[OPE-L:6361] Re: Rates of Profit?

Ajit Sinha (ecas@cc.newcastle.edu.au)
Fri, 27 Mar 1998 17:58:55 +1000

I found Chris Arthur's post on 'general' and 'average' rate of profit quite
thoughtful and interesting. From economics point of view I see the matter
this way:

Marx's surplus value and the rate of surplus value cannot be determined
without taking the 'whole of capital' (actually only all the basic goods
sectors) into account, since to determine surplus value you need to
determine the necessary labor-time and that can only be done by taking all
the basic good sectors into account. So before Marx could move to discuss
profits and rate of profit he had to take capital as a whole. The problem
Chris Arthur is confronting from philosophical point of view is exactly the
transformation problem. Marx thought that the determination of surplus
value derived from capital as a whole can be used directly to deduce the
'average rate of profit'. However, as Bortkiewicz pointed out, this was a
mistake. Prices of production and the rate of profit must be determined
simultaneously. Marx's average rate of profit derived from capital as a
whole and treated as equivalent to the 'general' rate of profit would, in
general, be incorrect, i.e. the 'average' and the 'general' are not the
same. But one should keep in mind that Marx, in his time, had no way of
determining prices and the rate of profit simultaneously. Given this
handicap, the only way he could proceed, given that Ricardo's LTV had to be
rejected, was to siquencially go from value to 'average/general' rate of
profit to prices of production. Of course, Sraffa becomes extremely
relevant in thinking through this problem. Cheers, ajit sinha

At 21:26 23/03/98 +0000, you wrote:
>>As I recall, in V3 of CAPITAL, Marx uses two terms to
>>describe the rate of profit -- general and average.
>>Is this a translation problem or is his use of the
>>two different adjectives intentional?
>Chris Arthur replies:
> Herewith an extract of a paper I am working on:
>The apparent identity of 'average' and 'general' rates of profit occurs in
>the very title of chapter 9, and I think Marx never at any point makes a
>distinction between them and treats these terms as synonyms. This is a
>pity. For they are not. Furthermore they could usefully be so defined as to
>refer to distinctly different concepts as follows:
> a) the notion of a 'general rate' implies that we have here something
>determined by other generalities.
> b) the notion of an 'average rate' implies an average of prior
>differences; hence a redistribution (of something created in particular
>sites) as a result of the interrelations of individual capitals, that is to
>say, as a result of competition. (An average can of course also be worked
>out in advance theoretically but this is of no consequence; in reality it
>is a question of the conditions of competition and whether they really tend
>to form a uniform profit rate across the capitals concerned.)
>Because Marx treats these very different concepts as identical it is not at
>all clear how he thinks the rate in question is determined. Much of the
>text can be read as if he held only the second notion, whereby the
>individual rates are prior to their average, and ironed out by competition
>(253, 273). But in one place where he speaks of 'the average rate of
>profit' he really seems to mean 'general' in our sense. For he says that it
>is determined by 'the level of exploitation of labour as a whole by capital
>as a whole' (298-99).
>The 'average' notion supports the idea that the rate of profit is
>codetermined with prices of production at the same level of analysis, while
>the notion of a 'general rate' is compatible with the possibility that the
>rate is determined at a higher level and is given prior to prices of
>production. Of course, even in this latter case, there would remain a real
>process whereby a uniform rate of profit would become actual, in tendency
>at least, through the mediation of competition; the point, however, would
>be that the resulting rate would be known in advance, resulting, in effect,
>from the posited general determinations. Competition would merely work
>within this constraint, and to make the general rate visible.
>Clearly, both the notion of 'general' and that of 'average' imply reference
>to a total amount of value. In the case of the former notion this total
>would be a socially determined mass which is available for distribution to
>particular capitals so as to realise a uniform profit rate, through the
>formation of prices of production. In the latter case the total would be
>merely the theoretical sum of the individually determined outputs and it
>would be reallocated through competition.
>The text itself often seems to favour the former interpretation: for
>example Marx speaks of 'total social capital', and of individual capitals
>as simply 'aliquot parts' of it. Indeed he does not hesitate to speak of
>these capitals as 'shareholders' in a 'common enterprise' which naturally
>accrue returns pro rata; hence such a return 'is governed not by the mass
>of profit that is produced by this specific capital in its specific sphere
>of production, but by the mass of profit that falls on average to each
>capital invested, as an aliquot part of the total social capital invested'.
>(258-9) However, the imagery of 'share holding' seems on the face of it
>thoroughly misleading when it is recalled that these capitals necessarily
>confront one another in competitive struggle. Indeed Marx's real position
>seems put beyond doubt when he begins his chapter on 'the equalisation of
>the general rate of profit through competition'. (273) He says that, while
>it is easy enough in theory to carry through an equalisation of the rate
>of profit conserving total value and total surplus, 'the really difficult
>question' is how exchange and competition effect it, since 'a general rate
>of profit...is evidently a result and cannot therefore be a point of
>departure'.(274) So in this passage it appears that Marx is committed to
>the view that a general rate of profit is established in reality as a
>result of competition between individual capitals, and has no prior
>existence in any meaningful sense. However it is not so simple; because
>this competition turns out to be structured by social determinations.
>'This is the form in which capital becomes conscious of itself as a *social
>power*, in which every capitalist participates in proportion to his share
>in the total social capital.'(297) Only in the last few pages of chapter
>10, does Marx make a real attempt to justify such claims.
>To begin with Marx makes every effort to assimilate all capitals to each
>other by arguing that they equally care for nothing but profit, that
>conversely labourers are indifferent to the specific character of work,
>being prepared to 'be flung from one sphere of production to another'.(297)
>This identity in the essential nature of capital means that migration of
>capitals will equalise profit rates if there is no obstacle they encounter,
>if capital 'subjects all the social preconditions that frame the production
>process to its specific character and immanent laws'.(297-98)
>In an exceptionally important passage Marx says that equalisation depends
>on the *mobility of capital and labour* (298) and he shows how social
>determinants accomplish this. One key institution making capital more fluid
>is the credit system which concentrates the available social capital and
>puts it at the disposal of the individual capitalists. (298) Marx then
>argues that exploitation is itself socially determined; it is a matter of
>class against class 'not just in terms of class sympathy, but in a direct
>economic sense' (298-99); for each capital 'has the same interest in the
>productivity of the social labour applied by the total capital' (299-300),
>while 'the particular interest that one capitalist ...has in exploiting the
>workers he directly employs is confined to the possibility of taking an
>extra cut, making an excess profit over and above the average'.(295)
>While the argument in these closing pages of chapter 10 is not, in my view,
>fully theorised, the general drift tends to qualify, or even overturn, the
>assertion at the beginning that the general rate of profit is a result of
>competition, not a point of departure. For here he says that 'the average
>rate of profit depends on the level of exploitation of labour as a whole by
>capital as a whole'.(299) To be sure, this is mediated case by case, as
>individual capitals attempt to squeeze out that bit 'extra'. But the
>general conditions of the class struggle are prior to this.
>Furthermore Marx also draws attention to the mobility of capital and the
>credit system as conditions of possibility of competition securing
>equalisation. This again refers us to 'capital as a whole'.
>-One approach to the problem would take 'capital' simply as a class name,
>the reality being that capitals are *fully individuated beings* whose only
>connection with each other is conflictual, that the determination of profit
>is peculiar to the ability of each capital to squeeze out a surplus from
>its own work force, and that the tendency towards a uniform rate of profit
>kicks in subsequently as a result of the external pressure arising from
>capitals migrating whither returns seem greater.
>-Another approach to the problem would take the equalisation achieved
>through competition as realising a general rate of profit whose essential
>determinants are already given prior to the formation of prices of
>production, that the aggregate value and surplus value arise from
>system-wide determinations effective at the level of the capitalist
>totality (which presupposes that 'capital in general' has a real existence
>and is not merely a theoretical tool) and then allocated to 'aliquot parts'
>of it.