For the analysis that now follows, we can leave aside the difference between price of production and value, since that difference falls away altogether when what is considered is the value of labour's total annual product — as it is here — that is, the value of the product of the total social capital.
Profit — profit of enterprise plus interest — and rent are nothing but special forms that particular parts of the surplus-value in commodities take on. How large the surplus-value is sets the limit on how large the sum of those parts can be. Average profit plus rent therefore equals surplus-value.
It can happen that a part of the surplus labour contained in commodities, and so of the surplus-value, does not go directly into the equalization that produces the average profit, so that a part of the commodities' value is not expressed in their price at all. But first, this makes itself good: either the rate of profit rises, if the commodity sold below its value is an element of constant capital, or profit and rent show up in a larger product, if the commodity sold below its value goes as an article of individual consumption into the part of value consumed as revenue. Second, it cancels out in the average movement.
In any case, even if a part of the surplus-value not expressed in the price of the commodity is lost to price formation, the sum of average profit plus rent, in its normal form, can never be greater than the total surplus-value — though it can be smaller. Its normal form presupposes a wage that corresponds to the value of labour-power. Even monopoly rent, so far as it is not a deduction from wages, and so forms no special category, must indirectly always form a part of surplus-value — if not a part of the excess of price over the production costs of the very commodity it helps make up, as with differential rent, or an excess part of that commodity's own surplus-value beyond the part of it measured by average profit (as with absolute rent), then a part of the surplus-value of other commodities, those exchanged against this commodity that carries a monopoly price.
The sum of average profit plus ground-rent can never be greater than the magnitude whose parts they are — a magnitude already given before this division. Whether the commodities' whole surplus-value, that is, all the surplus labour they contain, is realized in their price or not is therefore a matter of indifference for our inquiry. Surplus labour is not fully realized, if only because, with the socially necessary labour needed to produce a given commodity constantly changing in amount — a change that springs from the constant change in the productive power of labour — one part of commodities is always produced under abnormal conditions and must therefore be sold below its individual value. In any case, profit plus rent equals the whole realized surplus-value (surplus labour), and for the inquiry at issue here the realized surplus-value can be set equal to all surplus-value; for profit and rent are realized surplus-value, that is, the surplus-value that enters into the prices of commodities — so, practically speaking, all the surplus-value that forms a component of that price.
Wages, on the other hand — the third characteristic form of revenue — always equal the variable component of capital: the part laid out not on means of labour but on buying living labour-power, on paying workers. (Labour paid for out of revenue is itself paid for out of wages, profit or rent; so it makes up no part of the value of the commodities it is paid with, and it has no place in the analysis of commodity value and of the components that value breaks down into.) It is that part of the workers' total working day in which the value of the variable capital, and so the price of labour, is reproduced, in objectified form: the part of commodity value in which the worker reproduces the value of his own labour-power, or the price of his labour.
The worker's total working day falls into two parts. In one he performs the quantity of labour needed to reproduce the value of his own means of subsistence: this is the paid part of his total labour, the part needed for his own maintenance and reproduction. All the rest of the day — the whole surplus quantity of labour he performs over and above the labour realized in the value of his wage — is surplus labour, unpaid labour. It is represented in the surplus-value of his entire commodity production (and so in a surplus quantity of commodities), and that surplus-value in turn falls into parts with different names: profit (profit of enterprise plus interest) and rent.
So the total value-part of commodities in which the total labour the workers add over a day or a year is realized — the total value of the annual product that this labour creates — divides into the value of wages, profit and rent. For this total labour divides into necessary labour, through which the worker creates the part of the product's value with which he himself is paid, that is, wages, and into unpaid surplus labour, through which he creates the part of the product's value that represents surplus-value, and which later splits apart into profit and rent. Beyond this labour the worker performs no labour, and beyond the total value of the product, which takes the forms of wages, profit and rent, he creates no value. The value of the annual product in which the labour he adds anew during the year is represented equals wages, or the value of variable capital, plus surplus-value, which again splits into the forms of profit and rent.
So the whole value-part of the annual product that the worker creates in the course of the year is expressed in the year's value sum of the three revenues — the value of wages, profit and rent. Evidently, then, the value of the constant part of capital is not reproduced in the product-value created in the year. For wages equal only the value of the variable part of capital advanced in production, and rent and profit equal only the surplus-value: the surplus of value produced beyond the whole value of the capital advanced, which is the value of the constant capital plus that of the variable capital.
For the difficulty that is to be solved here it makes no difference at all that part of the surplus-value turned into the form of profit and rent is not consumed as revenue, but serves accumulation. The part put aside as an accumulation fund goes to form new, additional capital — not to replace the old capital, neither the component of it laid out on labour-power nor the component laid out on means of labour. So here, for simplicity, we can assume that the revenues go entirely into individual consumption. The difficulty now shows up in two forms. On the one hand: the value of the annual product in which these revenues — wages, profit, rent — are consumed contains within it a value part equal to the value part of the constant capital that went into it. It contains this value part over and above the part that resolves into wages, and the part that resolves into profit and rent. Its value is therefore = wages + profit + rent + C, where C stands for its constant value part. So how is the value produced in the year, which is only = wages + profit + rent, to buy a product whose value = (wages + profit + rent) + C? How can the value produced in the year buy a product that has a higher value than it has itself?
On the other hand: suppose we leave out the part of the constant capital that has not entered the product and so, though with a reduced value, goes on existing after the year's production of commodities just as before — that is, suppose we set aside for the time being the fixed capital that is applied but not consumed. Then the constant part of the advanced capital that took the form of raw and ancillary materials has passed wholly into the new product; of the means of labour, one part has been wholly used up and another only partly worn, so that only part of its value was consumed in production. This whole part of the constant capital used up in production must be replaced in kind. With all other circumstances, above all the productivity of labour, assumed unchanged, its replacement costs the same quantity of labour as before — it must be replaced by an equivalent in value. Where it is not, reproduction itself cannot take place on the old scale. But who is to perform this labour, and who does perform it?
The first difficulty asks: who is to pay for the constant value part contained in the product, and with what? It assumes that the value of the constant capital that went into production appears again as a value part of the product. That does not contradict what the second difficulty assumes. For it was already shown in Volume I, Chapter 7 ('The Labour Process and the Valorization Process') how new labour, simply by being added — even though it does not reproduce the old value but only makes an addition to it, creating only additional value — still keeps the old value preserved in the product; and how this happens not through labour as value-creating, that is, labour in general, but in labour's function as a specific productive labour.
So no additional labour was needed to preserve the value of the constant part in the product on which the revenue — that is, the whole value created during the year — is spent. But new additional labour is needed to replace the constant capital used up during the past year, in value and in use-value; without that replacement, reproduction is impossible altogether.
All newly added labour is expressed in the value newly created during the year, and that value in turn goes entirely into the three revenues: wages, profit and rent. So on the one hand no excess social labour is left over for the replacement of the consumed constant capital, which has to be restored partly in kind and in value, and partly only in value (for the mere wear of the fixed capital). On the other hand, the value created in the year by labour, which falls apart into the forms of wages, profit and rent and is spent in them, seems insufficient to pay for or to buy the constant capital part that the annual product must contain over and above the value of the revenues themselves.
You can see that the problem raised here is already solved — in the discussion of how society's total capital reproduces itself, Volume 2, Part Three. We come back to it here for two reasons. First, in Volume 2 surplus-value had not yet been worked out in the forms it takes as revenue — profit (profit of enterprise plus interest) and rent — and so it could not be dealt with in those forms either. Second, it is precisely to the form of wages, profit and rent that an incredible blunder in the analysis attaches, one that runs through the whole of political economy since Adam Smith.
In Volume 2 we split all capital into two great classes: department I, which produces means of production, and department II, which produces means of individual consumption. Certain products can serve for personal enjoyment and also as means of production — a horse, corn, and so on — but that does not in any way remove the absolute validity of this division. It is in fact no hypothesis; it only expresses a fact. Take a country's annual product. One part of that product goes into individual consumption, whatever its ability to serve as a means of production. It is the product on which wages, profit and rent are spent. This product is the product of a particular department of society's capital. It is possible that the same capital also produces products belonging to department I. So far as it does, the part of this capital consumed in department II's product — in product that really does fall to individual consumption — is not what supplies the productively consumed products falling to department I. This whole product II, which goes into individual consumption and on which revenue is therefore spent, is the existence of the capital consumed inside it plus the surplus produced. So it is the product of a capital laid out purely in the production of means of consumption. And in the same way, department I of the annual product, which serves as means of reproduction — raw material and instruments of labour — is the product of a capital laid out purely in the production of means of production, whatever capacity these things might otherwise have by their nature to serve as means of consumption. By far the greatest part of the products that form constant capital is also, in its material form, in a shape that cannot enter individual consumption. Where it could — a peasant could eat his seed-corn or slaughter his draught ox — the economic barrier does for him exactly what a non-consumable form would.
As already said, for both departments we set aside the fixed part of constant capital — the part that goes on existing in kind and in value independently of the annual product of both departments.
In department II — the department whose products wages, profit and rent are spent on, in short where revenues are consumed — the product itself, as value, is made up of three parts. One part equals the value of the constant capital used up in production; a second part equals the value of the variable capital advanced in production, laid out on wages; and a third part equals the surplus-value produced, that is, profit + rent. The first part of department II's product, the value of the constant capital, cannot be consumed by the capitalists of department II, nor by its workers, nor by its landowners. It forms no part of their revenue; it must be replaced in kind, and to make that happen it must be sold. The other two parts of this product, by contrast, equal the value of the revenues created in this department: wages + profit + rent.
In department I the product formally consists of the same parts. But the part that forms revenue here — wages + profit + rent, in short the variable capital + the surplus-value — is not consumed in the natural form of department I's own products, but in the products of department II. So the value of department I's revenues must be consumed in the part of department II's product that forms the constant capital of II which is to be replaced. That part of department II's product, the part that has to replace its constant capital, is consumed in its natural form by the workers, the capitalists and the landowners of department I. They spend their revenues on this product II. On the other side, department I's product, in its natural form, so far as it represents department I's revenue, is productively consumed by department II, whose constant capital it replaces in kind. Finally, the used-up constant capital part of department I is replaced out of department I's own products, which consist precisely of means of labour, raw and ancillary materials, and so on — partly through exchange among the capitalists of I, partly because some of these capitalists can directly apply their own product again as means of production.
Let us take the earlier schema (Volume 2, Chapter 20, 2) of simple reproduction:
On this showing, in II the producers and the landowners consume 500v + 500s = 1,000 as revenue; 2,000c remains to be replaced. That is consumed by the workers, capitalists and rent recipients of I, whose income is 1,000v + 1,000s = 2,000. Department II's consumed product is consumed as revenue by department I, and the revenue part of department I, which is represented in an unconsumable product, is consumed as constant capital by department II. So an account is still owed for the 4,000c in department I. It is replaced out of department I's own product of 6,000 — or rather 6,000 - 2,000, since that 2,000 has already been turned into constant capital for department II.
It should be noted that the figures are indeed assumed arbitrarily, so the relation between the value of department I's revenue and the value of department II's constant capital seems arbitrary too. It is plain, however, that so far as the reproduction process goes on normally and with other circumstances unchanged — that is, abstracting from accumulation — the value sum of wages, profit and rent in department I must equal the value of the constant capital part of department II. Otherwise either department II cannot replace its constant capital, or department I cannot convert its revenue out of the unconsumable form into the consumable form.
So the value of the year's commodity product splits into two parts — exactly as the value of the commodity product of any single capital outlay does, and as the value of any individual commodity does. Part A replaces the value of the constant capital that was advanced. Part B shows up in the form of revenue: wages, profit and rent. B stands opposed to A in so far as A, other things being equal, (1) never takes the form of revenue and (2) always comes back in the form of capital — constant capital, at that. But B is also opposed within itself. Profit and rent share something with wages: all three are forms of revenue. Even so, they differ in an essential way. Profit and rent stand for surplus-value, which is unpaid labour; wages stand for paid labour. The part of the product's value that stands for the wages paid — that replaces wages and, under our assumption that reproduction runs on the same scale and under the same conditions, turns back into wages — comes back first of all as variable capital, as one of the components of the capital that has to be advanced once more for reproduction. This component does two jobs. First it exists in the form of capital, and as capital it is exchanged against labour-power. In the worker's hand it turns into the revenue he draws from selling his labour-power; he turns it into means of subsistence and consumes it. Money circulation shows this double process. Variable capital is advanced in money and paid out as wages. That is its first job as capital: it is exchanged against labour-power and turned into labour, into the worker's putting-forth of that labour-power. That is the process as far as the capitalist is concerned. Second, the workers use this money to buy a part of their commodity product — a part measured by that money — and consume it as revenue. Now think the money circulation away. A part of the worker's product lies in the capitalist's hands as already existing capital. He advances this part as capital, gives it to the worker in exchange for new labour-power, and the worker consumes it as revenue, either directly or by exchanging it for other commodities. So the part of the product's value that is destined, in reproduction, to turn into wages — into revenue for the workers — comes back first of all into the capitalist's hands in the form of capital, more precisely variable capital. That it comes back in this form is an essential condition for labour, the means of production and the production process itself to keep reproducing themselves ever anew as wage-labour, as capital, and as a capitalist process.
If we do not want to get tangled in useless difficulties, we have to keep gross output and net output apart from gross income and net income.
Gross output, or the gross product, is the whole product reproduced. Leaving out the part of fixed capital that is applied but not consumed, the value of gross output equals the value of the capital advanced and consumed in production — constant and variable — plus the surplus-value that resolves into profit and rent. Or, if we look not at the product of a single capital but at that of society's total capital, gross output equals the material elements that make up constant and variable capital, plus the material elements of the surplus product in which profit and rent are represented.
Gross income is the part of the value — and the part of the gross product measured by it — that is left once we deduct the part of the value, and the part of total production measured by it, that replaces the constant capital advanced and consumed in production. So gross income equals wages (or the part of the product destined to become the worker's income again) + profit + rent. Net income, by contrast, is the surplus-value and therefore the surplus product left after wages are deducted; in fact it is the surplus-value that capital realizes and has to share with the landowners, together with the surplus product measured by it.
We have now seen that the value of every individual commodity, and the value of the whole commodity product of any single capital, falls into two parts: one that simply replaces constant capital, and another that — although a fraction of it flows back as variable capital, that is, in the form of capital — is destined to turn wholly into gross income and to take the form of wages, profit and rent, whose sum makes up gross income. We have also seen that the same holds for the value of a society's total annual product.
The product of the individual capitalist and that of society differ only in this respect: from the standpoint of the individual capitalist, net income differs from gross income, since gross income includes wages and net income leaves them out. Looking at the income of society as a whole, national income consists of wages plus profit plus rent, that is, gross income. But this too is an abstraction, in so far as society as a whole, on the basis of capitalist production, takes the capitalist standpoint and therefore counts as net income only the income that resolves into profit and rent.
On the other side stands the fantasy — found in Say, for example — that for a nation the whole output, the entire gross product, comes down to net output, or does not differ from it — that this distinction therefore stops holding from the national standpoint. That fantasy is only the necessary and last expression of the absurd dogma that has run through the whole of political economy since Adam Smith: that the value of commodities ultimately resolves wholly into income — into wages, profit and rent.
With any single capitalist it is easy enough to see that part of his product has to be turned back into capital — and that holds even apart from any expansion of reproduction or any accumulation. And it has to go not only into variable capital, which is itself destined to become income for the workers, so a form of revenue, but into constant capital, which can never become income. That insight is cheap, of course: the plainest look at the production process shows it.
The difficulty begins only once the production process is taken as a whole. There, on one side, stands a practically undeniable fact: the value of the whole part of the product that is consumed as revenue — as wages, profit and rent, and it makes no difference whether it is consumed individually or productively — does in fact go, in the analysis, entirely into the sum of value made up of wages plus profit plus rent, the total value of the three revenues. On the other side stands a theoretical contradiction that is just as undeniable: this part of the product, exactly like the part that does not enter revenue, contains a value part C, equal to the value of the constant capital contained in it, and so cannot possibly, prima facie, be limited by the value of the revenue.
This difficulty is easiest to dodge with the claim that commodity value contains a further value part, distinct from the part that exists in revenue form, only in appearance — only from the standpoint of the individual capitalist. Then there is the phrase: what appears as revenue for one forms capital for another. That spares all further thinking.
Within this view, how the old capital can be replaced if the value of the whole product can be consumed in the form of revenues, and how the value of each capital's product can equal the sum of the three revenues plus C, the constant capital, while the value sum of all capitals' products added together equals the three revenues plus 0 — all this naturally appears as an insoluble riddle, and has to be explained by saying that analysis is simply incapable of getting at the simple elements of price and must instead content itself with the vicious circle and the infinite regress — so that what appears as constant capital is resolvable into wages, profit and rent, while the commodity values in which wages, profit and rent are expressed are in turn determined by wages, profit and rent, and so on endlessly.
The fundamentally false dogma that the value of commodities can ultimately be resolved into wages + profit + rent also expresses itself in this way: the consumer must ultimately pay the total value of the total product. Or again in this way: the monetary circulation between producers and consumers must ultimately be equal to the monetary circulation among the producers themselves (Tooke). Contentions that are all just as false as the principle they rest on.
The difficulties that lead to this false and, on its face, absurd analysis are, briefly, these:
1. The basic relation between constant and variable capital is not understood — and with it the nature of surplus-value, and so the whole basis of the capitalist mode of production. The value of every part-product of capital, of every single commodity, contains a value part equal to constant capital, a value part equal to variable capital (turned into wages for the workers), and a value part equal to surplus-value (later separated into profit and rent). So how is it possible that the worker with his wages, the capitalist with his profit and the landowner with his rent are to buy commodities of which each contains not just one of these components but all three? And how is it possible that the value sum of wages, profit and rent — the three sources of income taken together — is to buy the commodities that go into the total consumption of the people who receive these incomes, commodities that contain, besides these three value components, one further value component, namely constant capital? How are they to buy a value of four with a value of three?
We have given the analysis in Volume 2, Part Three.
2. It is not understood how labour, in adding new value, keeps the old value in a new form — without producing that value anew.
3. The interconnection of the reproduction process is not understood as it presents itself when we look at it not from the standpoint of the individual capital but from that of the total capital. The difficulty is this: how the product in which wages and surplus-value are realized — and so the whole value that all the labour newly added during the year has created — can replace its constant value part and at the same time resolve into a value bounded merely by the revenues; and further, how the constant capital used up in production can be replaced, materially and in value, by new constant capital, even though the total sum of newly added labour is realized only in wages and surplus-value and is expressed exhaustively in the sum of the value of the two. It is precisely here that the main difficulty lies: in the analysis of reproduction and of the relation between its different components, both in their material character and in their value relations.
4. But a further difficulty is added, and it grows worse as soon as the different components of surplus-value appear in the form of revenues independent of one another: namely, that the fixed determinations of revenue and capital exchange places and shift, so that they seem to be only relative determinations from the standpoint of the individual capitalist, and to vanish in the overview of the whole production process.
For example: the revenue of the workers and capitalists of department I, which produces constant capital, replaces the constant capital of the capitalist class of department II, which produces means of consumption — in value and in material. So one can slip past the difficulty with the idea that what is revenue for one is capital for another, and that these determinations therefore have nothing to do with the real differentiation of the value components of the commodity. Further: commodities that are in the end meant to form the material elements of revenue spending, that is means of consumption, pass through various stages during the year — woollen yarn, cloth. At one of these stages they are part of constant capital; at another they are consumed individually and so pass wholly into revenue. So one can imagine, with Adam Smith, that constant capital is only an apparent element of commodity value, which vanishes in the overall context.
In the same way, variable capital is exchanged against revenue. With his wages the worker buys the part of the commodities that forms his revenue; in doing so he simultaneously replaces for the capitalist the money form of the variable capital. Finally: part of the products that form constant capital is replaced in kind, or by exchange, by the producers of constant capital themselves — a process with which the consumers have nothing to do. When this is overlooked, the illusion arises that the revenue of the consumers replaces the whole product, and so the constant value part as well.
5. Apart from the confusion that the transformation of values into prices of production produces, a further confusion arises from the transformation of surplus-value into different particular forms of revenue, independent of one another and related to the different elements of production — into profit and rent. What gets forgotten is that the values of commodities are the basis: the splitting of this commodity value into particular components, the further development of these value components into revenue forms, their transformation into relations between the different owners of the different agents of production and these individual value components, their distribution among those owners according to particular categories and titles — none of this changes value determination and its law in the slightest. Nor is the law of value changed by the fact that the equalization of profit, that is the distribution of the total surplus-value among the different capitals, and the obstacles that landed property partly puts in the way of that equalization (in absolute rent), determine the regulating average prices of commodities in a way that diverges from their individual values. Once again, this touches only the adding of surplus-value on to the different commodity prices; it does not do away with surplus-value itself, or with the total value of the commodities as the source of these different components of price.
This is the quid pro quo we look at in the next chapter, and it is necessarily bound up with the semblance that value springs from its own components. First, the different value components of the commodity receive independent forms in the revenues, and as such revenues they are related not to the value of the commodity as their source but to the particular material elements of production as their sources. They really are related to those elements, but not as value components — as revenues, as value components falling to these particular categories of production agents: the worker, the capitalist, the landowner. One can then imagine that these value components, instead of arising from the decomposition of commodity value, first form it by coming together — and out comes the lovely faulty circle: the value of commodities arises from the value sum of wages, profit and rent, while the value of wages, profit and rent is in turn determined by the value of commodities, and so on.
Take reproduction in its normal state. Only one part of the newly added labour goes into producing, and so replacing, constant capital — and that is exactly the part that replaces the constant capital used up in making means of consumption, the material elements of revenue. What balances this out is that this constant part in department II costs no extra labour.
Now take the constant capital that — looking at the reproduction process as a whole, so that the balancing between department I and department II is included — is no product of that newly added labour, although the product could not be made without it. This constant capital is, in its material aspect, exposed while reproduction goes on to accidents and dangers that can thin it out. And it can also lose value, through a change in the productive power of labour; that, however, concerns only the individual capitalist.
So one part of profit — and therefore of surplus-value, and therefore of the surplus product, in which, considered as to value, only newly added labour is represented — is set aside as an insurance fund. Nothing in the nature of the thing changes whether this insurance fund is handled by insurance companies as a separate business or not. This is the one part of revenue that is neither consumed as revenue nor necessarily serves as an accumulation fund; whether it in fact serves as one, or only covers a shortfall in reproduction, depends on chance.
It is also the only part of surplus-value and surplus product, hence of surplus labour, that — besides the part that serves accumulation, that is, the expansion of the reproduction process — would still have to exist after the capitalist mode of production is abolished. This of course presupposes that the part the direct producers regularly consume would not stay limited to its present minimum. Apart from the surplus labour for those who cannot yet, or can no longer, take part in production because of their age, all the labour for the upkeep of people who do not work would fall away.
Think of the beginning of society: there are not yet any produced means of production, so no constant capital whose value enters the product and which, whenever reproduction goes on at the same scale, has to be replaced in kind out of the product, in a measure set by its value. But here nature supplies the means of subsistence directly, without their having to be produced first. So nature also gives the savage, who has only a few needs to satisfy, the time — not to use means of production that do not yet exist for new production, but, alongside the labour it costs to take hold of the means of subsistence nature provides, to turn other natural products into means of production: a bow, a stone knife, a boat, and so on. This process with the savage corresponds entirely, considered purely on the material side, to the reconversion of surplus labour into new capital.
In the process of accumulation, this turning of a product of surplus labour into capital still goes on all the time. And the fact that all new capital springs from profit, rent or other forms of revenue, that is, from surplus labour, leads to the false idea that all commodity value springs from a revenue. On closer analysis, this reconversion of profit into capital shows rather the opposite: the additional labour — which always presents itself in the form of revenue — does not serve to maintain or reproduce the old capital value, but, so far as it is not consumed as revenue, serves to create new surplus capital.
The whole difficulty springs from this. All newly added labour, so far as the value it creates does not resolve into wages, appears as profit — taken here as the form of surplus-value in general — which means a value that has cost the capitalist nothing, and so certainly has no advance, no capital, to replace. This value therefore exists as available, additional wealth — in short, from the standpoint of the individual capitalist, as his revenue. But this newly created value can be consumed productively just as well as individually, as capital just as well as revenue. Part of it, by its very natural form, has to be consumed productively. So it is clear that the labour added each year creates capital as well as revenue — as the accumulation process also shows. The part of labour-power used to create new capital is made invisible by the fact that the whole product of surplus labour first presents itself as profit — a determination which in fact has nothing to do with this surplus product itself, and concerns only the capitalist's private relation to the surplus-value he pockets. (By analogy, that part of labour-power corresponds to the part of the working day the savage spends not getting hold of food but making the tool he uses to get hold of it.) In fact, the surplus-value the worker creates divides into revenue and capital, that is, into means of consumption and additional means of production. But the old constant capital taken over from the previous year — apart from the part that is damaged and so, to that extent, destroyed, that is, so far as it does not have to be reproduced, and such disturbances of the reproduction process fall under insurance — is, considered as to its value, not reproduced by the newly added labour.
We also see that one part of the newly added labour is constantly taken up with reproducing and replacing consumed constant capital — even though this newly added labour resolves only into revenues, into wages, profit and rent. Two things get overlooked here.
First, a value part of this labour's product is not a product of the newly added labour at all, but constant capital that was already there and has been used up. So the part of the product in which this value part is represented does not turn into revenue either; it replaces in kind the means of production of that constant capital.
Second, the value part in which this newly added labour really is represented is not consumed in kind as revenue. It replaces constant capital in another sphere, where it has been turned into a natural form in which it can be consumed as revenue — a form which in its turn is again not exclusively the product of newly added labour.
So far as reproduction goes on at the same scale, every used-up element of constant capital must be replaced in kind by a new item of the appropriate kind — if not in quantity and form, then in efficacy. If the productive power of labour stays the same, that replacement in kind includes replacing the same value the constant capital had in its old form.
But if the productive power of labour rises, so that less labour can reproduce the same material elements, then a smaller value part of the product can replace the constant part completely in kind. The surplus can then serve to build new additional capital, or a larger part of the product can be given the form of means of consumption, or surplus labour can be reduced.
If the productive power of labour falls instead, a greater part of the product has to go into replacing the old capital, and the surplus product declines.
Profit — or indeed any form of surplus-value — is turned back into capital. If we set aside its historically specific economic form and look at it only as the simple making of new means of production, this shows that a state still continues in which the worker, beyond the labour by which he obtains his immediate means of subsistence, applies labour to producing means of production.
Turning profit into capital means nothing but using a part of the surplus labour to form new, additional means of production. That this happens in the form of turning profit into capital means only that it is the capitalist, not the worker, who disposes of the surplus labour. And that this surplus labour must first pass through a stage in which it appears as revenue — whereas with the savage, say, it appears as surplus labour directed straight at producing means of production — means only that this labour, or its product, is appropriated by the non-worker.
But what is actually turned into capital is not profit as such. To turn surplus-value into capital means only this: the capitalist does not consume the surplus-value and the surplus product individually, as revenue. What really is turned into capital in this way is value, objectified labour — that is, the product in which this value is directly expressed, or against which it is exchanged after first being turned into money. Even when profit is turned back into capital, the source of the new capital is not this particular form of surplus-value, profit. In the process the surplus-value is merely changed from one form into another. But it is not this change of form that makes it capital. What now functions as capital is the commodity and its value. But that the value of the commodity is not paid for — and only through that does it become surplus-value — is a matter of complete indifference for the objectification of labour, for value itself.
The misunderstanding takes several forms. For instance, the idea that the commodities making up constant capital likewise contain elements of wages, profit and rent. Or the idea that what counts as revenue for one person counts as capital for another, so that these are merely subjective relations. Thus the spinner's yarn contains a value component that stands for profit to him; when the weaver buys the yarn he realizes the spinner's profit, yet for the weaver himself the yarn is only a part of his constant capital.
Besides what was already worked out earlier about the relation between revenue and capital, one thing is to be noted here. Considered as to value, what enters the weaver's capital along with the yarn, as a constituent part, is the yarn's value. How the parts of this value resolved for the spinner himself into capital and revenue — in other words into paid and unpaid labour — is completely indifferent for the determination of the value of the commodity itself (apart from the modifications made by average profit). Here the idea always lurks in the background that profit, and surplus-value in general, is an excess over the value of the commodity, made only by a surcharge, by mutual cheating, by profit on alienation. When the production price of the commodity is paid, or else its value, then of course those value components of the commodity are paid too which present themselves to their seller in the form of revenue. Monopoly prices, of course, are not at issue here.
Second, it is quite correct that the commodity components that constant capital consists of, like all other commodity value, are reducible to value components which, for their producers and for the owners of the means of production, resolve into wages, profit and rent. This is only the capitalist form of expressing the fact that all commodity value is only the measure of the socially necessary labour contained in a commodity. But it has already been shown in Volume I that this in no way prevents the commodity product of each capital from being divided into separate parts, of which one exclusively represents the constant capital part, another the variable capital part, and a third only the surplus-value.
Storch is giving voice to what many other people think too, when he says:
On Storch's view, the saleable products that make up a nation's revenue have to be looked at in political economy in two different ways: in relation to individuals as values, and in relation to the nation as goods. For, he holds, a nation's revenue is not assessed, the way an individual's is, by its value, but by its utility, or by the needs it is able to satisfy.
First, to treat a nation whose mode of production rests on value, and which is capitalistically organized besides, as a single body working simply for the nation's needs is a false abstraction.
Second: once the capitalist mode of production is abolished, but with social production kept, the determination of value still predominates — in the sense that the regulation of labour-time, the distribution of social labour among the various groups of production, and finally the keeping of accounts on this, become more essential than ever.
For the analysis that now follows, we can leave aside the difference between price of production and value, since that difference falls away altogether when what is considered is the value of labour's total annual product — as it is here — that is, the value of the product of the total social capital.
Profit — profit of enterprise plus interest — and rent are nothing but special forms that particular parts of the surplus-value in commodities take on. How large the surplus-value is sets the limit on how large the sum of those parts can be. Average profit plus rent therefore equals surplus-value.
It can happen that a part of the surplus labour contained in commodities, and so of the surplus-value, does not go directly into the equalization that produces the average profit, so that a part of the commodities' value is not expressed in their price at all. But first, this makes itself good: either the rate of profit rises, if the commodity sold below its value is an element of constant capital, or profit and rent show up in a larger product, if the commodity sold below its value goes as an article of individual consumption into the part of value consumed as revenue. Second, it cancels out in the average movement.
In any case, even if a part of the surplus-value not expressed in the price of the commodity is lost to price formation, the sum of average profit plus rent, in its normal form, can never be greater than the total surplus-value — though it can be smaller. Its normal form presupposes a wage that corresponds to the value of labour-power. Even monopoly rent, so far as it is not a deduction from wages, and so forms no special category, must indirectly always form a part of surplus-value — if not a part of the excess of price over the production costs of the very commodity it helps make up, as with differential rent, or an excess part of that commodity's own surplus-value beyond the part of it measured by average profit (as with absolute rent), then a part of the surplus-value of other commodities, those exchanged against this commodity that carries a monopoly price.
The sum of average profit plus ground-rent can never be greater than the magnitude whose parts they are — a magnitude already given before this division. Whether the commodities' whole surplus-value, that is, all the surplus labour they contain, is realized in their price or not is therefore a matter of indifference for our inquiry. Surplus labour is not fully realized, if only because, with the socially necessary labour needed to produce a given commodity constantly changing in amount — a change that springs from the constant change in the productive power of labour — one part of commodities is always produced under abnormal conditions and must therefore be sold below its individual value. In any case, profit plus rent equals the whole realized surplus-value (surplus labour), and for the inquiry at issue here the realized surplus-value can be set equal to all surplus-value; for profit and rent are realized surplus-value, that is, the surplus-value that enters into the prices of commodities — so, practically speaking, all the surplus-value that forms a component of that price.
Wages, on the other hand — the third characteristic form of revenue — always equal the variable component of capital: the part laid out not on means of labour but on buying living labour-power, on paying workers. (Labour paid for out of revenue is itself paid for out of wages, profit or rent; so it makes up no part of the value of the commodities it is paid with, and it has no place in the analysis of commodity value and of the components that value breaks down into.) It is that part of the workers' total working day in which the value of the variable capital, and so the price of labour, is reproduced, in objectified form: the part of commodity value in which the worker reproduces the value of his own labour-power, or the price of his labour.
The worker's total working day falls into two parts. In one he performs the quantity of labour needed to reproduce the value of his own means of subsistence: this is the paid part of his total labour, the part needed for his own maintenance and reproduction. All the rest of the day — the whole surplus quantity of labour he performs over and above the labour realized in the value of his wage — is surplus labour, unpaid labour. It is represented in the surplus-value of his entire commodity production (and so in a surplus quantity of commodities), and that surplus-value in turn falls into parts with different names: profit (profit of enterprise plus interest) and rent.
So the total value-part of commodities in which the total labour the workers add over a day or a year is realized — the total value of the annual product that this labour creates — divides into the value of wages, profit and rent. For this total labour divides into necessary labour, through which the worker creates the part of the product's value with which he himself is paid, that is, wages, and into unpaid surplus labour, through which he creates the part of the product's value that represents surplus-value, and which later splits apart into profit and rent. Beyond this labour the worker performs no labour, and beyond the total value of the product, which takes the forms of wages, profit and rent, he creates no value. The value of the annual product in which the labour he adds anew during the year is represented equals wages, or the value of variable capital, plus surplus-value, which again splits into the forms of profit and rent.
So the whole value-part of the annual product that the worker creates in the course of the year is expressed in the year's value sum of the three revenues — the value of wages, profit and rent. Evidently, then, the value of the constant part of capital is not reproduced in the product-value created in the year. For wages equal only the value of the variable part of capital advanced in production, and rent and profit equal only the surplus-value: the surplus of value produced beyond the whole value of the capital advanced, which is the value of the constant capital plus that of the variable capital.
For the difficulty that is to be solved here it makes no difference at all that part of the surplus-value turned into the form of profit and rent is not consumed as revenue, but serves accumulation. The part put aside as an accumulation fund goes to form new, additional capital — not to replace the old capital, neither the component of it laid out on labour-power nor the component laid out on means of labour. So here, for simplicity, we can assume that the revenues go entirely into individual consumption. The difficulty now shows up in two forms. On the one hand: the value of the annual product in which these revenues — wages, profit, rent — are consumed contains within it a value part equal to the value part of the constant capital that went into it. It contains this value part over and above the part that resolves into wages, and the part that resolves into profit and rent. Its value is therefore = wages + profit + rent + C, where C stands for its constant value part. So how is the value produced in the year, which is only = wages + profit + rent, to buy a product whose value = (wages + profit + rent) + C? How can the value produced in the year buy a product that has a higher value than it has itself?
On the other hand: suppose we leave out the part of the constant capital that has not entered the product and so, though with a reduced value, goes on existing after the year's production of commodities just as before — that is, suppose we set aside for the time being the fixed capital that is applied but not consumed. Then the constant part of the advanced capital that took the form of raw and ancillary materials has passed wholly into the new product; of the means of labour, one part has been wholly used up and another only partly worn, so that only part of its value was consumed in production. This whole part of the constant capital used up in production must be replaced in kind. With all other circumstances, above all the productivity of labour, assumed unchanged, its replacement costs the same quantity of labour as before — it must be replaced by an equivalent in value. Where it is not, reproduction itself cannot take place on the old scale. But who is to perform this labour, and who does perform it?
The first difficulty asks: who is to pay for the constant value part contained in the product, and with what? It assumes that the value of the constant capital that went into production appears again as a value part of the product. That does not contradict what the second difficulty assumes. For it was already shown in Volume I, Chapter 7 ('The Labour Process and the Valorization Process') how new labour, simply by being added — even though it does not reproduce the old value but only makes an addition to it, creating only additional value — still keeps the old value preserved in the product; and how this happens not through labour as value-creating, that is, labour in general, but in labour's function as a specific productive labour.
So no additional labour was needed to preserve the value of the constant part in the product on which the revenue — that is, the whole value created during the year — is spent. But new additional labour is needed to replace the constant capital used up during the past year, in value and in use-value; without that replacement, reproduction is impossible altogether.
All newly added labour is expressed in the value newly created during the year, and that value in turn goes entirely into the three revenues: wages, profit and rent. So on the one hand no excess social labour is left over for the replacement of the consumed constant capital, which has to be restored partly in kind and in value, and partly only in value (for the mere wear of the fixed capital). On the other hand, the value created in the year by labour, which falls apart into the forms of wages, profit and rent and is spent in them, seems insufficient to pay for or to buy the constant capital part that the annual product must contain over and above the value of the revenues themselves.
You can see that the problem raised here is already solved — in the discussion of how society's total capital reproduces itself, Volume 2, Part Three. We come back to it here for two reasons. First, in Volume 2 surplus-value had not yet been worked out in the forms it takes as revenue — profit (profit of enterprise plus interest) and rent — and so it could not be dealt with in those forms either. Second, it is precisely to the form of wages, profit and rent that an incredible blunder in the analysis attaches, one that runs through the whole of political economy since Adam Smith.
In Volume 2 we split all capital into two great classes: department I, which produces means of production, and department II, which produces means of individual consumption. Certain products can serve for personal enjoyment and also as means of production — a horse, corn, and so on — but that does not in any way remove the absolute validity of this division. It is in fact no hypothesis; it only expresses a fact. Take a country's annual product. One part of that product goes into individual consumption, whatever its ability to serve as a means of production. It is the product on which wages, profit and rent are spent. This product is the product of a particular department of society's capital. It is possible that the same capital also produces products belonging to department I. So far as it does, the part of this capital consumed in department II's product — in product that really does fall to individual consumption — is not what supplies the productively consumed products falling to department I. This whole product II, which goes into individual consumption and on which revenue is therefore spent, is the existence of the capital consumed inside it plus the surplus produced. So it is the product of a capital laid out purely in the production of means of consumption. And in the same way, department I of the annual product, which serves as means of reproduction — raw material and instruments of labour — is the product of a capital laid out purely in the production of means of production, whatever capacity these things might otherwise have by their nature to serve as means of consumption. By far the greatest part of the products that form constant capital is also, in its material form, in a shape that cannot enter individual consumption. Where it could — a peasant could eat his seed-corn or slaughter his draught ox — the economic barrier does for him exactly what a non-consumable form would.
As already said, for both departments we set aside the fixed part of constant capital — the part that goes on existing in kind and in value independently of the annual product of both departments.
In department II — the department whose products wages, profit and rent are spent on, in short where revenues are consumed — the product itself, as value, is made up of three parts. One part equals the value of the constant capital used up in production; a second part equals the value of the variable capital advanced in production, laid out on wages; and a third part equals the surplus-value produced, that is, profit + rent. The first part of department II's product, the value of the constant capital, cannot be consumed by the capitalists of department II, nor by its workers, nor by its landowners. It forms no part of their revenue; it must be replaced in kind, and to make that happen it must be sold. The other two parts of this product, by contrast, equal the value of the revenues created in this department: wages + profit + rent.
In department I the product formally consists of the same parts. But the part that forms revenue here — wages + profit + rent, in short the variable capital + the surplus-value — is not consumed in the natural form of department I's own products, but in the products of department II. So the value of department I's revenues must be consumed in the part of department II's product that forms the constant capital of II which is to be replaced. That part of department II's product, the part that has to replace its constant capital, is consumed in its natural form by the workers, the capitalists and the landowners of department I. They spend their revenues on this product II. On the other side, department I's product, in its natural form, so far as it represents department I's revenue, is productively consumed by department II, whose constant capital it replaces in kind. Finally, the used-up constant capital part of department I is replaced out of department I's own products, which consist precisely of means of labour, raw and ancillary materials, and so on — partly through exchange among the capitalists of I, partly because some of these capitalists can directly apply their own product again as means of production.
Let us take the earlier schema (Volume 2, Chapter 20, 2) of simple reproduction:
On this showing, in II the producers and the landowners consume 500v + 500s = 1,000 as revenue; 2,000c remains to be replaced. That is consumed by the workers, capitalists and rent recipients of I, whose income is 1,000v + 1,000s = 2,000. Department II's consumed product is consumed as revenue by department I, and the revenue part of department I, which is represented in an unconsumable product, is consumed as constant capital by department II. So an account is still owed for the 4,000c in department I. It is replaced out of department I's own product of 6,000 — or rather 6,000 - 2,000, since that 2,000 has already been turned into constant capital for department II.
It should be noted that the figures are indeed assumed arbitrarily, so the relation between the value of department I's revenue and the value of department II's constant capital seems arbitrary too. It is plain, however, that so far as the reproduction process goes on normally and with other circumstances unchanged — that is, abstracting from accumulation — the value sum of wages, profit and rent in department I must equal the value of the constant capital part of department II. Otherwise either department II cannot replace its constant capital, or department I cannot convert its revenue out of the unconsumable form into the consumable form.
So the value of the year's commodity product splits into two parts — exactly as the value of the commodity product of any single capital outlay does, and as the value of any individual commodity does. Part A replaces the value of the constant capital that was advanced. Part B shows up in the form of revenue: wages, profit and rent. B stands opposed to A in so far as A, other things being equal, (1) never takes the form of revenue and (2) always comes back in the form of capital — constant capital, at that. But B is also opposed within itself. Profit and rent share something with wages: all three are forms of revenue. Even so, they differ in an essential way. Profit and rent stand for surplus-value, which is unpaid labour; wages stand for paid labour. The part of the product's value that stands for the wages paid — that replaces wages and, under our assumption that reproduction runs on the same scale and under the same conditions, turns back into wages — comes back first of all as variable capital, as one of the components of the capital that has to be advanced once more for reproduction. This component does two jobs. First it exists in the form of capital, and as capital it is exchanged against labour-power. In the worker's hand it turns into the revenue he draws from selling his labour-power; he turns it into means of subsistence and consumes it. Money circulation shows this double process. Variable capital is advanced in money and paid out as wages. That is its first job as capital: it is exchanged against labour-power and turned into labour, into the worker's putting-forth of that labour-power. That is the process as far as the capitalist is concerned. Second, the workers use this money to buy a part of their commodity product — a part measured by that money — and consume it as revenue. Now think the money circulation away. A part of the worker's product lies in the capitalist's hands as already existing capital. He advances this part as capital, gives it to the worker in exchange for new labour-power, and the worker consumes it as revenue, either directly or by exchanging it for other commodities. So the part of the product's value that is destined, in reproduction, to turn into wages — into revenue for the workers — comes back first of all into the capitalist's hands in the form of capital, more precisely variable capital. That it comes back in this form is an essential condition for labour, the means of production and the production process itself to keep reproducing themselves ever anew as wage-labour, as capital, and as a capitalist process.
If we do not want to get tangled in useless difficulties, we have to keep gross output and net output apart from gross income and net income.
Gross output, or the gross product, is the whole product reproduced. Leaving out the part of fixed capital that is applied but not consumed, the value of gross output equals the value of the capital advanced and consumed in production — constant and variable — plus the surplus-value that resolves into profit and rent. Or, if we look not at the product of a single capital but at that of society's total capital, gross output equals the material elements that make up constant and variable capital, plus the material elements of the surplus product in which profit and rent are represented.
Gross income is the part of the value — and the part of the gross product measured by it — that is left once we deduct the part of the value, and the part of total production measured by it, that replaces the constant capital advanced and consumed in production. So gross income equals wages (or the part of the product destined to become the worker's income again) + profit + rent. Net income, by contrast, is the surplus-value and therefore the surplus product left after wages are deducted; in fact it is the surplus-value that capital realizes and has to share with the landowners, together with the surplus product measured by it.
We have now seen that the value of every individual commodity, and the value of the whole commodity product of any single capital, falls into two parts: one that simply replaces constant capital, and another that — although a fraction of it flows back as variable capital, that is, in the form of capital — is destined to turn wholly into gross income and to take the form of wages, profit and rent, whose sum makes up gross income. We have also seen that the same holds for the value of a society's total annual product.
The product of the individual capitalist and that of society differ only in this respect: from the standpoint of the individual capitalist, net income differs from gross income, since gross income includes wages and net income leaves them out. Looking at the income of society as a whole, national income consists of wages plus profit plus rent, that is, gross income. But this too is an abstraction, in so far as society as a whole, on the basis of capitalist production, takes the capitalist standpoint and therefore counts as net income only the income that resolves into profit and rent.
On the other side stands the fantasy — found in Say, for example — that for a nation the whole output, the entire gross product, comes down to net output, or does not differ from it — that this distinction therefore stops holding from the national standpoint. That fantasy is only the necessary and last expression of the absurd dogma that has run through the whole of political economy since Adam Smith: that the value of commodities ultimately resolves wholly into income — into wages, profit and rent.
With any single capitalist it is easy enough to see that part of his product has to be turned back into capital — and that holds even apart from any expansion of reproduction or any accumulation. And it has to go not only into variable capital, which is itself destined to become income for the workers, so a form of revenue, but into constant capital, which can never become income. That insight is cheap, of course: the plainest look at the production process shows it.
The difficulty begins only once the production process is taken as a whole. There, on one side, stands a practically undeniable fact: the value of the whole part of the product that is consumed as revenue — as wages, profit and rent, and it makes no difference whether it is consumed individually or productively — does in fact go, in the analysis, entirely into the sum of value made up of wages plus profit plus rent, the total value of the three revenues. On the other side stands a theoretical contradiction that is just as undeniable: this part of the product, exactly like the part that does not enter revenue, contains a value part C, equal to the value of the constant capital contained in it, and so cannot possibly, prima facie, be limited by the value of the revenue.
This difficulty is easiest to dodge with the claim that commodity value contains a further value part, distinct from the part that exists in revenue form, only in appearance — only from the standpoint of the individual capitalist. Then there is the phrase: what appears as revenue for one forms capital for another. That spares all further thinking.
Within this view, how the old capital can be replaced if the value of the whole product can be consumed in the form of revenues, and how the value of each capital's product can equal the sum of the three revenues plus C, the constant capital, while the value sum of all capitals' products added together equals the three revenues plus 0 — all this naturally appears as an insoluble riddle, and has to be explained by saying that analysis is simply incapable of getting at the simple elements of price and must instead content itself with the vicious circle and the infinite regress — so that what appears as constant capital is resolvable into wages, profit and rent, while the commodity values in which wages, profit and rent are expressed are in turn determined by wages, profit and rent, and so on endlessly.
The fundamentally false dogma that the value of commodities can ultimately be resolved into wages + profit + rent also expresses itself in this way: the consumer must ultimately pay the total value of the total product. Or again in this way: the monetary circulation between producers and consumers must ultimately be equal to the monetary circulation among the producers themselves (Tooke). Contentions that are all just as false as the principle they rest on.
The difficulties that lead to this false and, on its face, absurd analysis are, briefly, these:
1. The basic relation between constant and variable capital is not understood — and with it the nature of surplus-value, and so the whole basis of the capitalist mode of production. The value of every part-product of capital, of every single commodity, contains a value part equal to constant capital, a value part equal to variable capital (turned into wages for the workers), and a value part equal to surplus-value (later separated into profit and rent). So how is it possible that the worker with his wages, the capitalist with his profit and the landowner with his rent are to buy commodities of which each contains not just one of these components but all three? And how is it possible that the value sum of wages, profit and rent — the three sources of income taken together — is to buy the commodities that go into the total consumption of the people who receive these incomes, commodities that contain, besides these three value components, one further value component, namely constant capital? How are they to buy a value of four with a value of three?
We have given the analysis in Volume 2, Part Three.
2. It is not understood how labour, in adding new value, keeps the old value in a new form — without producing that value anew.
3. The interconnection of the reproduction process is not understood as it presents itself when we look at it not from the standpoint of the individual capital but from that of the total capital. The difficulty is this: how the product in which wages and surplus-value are realized — and so the whole value that all the labour newly added during the year has created — can replace its constant value part and at the same time resolve into a value bounded merely by the revenues; and further, how the constant capital used up in production can be replaced, materially and in value, by new constant capital, even though the total sum of newly added labour is realized only in wages and surplus-value and is expressed exhaustively in the sum of the value of the two. It is precisely here that the main difficulty lies: in the analysis of reproduction and of the relation between its different components, both in their material character and in their value relations.
4. But a further difficulty is added, and it grows worse as soon as the different components of surplus-value appear in the form of revenues independent of one another: namely, that the fixed determinations of revenue and capital exchange places and shift, so that they seem to be only relative determinations from the standpoint of the individual capitalist, and to vanish in the overview of the whole production process.
For example: the revenue of the workers and capitalists of department I, which produces constant capital, replaces the constant capital of the capitalist class of department II, which produces means of consumption — in value and in material. So one can slip past the difficulty with the idea that what is revenue for one is capital for another, and that these determinations therefore have nothing to do with the real differentiation of the value components of the commodity. Further: commodities that are in the end meant to form the material elements of revenue spending, that is means of consumption, pass through various stages during the year — woollen yarn, cloth. At one of these stages they are part of constant capital; at another they are consumed individually and so pass wholly into revenue. So one can imagine, with Adam Smith, that constant capital is only an apparent element of commodity value, which vanishes in the overall context.
In the same way, variable capital is exchanged against revenue. With his wages the worker buys the part of the commodities that forms his revenue; in doing so he simultaneously replaces for the capitalist the money form of the variable capital. Finally: part of the products that form constant capital is replaced in kind, or by exchange, by the producers of constant capital themselves — a process with which the consumers have nothing to do. When this is overlooked, the illusion arises that the revenue of the consumers replaces the whole product, and so the constant value part as well.
5. Apart from the confusion that the transformation of values into prices of production produces, a further confusion arises from the transformation of surplus-value into different particular forms of revenue, independent of one another and related to the different elements of production — into profit and rent. What gets forgotten is that the values of commodities are the basis: the splitting of this commodity value into particular components, the further development of these value components into revenue forms, their transformation into relations between the different owners of the different agents of production and these individual value components, their distribution among those owners according to particular categories and titles — none of this changes value determination and its law in the slightest. Nor is the law of value changed by the fact that the equalization of profit, that is the distribution of the total surplus-value among the different capitals, and the obstacles that landed property partly puts in the way of that equalization (in absolute rent), determine the regulating average prices of commodities in a way that diverges from their individual values. Once again, this touches only the adding of surplus-value on to the different commodity prices; it does not do away with surplus-value itself, or with the total value of the commodities as the source of these different components of price.
This is the quid pro quo we look at in the next chapter, and it is necessarily bound up with the semblance that value springs from its own components. First, the different value components of the commodity receive independent forms in the revenues, and as such revenues they are related not to the value of the commodity as their source but to the particular material elements of production as their sources. They really are related to those elements, but not as value components — as revenues, as value components falling to these particular categories of production agents: the worker, the capitalist, the landowner. One can then imagine that these value components, instead of arising from the decomposition of commodity value, first form it by coming together — and out comes the lovely faulty circle: the value of commodities arises from the value sum of wages, profit and rent, while the value of wages, profit and rent is in turn determined by the value of commodities, and so on.
Take reproduction in its normal state. Only one part of the newly added labour goes into producing, and so replacing, constant capital — and that is exactly the part that replaces the constant capital used up in making means of consumption, the material elements of revenue. What balances this out is that this constant part in department II costs no extra labour.
Now take the constant capital that — looking at the reproduction process as a whole, so that the balancing between department I and department II is included — is no product of that newly added labour, although the product could not be made without it. This constant capital is, in its material aspect, exposed while reproduction goes on to accidents and dangers that can thin it out. And it can also lose value, through a change in the productive power of labour; that, however, concerns only the individual capitalist.
So one part of profit — and therefore of surplus-value, and therefore of the surplus product, in which, considered as to value, only newly added labour is represented — is set aside as an insurance fund. Nothing in the nature of the thing changes whether this insurance fund is handled by insurance companies as a separate business or not. This is the one part of revenue that is neither consumed as revenue nor necessarily serves as an accumulation fund; whether it in fact serves as one, or only covers a shortfall in reproduction, depends on chance.
It is also the only part of surplus-value and surplus product, hence of surplus labour, that — besides the part that serves accumulation, that is, the expansion of the reproduction process — would still have to exist after the capitalist mode of production is abolished. This of course presupposes that the part the direct producers regularly consume would not stay limited to its present minimum. Apart from the surplus labour for those who cannot yet, or can no longer, take part in production because of their age, all the labour for the upkeep of people who do not work would fall away.
Think of the beginning of society: there are not yet any produced means of production, so no constant capital whose value enters the product and which, whenever reproduction goes on at the same scale, has to be replaced in kind out of the product, in a measure set by its value. But here nature supplies the means of subsistence directly, without their having to be produced first. So nature also gives the savage, who has only a few needs to satisfy, the time — not to use means of production that do not yet exist for new production, but, alongside the labour it costs to take hold of the means of subsistence nature provides, to turn other natural products into means of production: a bow, a stone knife, a boat, and so on. This process with the savage corresponds entirely, considered purely on the material side, to the reconversion of surplus labour into new capital.
In the process of accumulation, this turning of a product of surplus labour into capital still goes on all the time. And the fact that all new capital springs from profit, rent or other forms of revenue, that is, from surplus labour, leads to the false idea that all commodity value springs from a revenue. On closer analysis, this reconversion of profit into capital shows rather the opposite: the additional labour — which always presents itself in the form of revenue — does not serve to maintain or reproduce the old capital value, but, so far as it is not consumed as revenue, serves to create new surplus capital.
The whole difficulty springs from this. All newly added labour, so far as the value it creates does not resolve into wages, appears as profit — taken here as the form of surplus-value in general — which means a value that has cost the capitalist nothing, and so certainly has no advance, no capital, to replace. This value therefore exists as available, additional wealth — in short, from the standpoint of the individual capitalist, as his revenue. But this newly created value can be consumed productively just as well as individually, as capital just as well as revenue. Part of it, by its very natural form, has to be consumed productively. So it is clear that the labour added each year creates capital as well as revenue — as the accumulation process also shows. The part of labour-power used to create new capital is made invisible by the fact that the whole product of surplus labour first presents itself as profit — a determination which in fact has nothing to do with this surplus product itself, and concerns only the capitalist's private relation to the surplus-value he pockets. (By analogy, that part of labour-power corresponds to the part of the working day the savage spends not getting hold of food but making the tool he uses to get hold of it.) In fact, the surplus-value the worker creates divides into revenue and capital, that is, into means of consumption and additional means of production. But the old constant capital taken over from the previous year — apart from the part that is damaged and so, to that extent, destroyed, that is, so far as it does not have to be reproduced, and such disturbances of the reproduction process fall under insurance — is, considered as to its value, not reproduced by the newly added labour.
We also see that one part of the newly added labour is constantly taken up with reproducing and replacing consumed constant capital — even though this newly added labour resolves only into revenues, into wages, profit and rent. Two things get overlooked here.
First, a value part of this labour's product is not a product of the newly added labour at all, but constant capital that was already there and has been used up. So the part of the product in which this value part is represented does not turn into revenue either; it replaces in kind the means of production of that constant capital.
Second, the value part in which this newly added labour really is represented is not consumed in kind as revenue. It replaces constant capital in another sphere, where it has been turned into a natural form in which it can be consumed as revenue — a form which in its turn is again not exclusively the product of newly added labour.
So far as reproduction goes on at the same scale, every used-up element of constant capital must be replaced in kind by a new item of the appropriate kind — if not in quantity and form, then in efficacy. If the productive power of labour stays the same, that replacement in kind includes replacing the same value the constant capital had in its old form.
But if the productive power of labour rises, so that less labour can reproduce the same material elements, then a smaller value part of the product can replace the constant part completely in kind. The surplus can then serve to build new additional capital, or a larger part of the product can be given the form of means of consumption, or surplus labour can be reduced.
If the productive power of labour falls instead, a greater part of the product has to go into replacing the old capital, and the surplus product declines.
Profit — or indeed any form of surplus-value — is turned back into capital. If we set aside its historically specific economic form and look at it only as the simple making of new means of production, this shows that a state still continues in which the worker, beyond the labour by which he obtains his immediate means of subsistence, applies labour to producing means of production.
Turning profit into capital means nothing but using a part of the surplus labour to form new, additional means of production. That this happens in the form of turning profit into capital means only that it is the capitalist, not the worker, who disposes of the surplus labour. And that this surplus labour must first pass through a stage in which it appears as revenue — whereas with the savage, say, it appears as surplus labour directed straight at producing means of production — means only that this labour, or its product, is appropriated by the non-worker.
But what is actually turned into capital is not profit as such. To turn surplus-value into capital means only this: the capitalist does not consume the surplus-value and the surplus product individually, as revenue. What really is turned into capital in this way is value, objectified labour — that is, the product in which this value is directly expressed, or against which it is exchanged after first being turned into money. Even when profit is turned back into capital, the source of the new capital is not this particular form of surplus-value, profit. In the process the surplus-value is merely changed from one form into another. But it is not this change of form that makes it capital. What now functions as capital is the commodity and its value. But that the value of the commodity is not paid for — and only through that does it become surplus-value — is a matter of complete indifference for the objectification of labour, for value itself.
The misunderstanding takes several forms. For instance, the idea that the commodities making up constant capital likewise contain elements of wages, profit and rent. Or the idea that what counts as revenue for one person counts as capital for another, so that these are merely subjective relations. Thus the spinner's yarn contains a value component that stands for profit to him; when the weaver buys the yarn he realizes the spinner's profit, yet for the weaver himself the yarn is only a part of his constant capital.
Besides what was already worked out earlier about the relation between revenue and capital, one thing is to be noted here. Considered as to value, what enters the weaver's capital along with the yarn, as a constituent part, is the yarn's value. How the parts of this value resolved for the spinner himself into capital and revenue — in other words into paid and unpaid labour — is completely indifferent for the determination of the value of the commodity itself (apart from the modifications made by average profit). Here the idea always lurks in the background that profit, and surplus-value in general, is an excess over the value of the commodity, made only by a surcharge, by mutual cheating, by profit on alienation. When the production price of the commodity is paid, or else its value, then of course those value components of the commodity are paid too which present themselves to their seller in the form of revenue. Monopoly prices, of course, are not at issue here.
Second, it is quite correct that the commodity components that constant capital consists of, like all other commodity value, are reducible to value components which, for their producers and for the owners of the means of production, resolve into wages, profit and rent. This is only the capitalist form of expressing the fact that all commodity value is only the measure of the socially necessary labour contained in a commodity. But it has already been shown in Volume I that this in no way prevents the commodity product of each capital from being divided into separate parts, of which one exclusively represents the constant capital part, another the variable capital part, and a third only the surplus-value.
Storch is giving voice to what many other people think too, when he says:
On Storch's view, the saleable products that make up a nation's revenue have to be looked at in political economy in two different ways: in relation to individuals as values, and in relation to the nation as goods. For, he holds, a nation's revenue is not assessed, the way an individual's is, by its value, but by its utility, or by the needs it is able to satisfy.
First, to treat a nation whose mode of production rests on value, and which is capitalistically organized besides, as a single body working simply for the nation's needs is a false abstraction.
Second: once the capitalist mode of production is abolished, but with social production kept, the determination of value still predominates — in the sense that the regulation of labour-time, the distribution of social labour among the various groups of production, and finally the keeping of accounts on this, become more essential than ever.