, our assumption has been that the supply of cloth remains unchanged. Now, let us suppose that the market demand increases from 10,000 meters to 40,000 meters, and the price per meter remains the same at £50. In such a situation, the investment product must be anchored on the shore of £2 million. But if the market demand remained only twice as large as before, the same amount of investment would still be sufficient and there would be no need for additional capital. What we see in all these cases is that the change in the value or price of the cloth does not reveal a significant difference. In the same way that the change in the amount of product in relation to the allocated capital does not create a significant change. In the first case, capital was freed. In the second case, with the doubling of the market demand for cloth with carpets, production doubled, no capital was freed, but there was no need for additional capital either.

From the point of view of capitalist production, the reduction of the variable component and the increase of the constant component of capital are economical! Not in the sense that the increase and decrease of these two components of capital cause a direct rise or fall in the volume of surplus value, but only because the higher organic composition of capital and the heavier the weight of its constant component are seen to cause a fall in the cost of investment! An idea that capital induces and shapes the capitalist’s thinking. The development of credit and the abundance of loanable capital provide the necessary conditions for disproving this assumption. Let us clarify the matter by giving an example. Let us consider an additional fixed capital of £1,000,000, which requires £1,000 of variable capital to advance and increase its value. 5 workers turn the production cycle around. The rate of surplus value is 100%. In this case, 5 workers will create 2000 pounds of new value. The question is, what do capital and the capitalist see in this? What do they think? From their point of view, the total product of 3050 pounds, of which 1000 pounds is net profit, is the result of an advance of capital of 2050 pounds. Capital and the capitalist do not see the product of 2000 pounds of new values ​​composed of workers’ wages and surplus values ​​in variable capital, they look for capital in total!!, on this basis they think that in the process of investment only raw materials and depreciation costs are consumed, a significant part of the fixed capital remains, while the variable capital is completely consumed and must be advanced again in each period of turnover. Independent small producers everywhere, for example in the colonies, lack capital, and if they have a little capital, they have acquired it at exorbitant interest. A part of the product of their labour, even under the name of income, is in fact wages. The same part that is capital advanced to the capitalist. The small producers in question see the cost of their labour as an inescapable precondition for any possible income. Their surplus labour, after deducting the necessary labour, is embodied in the form of a surplus product. What they consider to be of no cost to them, they consider the money from its sale as profit, regardless of whether it is above or below the value. This is of course if this so-called profit has not been swallowed up by bank interest. On the other hand, the capitalist sees the cost of both the fixed and variable components of his capital as an advance of new capital. At the same time, with his inverted consciousness, he believes that a relatively greater allocation of fixed capital, assuming other conditions remain constant, lowers the cost price and, in fact, the value of commodities. He does not see and does not accept the source of the surplus value of variable capital. He thinks that living labour is the most expensive element in the cost of production and must be reduced as much as possible. This is only a modified expression of the obvious fact that an increase in the fixed component of capital leads to a greater productivity of labour and social wealth. Competition turns everything upside down and induces change.

Chapter 42

Differential Rent 2, Second Case, Falling Price of Production

The price of production can fall, while the productivity of added capital remains constant, decreases, or increases.

1 – Additional capital and constant productivity:

The more additional capital is added to different lands, the greater the yield. If the difference in the lands remains constant, the additional profit of the additional capitals will grow in proportion to their amount. The greater advance of capital in land A will have no effect on the amount of differential rents. On this land the additional rate of profit is zero and will remain zero, because the productivity of additional capital and the additional rate of profit are assumed to be constant. According to the above assumptions, the price of production is determined by land A. This price changes when A no longer plays this role, and for such an event to occur, the new additional capitals will produce such a large volume of flour that there is no need to cultivate A or even B. In this case, land C will play the former role of A and will determine the price of production. Let us recall Table 2. The total yield was 20 quarters, and the total rents were 36 pounds. Suppose the demand falls from 20 to 18. Land A is removed from the circle, land B determines the production price, the aforementioned table is replaced by the table below.

If we compare the above data with Table 1, the grain rent remains unchanged at the same level as in the six quarters, but the money rent has fallen from £18 to £9. Land B, which was eligible for rent, now receives no rent. C and D also receive less rent than before. If land A is eliminated and the shortage of supply is made up by two crops on land C, the result will be as follows.

If a third investment of two and a half pounds were made on land B, the quantity of production would change but the rent would remain unchanged, because our assumption is that successive investments do not change the land and therefore B remains rent-free. Consider another case. If the latest investment were made on land D instead of C, the result would be as follows.

Table IV b (4b)

Land type	Acre	Capital £	Profit £	Production price, £	Product Quarters	Sales Price £	Proceeds £	Rent Quarters	Rent £	Rate Suroplus
B	1	5	1	6	4	1.5	6	—	—	—-
C	1	5	1	6	6	1.5	9	2	3	60%
D	1	7،5	1.5	9	12	1.5	18	6	9	120%
Total	3	17,5	3,5	21	22	4.5	33	8	12

2 – Additional capital and reduced productivity

The above study showed that additional investments in better quality land than A can led to the removal of this land from the production chain. The price of production decreases, and the grain and cash rent per jerib increases, decreases, or remains constant. Let us analyse the changes through a careful comparison. Let us rename

 Table 1 as 1-a.

Let us turn to Table 3. It is assumed that product A has been considered surplus to demand and has been removed from the grain production cycle for various reasons, such as being allocated to cotton cultivation instead of wheat, decreasing demand, or double cultivation of wheat on one of the more fertile lands. 16 quarters of wheat from the other 3 lands meet the market demand. In this case, the new display of the aforementioned table will be as follows.

Table 5

3 – Additional capital and the increasing rate of productivity

The difference between this case and the first form of the present chapter or the condition of constant productivity is only that if additional production is needed to withdraw land A from the cycle of grain cultivation, this is done more easily.

Chapter Forty-Six

Rent of Building Land, Rent of Mines, Price of Land

With the existence of rent in general, the emergence of differential rent is also assumed and follows the same laws as differential rent in agriculture. Wherever certain natural forces can be brought into exclusive ownership, be it a waterfall or a rich mine, a fishing ground or a place to establish a factory and erect a building, the capitalist who owns the land receives an additional profit under the name of rent from his active capital, compared to capitalists who do not have these resources, natural facilities. In the case of land with the possibility of building real estate, railway crossings, basic facilities required by capitalism, mines, and similar cases, the landowners, without spending or making a single riyal, both receive a significant share of the surplus values ​​resulting from the exploitation of the working class in the form of rent, and in parallel with the economic and social development of society, they make this share or this rent even greater and greater. In the territory of the construction sites, they even turn the poverty of the workers into a weapon to increase their rent and share of profits. The more the workers are forced to live in rented accommodation under the pressure of poverty, the more displaced and homeless they become, the more the need for housing increases and the rents increase, the higher their share of surplus value or rent, the more they share in the fruits of the exploitation of the workers. They make the very fact of the workers being forced to live on the planet a great blessing for a more predatory share in the profits resulting from their brutal exploitation. Land ownership is generally an inhumane tactic for the criminal seizure of all the surface and depth of the earth and its internal reserves. The more these lands are exploited by capital, the more they become a weapon in the hands of the capitalists to intensify the exploitation of the working masses. The growth of the need for housing, the construction of roads and railways, the establishment of industrial buildings and storage facilities, as well as the further development of capitalism, drives the workers away from their work with higher rents, higher transportation costs, and rising prices, making the pressure of exploitation on them more severe and, in return, the rent of the landowners or their share in surplus values ​​more astronomical. Sometimes the landowner has abundant facilities, resources, and reserves, and is also the one who advances capital. In such conditions, in addition to the surplus values ​​equivalent to the general profit of his capital, he also takes and appropriates a double share of the surplus values ​​as differential rent of the land.

A distinction must be made between rent resulting from the independent monopoly price of the product, rent from the land itself, and the fact that the product is sold at a monopoly price due to the existence of rent. The purpose of land rent is clear. Let us explain a little about the other two forms. In the first case: a good land produces a product that is better than the product of land lacking this quality. The product that is sold at a monopoly price different from the production price formed under the pressure of competition and the general rate of profit because of this quality is sold under the pressure of competition and the general rate of profit, the monopoly price here is due to rent. In the second case, for example, the owner of a winery in his small vineyard produces a very special type of wine in small quantities that is welcomed by a number of wealthy aristocrats. People who are willing to buy this wine at any price and pay any money for it. Here, the monopoly price of the product is due to the excessive greed of buyers and their endless wealth. Rent is also due to the independent monopoly price of the special product and is clearly different from the monopoly price based on the existence of differential land rent.

There is no point in the social life of the modern man that is not the target of the storm of distortion, inversion and engineering of the thought of capital. The ownership and rent of land in capitalism also bears the sufficient stamp of the fabrication and brainwashing of humanity by capital. This false idea that a handful of landowners consider themselves the private owners of land and, on the basis of this false ownership, claim the right to tribute or rent, springs from this poisonous source of deception that land is bought and sold like a commodity. The buyer thinks that paying money has made him the owner of the land and therefore entitled to the rent. These false beliefs without foundation originate from commodity relations and the high phase of its development, namely capitalism. Buying land does not create ownership rights in any way. On the contrary, in order for an object such as land to be bought and sold, the right to possess it must have been established in advance. Ownership is created entirely and without any addition or subtraction by the mode of production. For this reason, with the change in the relations of production, the type, meaning and economic burden of all the characteristics of ownership undergo changes. Private property exists in all economic relations based on commodity production, but capitalist property is not the same as feudal property and slavery. There, it was about ownership of the surplus product of the peasant, the serf, the craftsman, the slave. Here, ownership of capital is the embodied and living labour of the worker, surplus values. The day capitalism is forever consigned to the graveyard of history by the organized movement of the working masses, there will be no more ownership of anything, including land. Even talk of community or collective ownership will be a completely empty, meaningless word. The word ownership will also be erased from the consciousness and mind of humans.

Chapter Forty-Seven

Genesis of Capitalist Ground-Rent

Labour rent

We begin the explanation with “labour rent.” Let us recall a “serf” producer who worked half the week on his own land with his own means of labour to provide for the subsistence needs of his family and the other half as a labourer for the landowner. If we want to express this relationship as an example and with the aim of exploring the historical roots of rent with the common concepts and terms of the capitalist mode of production, the specific working time of the “serf” that is spent on providing the subsistence needs and reproducing the conditions of his work is called wages or paid labour, and whatever he has worked for the rest of the week will be equivalent to surplus or unpaid labour. In this way, as far as the era of the dominance of the serfdom system is concerned, rent and profit are in harmony. The serf is an unfree human being; his relationship with the landowner is one of domination and servitude. In order to force him to work and condemn him to servitude, the master must resort to the weapon of non-economic force. The conflict between them can, on some level, replace servitude with something like tribute. It is basically the economic form or the specific mode of production that determines the nature of the relationship of domination and servitude in different periods. This relationship itself originates from the specific form of production and at the same time acts as a determining factor on the production relations of the day. It is a relationship full of secrets and mysteries, the most intimate and innermost of which is the hidden basis of the entire social structure, the political pattern of order, the relationship of sovereignty and dependence, the specific political form of the state in each specific historical period. In the rent of labour, which is the simplest and most primitive form of rent, rent is the same as unpaid labour or surplus value and corresponds to it. The labour of the direct producer for himself is separate in time and place from the labour for the master. The second form of labour appears in every respect cruel and brutal; rent is not a mystery. It is a cruelty and atrocity that lies before the eyes and within the reach of the consciousness of the direct producer. The property relation and the form of production and the social relations of origin, the guardian of which has chained the serf to the land, compels him to surrender to the landlord everything that is more than the elementary necessities of his subsistence. The natural conditions or limits of rent are here apparent. The direct producer must be able to work sufficiently; the land must also have a certain level of quality. It is in the light of these conditions that the serf chained to the land can deliver the desired amount of rent or surplus and unpaid labour into the pockets of the greedy hoarders and plunderers of the landlords.

Every mode of production develops all the needs of its development, consolidation, and survival in the form of a set of agreements, contracts, decrees, charters, and decrees, in the form of a dominant social structure. The relationship of domination and servitude between the master and the direct producer in the form of the “serf” and the landowner also led to the emergence of the laws of the serfdom system. The coercive compulsion of the serf to perform unpaid additional labour in accordance with rent, to surrender all labour to the landowner in excess of the labour required for his minimum subsistence, also became the sacred, valid, overriding, and binding law of the era. A relationship that was in no way specific to labour on the land. It also encompassed the sphere of rural home industry.

Rent In Kind

This form of rent is essentially the same as labour rent, but it represents a more developed level of it. It indicates a higher degree of development of pre-capitalist commodity production. Rent still corresponds to surplus and unpaid labour, its relationship to the part of the direct producer’s labour that is spent on reproducing the basic necessities of his livelihood is also of the same kind and nature. But its formal form has become completely different. It has also become somewhat more mysterious. In this respect, the commodity economy has stamped the impact of every second of its development on human consciousness in the form of thought engineering and brainwashing. In rent labour, it was customary for the direct producer to work certain days in a specific place for himself and the rest on other days and in other places for the landlord. This situation has changed here. Times and places are not necessarily separate, although this separation can still exist and remain at a level or in some places. The dominant form is that the direct producer, outside the sphere of compulsion to separate the time and place of work for himself and for the landlord, simply works and, from his total annual or monthly work, in each round of reproduction, he surrenders a much larger share to the landlord under the name of tribute, owner’s interest, or any other name or title. The more the serfdom system or any other form of feudal, master-serf relations expanded, the more its length, breadth, volume, type, and variety increased. Iran during the Qajar era and even the first three decades of the reign of the predatory Reza Khan, Mohammad Reza Khan, were clear examples of the cancerous growth of the proliferation of these horrific feudal interests. According to some research, including the documentary reports prepared by “Baqir Momeni”, not only in the territory dominated by feudal lords and tribal landowners such as the heads of the Qashqai and Bakhtiari tribes, but also in the southern part of the largest capital of the Middle East, near Tehran, until the year of the imperialist implementation of the land reform, and even for a few years after this date, in addition to the feudal interest of several tens of percent, over 300 other types of interest and other feudal taxes were collected from the masses of peasants by brutal, extra-economic violence.

Money-Rent

Just as product rent (rent In Kind) was a modified form of labour rent but essentially the same, money rent is also a kind of metamorphosis of sexual rent with the same previous nature. A transformation whose objective manifestation occurs with the replacement of product rent by money. This took place somewhere in history in conditions when the payment of landowner rent in the form of products no longer met the needs, greed, avarice, and expectations of the feudal landowners. The commodity economy had passed a phase of development. Trade was expanding. Markets were becoming hotter than before. Money was strengthening its position in domestic and international transactions. Products were sold more or less at market prices. All of this widened the scope of the landowners, feudal lords, and royal courts’ need for money and made the ground for the replacement of product rent by monetary interest more intense and more fertile. While essentially homogeneous and identical with labour and product rent, on the one hand, it displayed a more advanced and perfected level than previous forms, on the other hand, it brought to the attention of history, albeit from a distant horizon, the facets of its dissolution and decline as feudal land rent and its transformation into the rent of the capitalist era. The process that heralded the increasing and ever-increasing expansion of the commodity economy indicated the relatively all-encompassing role of money, and it swept away the threshold of the preparation of old forms of capital for entering the primitive accumulation phase of capitalism. It sealed the germ of rent-seeking peasants who were free and enjoyed land ownership. It allowed peasant ownership of land to emerge and grow. It paved the way for the birth of the capitalist rent-seeker and his payment of rent to the landowner. In the first steps, it made it possible for a number of serfs to exploit other serfs; in the later steps, it brought about the gradual dispossession of the peasant cultivator of the land and his replacement by the capitalist tenant. The process of converting product rent into money, apart from all the above, also laid and developed the historical background for the emergence of wage workers without any kind of property. While a group of prosperous peasants were paying rent to the landowners, these wage workers, displaced, wandering, deprived of any property, rights, or means of livelihood, were subjected to their brutal exploitation.

Métayage And Peasant Proprietorship of Land Parcels (Transition from primary land rent to capitalist rent)

In all forms of land rent, from labour rent to in-kind and monetary rent, the renter was always and everywhere the cultivator of the land, a person whose unpaid surplus labour was directly surrendered to the landowner. Land rent corresponded to profit. What we know under the name of muzara’eh (contract a farm, as a transitory form from the original form of rent to capitalist rent, we may consider the métayer system, or share-cropping, under which the manager (farmer) furnishes labour, his own or another’s, and also a portion of working capital, and the landlord furnishes, aside from land, another portion of working capital, e.g., cattle, and the product is divided between tenant and landlord in definite proportions which vary from country to country. On the one hand, the farmer here lacks sufficient capital required for complete capitalist management. On the other hand, the share here appropriated by the landlord does not bear the pure form of rent. It may actually include interest on the capital advanced by him and an excess rent. It may also absorb practically the entire surplus-labour of the farmer or leave him a greater or smaller portion of this surplus-labour.) is the transition from this type of land rent to the capitalist form of rent. The tenant cultivator provided part of the capital in addition to his own or others’ labour. The landowner also provided another part of the capital in addition to his land. This part could take the form of livestock, seeds, or other means of labour. The produce of the cultivation and labour was divided between the tenant cultivator and the landowner in a ratio that differed in different societies around the world. In muzara’eh, the tenant lacked sufficient capital to advance in the land and was forced to make the landowner a partner in the investment. What the landowner appropriated also did not correspond in any way to monetary, in-kind, or labour rent. Part of the rent could be the profit on the capital provided by the landowner, or it could be the entire surplus labour of the tenant. The essential point is that rent was no longer the conventional form of surplus value. The tenant received his share of the produce, but not as a worker but as the owner of a portion of the capital. The landlord did not regard his share as a mere interest in the ownership of the land, but as a portion of the interest on a loan which he had paid and advanced in the form of capital.

Small-scale peasant ownership

The peasant is here recognized as the sovereign owner of his own land. The land is his basic means of production, his field of labour and investment. He pays no rent and does not express anything under this name distinct and separate from surplus value. This form of land ownership assumes that the agricultural population still has a significant plurality compared to the urban population. Even if capitalist production has achieved dominance, its degree of development is not sufficiently comprehensive. Branches of industry are not omnipresent. The concentration of capital is halfway. The dispersion of the spheres of accumulation prevails. The greater part of the products is spent on the subsistence of the direct producers; the rest goes to the market. How the price of production and average profit are formed and determined in this situation and at this level of capitalist development is debatable, but regardless of this, one thing is clear. A differential rent, in excess of the market price of products, exists and plays a role for better land or in more privileged positions, just as it does in the era of capitalist domination.

The independent landowner peasant who cultivates his own land is the symbol of land ownership in small-scale agriculture. A form of production in which the possession of land is a condition for the direct ownership of the producer over the product of his labour. Here the farmer produces his own necessities of life as an individual worker, usually together with his family. Land ownership is as essential for the growth of this activity as ownership of the tools of labour is vital and important for the free development of artisanal trade. The peasant’s ownership is the basis of his personal independence and the urgent need for agricultural development. Ownership, independence and development are under pressure from all kinds of restrictions and the scourge of decay. The destruction of rural cottage industry, the development of large-scale industry, the gradual depletion of the soil, which is the fate of this form of agriculture, the appropriation of common property by large-scale owners are among these restrictions and factors of decay. Small-scale agricultural ownership is inherently an obstacle to the growth of the productive forces of social labour, the concentration of capital, the formation of large-scale livestock farms, and the increasing application of human knowledge. Usury, the tax system, like a gnawing thorn, gnaws and reduces the vitality of small-scale agricultural ownership.

Section Eight: Revenues and their Sources

Chapter Forty-Eight

The Trinity Formula, Capital – Land – Labor

Capital is not an object. It is a specific social relation of production, belonging to a specific historical formation, which appears in an object and gives this object a specific social identity. Capital is not the result of the sum of the means of production and the natural materials produced; it is the means of production that have been transformed into capital. These means are not capital in themselves, just as gold and silver are not money in themselves. Capital is the means of production that a special class in society has made its exclusive possession. The products and material conditions of the activity of the labour force, which has become independent and autonomous in relation to living labour force, are in conflict with this living labour force, and through this conflict are personified in capital. Of course, the story does not end there. Capital is not just the material embodiment of the independent and empowered products of the worker, it is a very mysterious interconnected complex of a structure of economic, political, legal, civil, cultural, social order that lines up with mythical, plague-like power against the worker and his entire class and commits every barbarity. The process of transforming the product of the worker’s labour into capital is also the process of emergence, development, and domination of this entire structure. With the development of this process, land no longer becomes capital, and precisely capital itself. Surplus value does not emanate from land!! Just as no riyal of capital emerges from dead labour that has become capital. The quality of land is also not the source of any surplus value; its entire effect can be summarized in the way surplus values ​​are distributed.

Folk economics presents and justifies in a worldly way what is the imagination of the agents of production and is captured by the fabric of capitalist relations. It is unaware that if the apparent form of things were the same as their essence, then all sciences would become redundant. The more hidden and mysterious the internal links of social-productive relations remain, the clearer and more natural they appear to this economy. The triad of land-rent, capital-interest, labour-wages, which are the embodiment of three completely unrelated elements, is seen as conflated. It does not take into account that the capitalist production process is a historically determined form of the process of social production in general. On the one hand, the production process is the material conditions of human life, and on the other hand, it is a process that flows in specific economic, historical production relations. Production relations whose bearers produce and reproduce the material conditions of their existence, the relations between themselves in the form of the economic form of society. Society is the totality of these relations and interactions between their bearers with each other and with nature. Capital is understandable in the historically determined social production process in proportion to itself, and the capitalist is nothing other than the human embodiment of capital and its bearer. He plunders a certain quantity of surplus labour from the direct producers or workers from their daily life and livelihood, he appropriates this unpaid surplus labour without any compensation, even if he puts this work in a framework!! Basically, in essence, he immortalizes it in the form of forced, compulsory labour, in his opinion. One of the apparently “civilizing” aspects of capital is that it appropriates this predatory forced surplus labour in a special way under conditions that, compared to slavery and serfdom, are more beneficial to social relations and the consolidation of a new and more advanced economic and social formation than the previous ones. In this regard, the distortion of facts takes the engineering of human thoughts to the highest level. The terrifying force involved in the criminal appropriation of this surplus labour distances the workers from their consciousness, intensifies the pressure of exploitation at every step. It reduces production time in general, including the time of production of the basic necessities of reproduction of labour power, and it separates the working mass, the creator of capital, from its work and alienates it from it more deeply, more crushingly, more crushingly.

Surplus value in capitalist society is divided among capitalists in proportion to their share of the total social capital. Surplus value here takes the form of average profit. The average profit is divided between the entrepreneur under the name of profit and the landowner under the name of ground rent. If the capitalist transforms the largest part of the labour of the worker into surplus value and appropriates it in the form of profit, the landowner also receives a share of this profit in the form of rent. When we speak of capitalism, capital, the entrepreneur’s profit, ground rent are only distinct forms of surplus value, its constituent parts, and finally the worker, who is the sole creator of all these parts, receives a meagre portion of the huge mountain of his creations under the name of wages. The capitalist and the capitalist system pay this wage only because its payment is an indispensable condition for the reproduction of labour power, its resale to the capitalist, and the continuation of the galactic production of capital. We call what the worker receives necessary labour, in contrast to his surplus labour, which becomes the capitalist’s additional capital and his well-being and wealth.

Chapter 51

Distribution Relations and Production Relations

The newly created values ​​in the year realize three different forms of income and are divided between the owner of labour, the capitalist and the landowner. A type of division that is called distribution relations and popular knowledge considers it natural. Some people with a higher level of awareness, while accepting its reality, have insisted on focusing the analysis on the fixed nature of the relations of production. The scientific anatomy of capitalist production contradicts this conclusion. In this analysis, the annual product is divided into capital and income. One of these incomes, wages, in order to find the form of the worker’s income, must have previously encountered the worker in the form of capital, in the form of means of labour and capitalized production. A confrontation that is simultaneously aimed at the expropriation of the independent producer and his transformation into a wage slave. If one part of the product did not become capital, the other part would not have the form of wages, profit, rent. The birth of capitalism has historically been dependent on the dispossession of the worker from the means of labour, the concentration of ownership of these tools in the hands of a minority, and the ownership of land in the hands of others. Developments that have been called the “phase of primitive accumulation of capital.” Capitalism entered history with two essential indicators. First: that its products are commodities. Let us not forget that commodity production began with the primitive commodity economy, but it is in capitalist production that it acquires a dominant role. It is here that the worker also finds his identity as a seller of the commodity of labour power. Labor in general gives way to wage labour. The buying and selling of labour power is the foundation of existence, the defining characteristic of capitalism. Second: the production of surplus value as the direct, essential, ultimate goal. Capital essentially produces capital.

Capitalism makes the social character of production an instrument of its absolute authority and totalitarian rule over the working masses. Here the social mechanism of the labour process is organized in the nature of an absolute, all-powerful, absolute monarchy ruling over the worker. Authority, totalitarianism, and absolute despotism that does not have the appearance of previous political or religious rulers but is the “human” personification of the instruments of labour and the means of production capitalized against labour and the worker. It is the capitalists who, on the one hand, confront the working class as a single class, and on the other hand, and at the same time, demonstrate the most complete form of anarchic rule among themselves as commodity owners. With the transformation of labour into wage labour and the transformation of the instruments of labour and production into capital, it is only with the emergence of this specific social form that it is based on the two above-mentioned absolutely fundamental factors that part of the value of the product becomes surplus value or profit of the capitalist. The predominant part of this surplus value becomes the capitalist’s new additional capital, making possible the expansion of the reproduction process or the process of capitalist accumulation. Wage labour, with all its fundamental, vital role and outward nature in the capitalist mode of production, does not determine value. It is the socially necessary labour time, the labour crystallized in various products and absorbable by society, that defines value. But the specific social form, in which socially necessary labour time determines the value of commodities, corresponds only to the wage form of labour. Commodity production is produced only with this index of the general form.

Let us return to the relations of distribution. Capitalist distribution differs essentially from the previous forms of distribution. Here, surplus labour is the surplus value produced by wage-earners, which is distributed among the various sections of the capitalist class. The type, form, and nature of distribution in each period are determined by the specific and prevailing mode of production of that period. With the change of the mode of production, the form of distribution also undergoes a fundamental change. To speak of the fixed character of the relations of production arising from human nature is in every respect meaningless and misleading.

Nasser Paydar

December 2025