

Karl Marx
Marx, Karl
Display paragraphs in this book containing:
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 1st edition.
18 of 55

Part III, Chapter XV

I. General Remarks.


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


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


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


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


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


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


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


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


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


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


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


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

II. Conflict between the Expansion of Production and the Creation of Values.


The development of the productive power of labor shows itself in two ways: First, in the magnitude of the already produced productive powers, in the volume of values and masses of requirements of production, under which new production is carried on, and in the absolute magnitude of the already accumulated productive capital: secondly, in the relative smallness of the capital invested in wages as compared to the total capital, that is, in the relatively small quantity of living labor required for the reproduction and self-expansion of a given capital as compared to mass production. It is at the same time conditioned on the concentration of capital.


So far as the employed labor-power is concerned, the development of the productive powers shows itself once more in two ways: First, in the increase of surplus-labor, that is, the reduction of the necessary labor time required for the reproduction of labor-power; secondly, in the decrease of the quantity of labor-power (the number of laborers) employed in general for the purpose of setting in motion a given capital.


Both movements do not only go hand in hand, but are mutually conditioned on one another. They are different phenomena, through which the same law expresses itself. However, they affect the rate of profit in opposite ways. The total mass of profits is equal to the total mass of surplus-values, the rate of profit = s/C = (surplus-value)/(advanced total capital). Now, surplus-value, as a total, is determined first by its rate, secondly by the mass of labor simultaneously employed at this rate, or what amounts to the same, by the magnitude of the variable capital. One of these factors, the rate of surplus-value, rises in one direction, the other factor, the number of laborers, falls in the opposite direction (relatively or absolutely). To the extent that the development of the productive power reduces the paid portion of the employed labor, it raises the surplus-value by raising its rate; but to the extent that it reduces the total mass of labor employed by a certain capital, it reduces the factor of numbers with which the rate of surplus-value is multiplied in order to calculate its mass. Two laborers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 laborers each working only 2 hours, even if they could live on air and did not have to work for themselves at all. In this respect, then, the compensation of the reduction in the number of laborers by means of an intensification of exploitation has certain impassible limits. It may, for this reason, check the fall of the rate of profit, but cannot prevent it entirely.


With the development of the capitalist mode of production, the rate of profit therefore falls, while its mass increases with the growing mass of the employed capital. Given the rate, the absolute increase in the mass of capital depends on its existing magnitude. But on the other hand, if this magnitude is given, the proportion of its growth, the rate of its increment, depends on the rate of profit. The increase in the productive power (which, we repeat, always goes hand in hand with a depreciation of the productive capital) cannot directly increase the value of the existing capital, unless it increases, by raising the rate of profit, that portion of the value of the annual product which is reconverted into capital. So far as the productive power is concerned (since it has no direct bearing upon the value of the existing capital), it can accomplish this only by raising the relative surplus-value, or reducing the value of the constant capital, so that those commodities which enter either into the reproduction of labor-power or into the elements of constant capital are cheapened. Both of these things imply a depreciation of the existing capital, and both of them go hand in hand with a relative reduction of the variable as compared to the constant capital. Both things imply a fall in the rate of profit, and both of them check it. Furthermore, so far as an increased rate of profit causes a greater demand for labor, it tends to increase the working population and thus the material, whose exploitation gives to capital its real nature of capital.


Indirectly, however, the development of the productive power of labor contributes to the increase of the value of the existing capital, by increasing the mass and variety of use-values, in which the same exchange value presents itself and which form the material substance, the objective elements, of capital, the material objects of which the constant capital is directly composed and the variable capital at least indirectly. With the same capital and the same labor more things are produced, which may be converted into capital, aside from their exchange value. Things which may serve for the absorption of additional labor, and consequently of additional surplus-labor, and which therefore may become additional capital. The amount of labor, which a certain capital may command, does not depend on its value, but on the mass of raw and auxiliary materials, of machinery and elements of fixed capital, of necessities of life, of which it is composed, whatever may be their value. As the mass of the employed labor, and thus of surplus-labor, increases, so does the value of the reproduced capital and the surplus-value newly added to it grow.


These two elements playing their role in the process of accumulation should not, however, be observed in their quiet existence side by side, as Ricardo does. They imply a contradiction, which expresses itself in antagonistic tendencies and phenomena. These antagonistic agencies oppose each other simultaneously.


Together with the incentives for an actual increase of the laboring population, which originates in the augmentation of that portion of the total social product which serves as capital, there are the effects of other agencies, which create merely a relative over-population.


Together with the fall of the rate of profit grows the mass of capitals, and hand in hand with it goes a depreciation of the existing capitals, which checks this fall and gives an accelerating push to the accumulation of capital-values.


Together with the development of the productive power grows the higher composition of capital, the relative decrease of the variable as compared to the constant capital.


These different influences make themselves felt, now more side by side in space, now more successively in time. Periodically the conflict of antagonistic agencies seeks vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions, which restore the disturbed equilibrium for a while.


The contradiction, generally speaking, consists in this that the capitalist mode of production has a tendency to develop the productive forces absolutely, regardless of value and of the surplus-value contained in it and regardless of the social conditions under which capitalist production takes place; while it has on the other hand for its aim the preservation of the value of the existing capital and its self-expansion to the highest limit (that is, an ever accelerated growth of this value). Its specific character is directed at the existing value of capital as a means of increasing this value to the utmost. The methods by which it aims to accomplish this comprise a fall of the rate of profit, a depreciation of the existing capital, and a development of the productive forces of labor at the expense of the already created productive forces.


The periodical depreciation of the existing capital, which is one of the immanent means of capitalist production by which the fall in the rate of profit is checked and the accumulation of capital-value through the formation of new capital promoted, disturbs the existing conditions, within which the process of circulation and reproduction of capital takes place, and is therefore accompanied by sudden stagnations and crises in the process of production.


The relative decrease of variable capital as compared to the constant, which goes hand in hand with the development of the productive forces, gives an impulse to the growth of the laboring population, while it continually creates an artificial over-population. The accumulation of capital, so far as its value is concerned, is checked by the falling rate of profit, in order to hasten still more the accumulation of its use-value, and this, in its turn, adds new speed to the accumulation of its value.




The real barrier of capitalist production is capital itself. It is the fact that capital and its self-expansion appear as the starting and closing point, as the motive and aim of production; that production is merely production for capital, and not vice versa, the means of production mere means for an ever expanding system of the life process for the benefit of the society of producers. The barriers, within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move, these barriers come continually in collision with the methods of production, which capital must employ for its purposes, and which steer straight toward an unrestricted extension of production, toward production for its own self, toward an unconditional development of the productive forces of society. The means, this unconditional development of the productive forces of society, comes continually into conflict with the limited end, the self-expansion of the existing capital. Thus, while the capitalist mode of production is one of the historical means by which the material forces of production are developed and the world-market required for them created, it is at the same time in continual conflict with this historical task and the conditions of social production corresponding to it.

III. Surplus of Capital and Surplus of Population.


With the fall of the rate of profit grows the lowest limit of capital required in the hands of the individual capitalist for the productive employment of labor, required both for the exploitation of labor and for bringing the consumed labor time within the limits of the labor time necessary for the production of the commodities, the limits of the average social labor time required for the production of the commodities. Simultaneously with it grows the concentration, because there comes a certain limit where large capital with a small rate of profit accumulates faster than small capital with a large rate of profit. This increasing concentration in its turn brings about a new fall in the rate of profit at a certain climax. The mass of the small divided capitals is thereby pushed into adventurous channels, speculation, fraudulent credit, fraudulent stocks, crises. The so-called plethora of capital refers always essentially to a plethora of that class of capital which finds no compensation in its mass for the fall in the rate of profit—and this applies always to the newly formed sprouts of capital—or to a plethora of capitals incapable of self-dependent action and placed at the disposal of the managers of large lines of industry in the form of credit. This plethora of capital proceeds from the same causes which call forth a relative over-population. It is therefore a phenomenon supplementing this last one, although they are found at opposite poles, unemployed capital on the one hand, and unemployed laboring population on the other.


An overproduction of capital, not of individual commodities, signifies therefore simply an over-accumulation of capital—although the overproduction of capital always includes the overproduction of commodities. In order to understand what this over-accumulation is (its detailed analysis follows later), it is but necessary to assume it to be absolute. When would an overproduction of capital be absolute? When would it be an overproduction which would not affect merely a few important lines of production, but which would be so absolute as to extend to every field of production?


There would be an absolute overproduction of capital as soon as the additional capital for purposes of capitalist production would be equal to zero. The purpose of capitalist production is the self-expansion of capital, that is, the appropriation of surplus-labor, the production of surplus-value, of profit. As soon as capital would have grown to such a proportion compared with the laboring population, that neither the absolute labor time nor the relative surplus-labor time could be extended any further (this last named extension would be out of the question even in the mere case that the demand for labor would be very strong, so that there would be a tendency for wages to rise); as soon as a point is reached where the increased capital produces no larger, or even smaller, quantities of surplus-value than it did before its increase, there would be an absolute overproduction of capital. That is to say, the increased capital C+ΔC would not produce any more profit, or even less profit, than capital C before its expansion by ΔC. In both cases there would be a strong and sudden fall in the average rate of profit, but it would be due to a change in the composition of capital which would not be caused by the development of the productive forces, but by a rise in the money-value of the variable capital (on account of the increased wages) and the corresponding reduction in the proportion of surplus-labor to necessary labor.


In reality the matter would amount to this, that a portion of the capital would lie fallow completely or partially (because it would first have to crowd some of the active capital out before it could take part in the process of self-expansion), while the active portion would produce values at a lower rate of profit, owing to the pressure of the unemployed or but partly employed capital. Matters would not be altered in this respect, if a part of the additional capital were to take the place of some old capital crowding this into the position of additional capital. We should always have on one side the sum of old capitals, on the other that of the additional capitals. The fall in the rate of profit would then be accompanied by an absolute decrease in the mass of profits, since under the conditions assumed by us the mass of the employed labor-power could not be increased and the rate of surplus-value not raised, so that there could be no raising of the mass of surplus-value. And the reduced mass of profits would have to be calculated on an increased total capital.—But even assuming that the employed capital were to continue producing value at the old rate, the mass of profits remaining the same, this mass would still be calculated on an increased total capital, and this would likewise imply a fall in the rate of profits. If a total capital of 1,000 yielded a profit of 100, and after its increase to 1,500 still yielded 100, then 1,000 in the second case would yield only 66 2/3. The self-expansion of the old capital would have been reduced absolutely. A capital of 1,000 would not yield any more under the new circumstances than formerly a capital of 666 2/3.


It is evident that this actual depreciation of the old capital could not take place without a struggle, that the additional capital ΔC could not assume the functions of capital without an effort. The rate of profit would not fall on account of competition due to the overproduction of capital. The competitive struggle would rather begin, because the fall of the rate of profit and the overproduction of capital are caused by the same conditions. The capitalists who are actively engaged with their old capitals would keep as much of the new additional capitals as would be in their hands in a fallow state, in order to prevent a depreciation of their original capital and a crowding of its space within the field of production. Or they would employ it for the purpose of loading, even at a momentary loss, the necessity of keeping additional capital fallow upon the shoulders of new intruders and other competitors in general.


That portion of ΔC which would be in new hands would seek to make room for itself at the expense of the old capital, and would accomplish this in part by forcing a portion of the old capital into a fallow state. The old capital would have to give up its place to the new and retire to the place of the completely or partially unemployed additional capital.


Under all circumstances, a portion of the old capital would be compelled to lie fallow, to give up its capacity of capital and stop acting and producing value as such. The competitive struggle would decide what part would have to go into this fallow state. So long as everything goes well, competition effects a practical brotherhood of the capitalist class, as we have seen in the case of the average rate of profit, so that each shares in the common loot in proportion to the magnitude of his share of investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, every one tries to reduce his own share to a minimum and load as much as possible upon the shoulders of some other competitor. However, the class must inevitably lose. How much the individual capitalist must bear of the loss, to what extent he must share in it at all, is decided by power and craftiness, and competition then transforms itself into a fight of hostile brothers. The antagonism of the interests of the individual capitalists and those of the capitalist class as a whole then makes itself felt just as previously the identity of these interests impressed itself practically on competition.


How would this conflict be settled and the "healthy" movement of capitalist production resumed under normal conditions? The mode of settlement is already indicated by the mere statement of the conflict whose settlement is under discussion. It implies the necessity of making unproductive, or even partially destroying, some capital, amounting either to the complete value of the additional capital C, or to a part of it. But a graphic presentation of this conflict shows that the loss is not equally distributed over all the individual capitals, but according to the fortunes of the competitive struggle, which assigns the loss in very different proportions and in various shapes by grace of previously captured advantages or positions, so that one capital is rendered unproductive, another destroyed, a third but relatively injured or but momentarily depreciated, etc.


But under all circumstances the equilibrium is restored by making more or less capital unproductive or destroying it. This would affect to some extent the material substance of capital, that is, a part of the means of production, fixed and circulating capital, would not perform any service as capital; a portion of the running establishments would then close down. Of course, time would corrode and depreciate all means of production (except land), but this particular stagnation would cause a far more serious destruction of means of production. However, the main effect in this case would be to suspend the functions of some means of production and prevent them for a shorter or longer time from serving as means of production.


The principal work of destruction would show its most dire effects in a slaughtering of the values of capitals. That portion of the value of capital which exists only in the form of claims on future shares of surplus-value of profit, which consists in fact of creditor's notes on production in its various forms, would be immediately depreciated by the reduction of the receipts on which it is calculated. One portion of the gold and silver money is rendered unproductive, cannot serve as capital. One portion of the commodities on the market can complete its process of circulation and reproduction only by means of an immense contraction of its prices, which means a depreciation of the capital represented by it. In the same way the elements of fixed capital are more or less depreciated. Then there is the added complication that the process of reproduction is based on definite assumptions as to prices, so that a general fall in prices checks and disturbs the process of reproduction. This interference and stagnation paralyses the function of money as a medium of payment, which is conditioned on the development of capital and the resulting price relations. The chain of payments due at certain times is broken in a hundred places, and the disaster is intensified by the collapse of the credit-system. Thus violent and acute crises are brought about, sudden and forcible depreciations, an actual stagnation and collapse of the process of reproduction, and finally a real falling off in reproduction.


At the same time still other agencies would have been at work. The stagnation of production would have laid off a part of the laboring class and thereby placed the employed part in a condition, in which they would have to submit to a reduction of wages, even below the average. This operation has the same effect on capital as though the relative or absolute surplus-value had been increased at average wages. The time of prosperity would have promoted marriages among the laborers and reduced the decimation of the offspring. These circumstances, while implying a real increase in population, do not signify an increase in the actual working population, but they nevertheless affect the relations of the laborers to capital in the same way as though the number of the actually working laborers had increased. On the other hand, the fall in prices and the competitive struggle would have given to every capitalist an impulse to raise the individual value of his total product above its average value by means of new machines, new and improved working methods, new combinations, which means, to increase the productive power of a certain quantity of labor, to lower the proportion of the variable to the constant capital, and thereby to release some laborers, in short, to create an artificial over-population. The depreciation of the elements of constant capital itself would be another factor tending to raise the rate of profit. The mass of the employed constant capital, compared to the variable, would have increased, but the value of this mass might have fallen. The present stagnation of production would have prepared an expansion of production later on, within capitalistic limits.


And in this way the cycle would be run once more. One portion of the capital which had been depreciated by the stagnation of its function would recover its old value. For the rest, the same vicious circle would be described once more under expanded conditions of production, in an expanded market, and with increased productive forces.


However, even under the extreme conditions assumed by us this absolute overproduction of capital would not be an absolute overproduction in the sense that it would be an absolute overproduction of means of production. It would be an overproduction of means of production only to the extent that they serve as capital, so that the increased value of its increased mass would also imply a utilisation for the production of more value.


Yet it would be an overproduction, because capital would be unable to exploit labor to a degree required by the "healthy, normal" development of the process of capitalist production, a degree of exploitation, which would increase at least the mass of profit to the extent that the mass of the employed capital would grow; which would therefore exclude any possibility of the rate of profit falling to the same extent that capital grows, or of the rate of profits falling even more rapidly than capital grows.


Overproduction of capital never signifies anything else but overproduction of means of production—means of production and necessities of life—which may serve as capital, that is, serve for the exploitation of labor at a given degree of exploitation; for a fall in the intensity of exploitation below a certain point calls forth disturbances and stagnations in the process of capitalist production, crises, destruction of capital. It is no contradiction that this overproduction of capital is accompanied by a more or less considerable relative over-population. The same circumstances, which have increased the productive power of labor, augmented the mass of produced commodities, expanded the markets, accelerated the accumulation of capital both as concerns its mass and its value, and lowered the rate of profit, these same circumstances have also created a relative over-population, and continue to create it all the time, an over-population of laborers who are not employed by the surplus-capital on account of the low degree of exploitation at which they might be employed, or at least on account of the low rate of profit, which they would yield with the given rate of exploitation.


If capital is sent to foreign countries, it is not done, because there is absolutely no employment to be had for it at home. It is done, because it can be employed at a higher rate of profit in a foreign country. But such capital is absolute surplus-capital for the employed laboring population and for the home country in general. It exists as such together with the relative over-population, and this is an illustration of the way in which both of them exist side by side and are conditioned on one another.


On the other hand, the fall in the rate of profit connected with accumulation necessarily creates a competitive struggle. The compensation of the fall in the rate of profit by a rise in the mass of profit applies only to the total social capital and to the great capitalists who are firmly installed. The new additional capital, which enters upon its functions, does not enjoy any such compensating conditions. It must conquer them for itself, and so the fall in the rate of profit calls forth the competitive struggle among capitalists, not vice versa. This competitive struggle is indeed accompanied by a transient rise in wages and a resulting further fall of the rate of profit for a short time. The same thing is seen in the over-production of commodities, the overstocking of markets. Since the aim of capital is not to minister to certain wants, but to produce profits, and since it accomplishes this purpose by methods which adapt the mass of production to the scale of production, not vice versa, conflict must continually ensue between the limited conditions of consumption on a capitalist basis and a production which forever tends to exceed its immanent barriers. Moreover, capital consists of commodities, and therefore the overproduction of capital implies an overproduction of commodities. Hence we meet with the peculiar phenomenon that the same economists, who deny the overproduction of commodities, admit that of capital. If it is said that there is no general overproduction, but that a disproportion grows up between various lines of production, then this is tantamount to saying that within capitalist production the proportionality of the individual lines of production is brought about through a continual process of disproportionality, that is, the interrelations of production as a whole enforce themselves as a blind law upon the agents of production instead of having brought the productive process under their common control as a law understood by the social mind. It amounts furthermore to demanding that countries, in which capitalist production is not yet developed, should consume and produce at the same rate as that adapted to countries with capitalist production. If it is said that overproduction is only relative, then the statement is correct; but the entire mode of production is only a relative one, whose barriers are not absolute, but have absoluteness only in so far as it is capitalistic. Otherwise, how could there be a lack of demand for the very commodities which the mass of the people want, and how would it be possible that this demand must be sought in foreign countries, in foreign markets, in order that the laborers at home might receive in payment the average amount of necessities of life? This is possible only because in this specific capitalist interrelation the surplus-product assumes a form, in which its owner cannot offer it for consumption, unless it first reconverts itself into capital for him. Finally, if it is said that the capitalists would only have to exchange and consume those commodities among themselves, then the nature of the capitalist mode of production is forgotten, it is forgotten, that the question is merely one of expanding the value of the capital, not of consuming it. In short, all these objections to the obvious phenomena of overproduction (phenomena which do not pay any attention to these objections) amounts to this, that the barriers of capitalist production are not absolute barriers of production itself and therefore no barriers of this specific, capitalistic, production. But the contradiction of this capitalist mode of production consists precisely in its tendency to an absolute development of productive forces, a development, which comes continually in conflict with the specific conditions of production in which capital moves and alone can move.


It is not a fact that too many necessities of life are produced in proportion to the existing population. The reverse is true. Not enough is produced to satisfy the wants of the great mass decently and humanely.


It is not a fact that too many means of production are produced to employ the able bodied portion of the population. The reverse is the case. In the first place, too large a portion of the population is produced consisting of people who are really not capable of working, who are dependent through force of circumstances on the exploitation of the labor of others, or compelled to perform certain kinds of labor which can be dignified with this name only under a miserable mode of production. In the second place, not enough means of production are produced to permit the employment of the entire able bodied population under the most productive conditions, so that their absolute labor time would be shortened by the mass and effectiveness of the constant capital employed during working hours.


On the other hand, there is periodically a production of too many means of production and necessities of life to permit of their serving as means for the exploitation of the laborers at a certain rate of profit. Too many commodities are produced to permit of a realisation of the value and surplus-value contained in them under the conditions of distribution and consumption peculiar to capitalist production, that is, too many to permit of the continuation of this process without ever recurring explosions.


It is not a fact that too much wealth is produced. But it is true that there is periodical overproduction of wealth in its capitalistic and self-contradictory form.


The barrier of the capitalist mode of production becomes apparent:

1) In the fact that the development of the productive power of labor creates in the falling rate of profit a law which turns into an antagonism of this mode of production at a certain point and requires for its defeat periodical crises.
2) In the fact that the expansion or contraction of production is determined by the appropriation of unpaid labor, and by the proportion of this unpaid labor to materialised labor in general, or, to speak the language of the capitalists, is determined by profit and by the proportion of this profit to the employed capital, by a definite rate of profit, instead of being determined by the relations of production to social wants to the wants of socially developed human beings. The capitalist mode of production, for this reason, meets with barriers at a certain scale of production which would be inadequate under different conditions. It comes to a standstill at a point determined by the production and realisation of profit, not by the satisfaction of social needs.


If the rate of profit falls, there follows on one hand an exertion of capital, in order that the capitalist may be enabled to depress the individual value of his commodities below the social average level and thereby realise an extra profit at the prevailing market prices. On the other hand, there follows swindle and a general promotion of swindle by frenzied attempts at new methods of production, new investments of capital, new adventures, for the sake of securing some shred of extra profit, which shall be independent of the general average and above it.


The rate of profit, that is, the relative increment of capital, is above all important for all new offshoots of capital seeking an independent location. And as soon as the formation of capital were to fall into the hands of a few established great capitals, which are compensated by the mass of profits for the loss through a fall in the rate of profits, the vital fire of production would be extinguished. It would fall into a dormant state. The rate of profit is the compelling power of capitalist production, and only such things are produced as yield a profit. Hence the fright of the English economists over the decline of the rate of profit. That the bare possibility of such a thing should worry Ricardo, shows his profound understanding of the conditions of capitalist production. The reproach moved against him, that he has an eye only to the development of the productive forces regardless of "human beings," regardless of the sacrifices in human beings and capital values incurred, strikes precisely his strong point. The development of the productive forces of social labor is the historical task and privilege of capital. It is precisely in this way that it unconsciously creates the material requirements of a higher mode of production. What worries Ricardo is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself. And the quantitative proportion means everything here. There is indeed something deeper than this hidden at this point, which he vaguely feels. It is here demonstrated in a purely economic way, that is, from a bourgeois point of view, within the confines of capitalist understanding, from the standpoint of capitalist production itself, that it has a barrier, that it is relative, that it is not an absolute, but only a historical mode of production corresponding to a definite and limited epoch in the development of the material conditions of production.

IV. Supplementary Remarks.


Seeing that the development of the productive power of labor proceeds very disproportionately in the various lines of industry, not only in degree, but also in at times in opposite directions, it follows that the mass of the average profit (= surplus-value) must be considerably below that level, which one would naturally assume according to the development of the productive forces in the most advanced lines of industry. The fact that the development of the productive forces in different lines of industry proceeds in considerably different rates, or even in opposite directions, is not due merely to the anarchy of competition and the peculiarity of the bourgeois mode of production. The productivity of labor is also conditioned on natural premises, which frequently become less productive to the extent that productivity, so far as it depends on social conditions, increases. This leads to opposite movements in these different spheres, progress here, retrogression there. Consider, for instance, the mere influence of the seasons, on which the greater part of the raw materials depends for its mass, the exhaustion of forests, coal and iron mines, etc.


While the circulating part of constant capital, such as raw material, etc., continually increases in mass to the extent that the productivity of labor grows, it is not so with the fixed capital, such as buildings, machinery, apparatus for lighting, heating, etc. Although a machine becomes absolutely dearer with the growth of its bodily mass, it becomes relatively cheaper. If five laborers produce ten times as many commodities as formerly, this does not increase the outlay for fixed capital tenfold; although the value of this part of the constant capital increases with the development of the productive forces, it does not increase by any means in the same proportion with them. We have frequently pointed out the difference in the proportions of the constant to the variable capital, as it expresses itself in the fall of the rate of profit, and the difference in the same proportions as expressed with the development of the productivity of labor with reference to the individual commodity and its price.


[The value of a commodity is determined by the total labor-time, whether past or living, incorporated in it. The increase in the productivity of labor consists precisely in this that the share of the living labor is reduced while that of the past labor is increased, but in such a way that the total quantity of labor incorporated in that commodity declines, so that the living labor decreases more than the past labor increases. The past labor—the constant part of capital—materialised in the value of a certain commodity consists partly of wear and tear of fixed, partly of circulating constant capital entirely consumed by that commodity, such as raw and auxiliary materials. That portion of value which comes from raw and auxiliary materials must decrease with the productivity of labor, because this productivity seeks expression through these materials by reducing their value. On the other hand, it is precisely characteristic of the rising productivity of labor, that the fixed part of the constant capital is strongly augmented and with it that portion of value which is transferred by wear and tear to the commodities. In order that a new method of production may turn out to be a real increase in productivity, it must transfer in wear and tear a smaller portion of the value of fixed capital than is deducted from it through a saving of living labor, in short, it must reduce the value of the commodity. It must do so as a matter of course, even if an additional value is transferred to the commodity through an increase in the quantity or value of raw and auxiliary materials, as may sometimes happen. All additions of value must be more than compensated by the reduction in value resulting from a decrease in living labor.


This reduction of the total quantity of labor incorporated in a certain commodity seems to be the essential mark of an increase in the productive power of labor, no matter under what sort of social conditions production is carried on. There is no doubt that the productivity of labor would be measured by this standard in a society, in which the producers would regulate their production according to a preconceived plan, or even under a simple production of commodities. But how is this under capitalist production?


Take it, for instance, that a certain line of capitalist industry produces an average normal commodity of its sphere under the following conditions: The wear and tear of fixed capital amounts to ½ shilling per piece; raw and auxiliary materials are transferred into it at the rate of 17½ shillings per piece; in wages, 2 shillings, and surplus-value 2 shillings, the rate of surplus-value being 100%. Total value 22 shillings. We assume for the sake of simplicity that the capital in this line of production has the composition of the average social capital, so that the price of production of the commodities is identical with the value and the profit of the capitalist with the created surplus-value. In that case the cost-price of the commodity is ½ + 17½ + 2 = 20 sh., the average rate of profit 2/20 = 10%, and the price of production of one individual commodity 22 sh., equal to its value.


Now let us assume that a machine is invented, which reduces the living labor required for each individual commodity by one-half, but at the same time trebles that portion of the commodity's value which is due to the wear and tear of fixed capital. In that case, the calculation is modified in this way: Wear and tear 1½ sh., raw and auxiliary materials the same as before, 17½ sh., wages 1 sh., surplus-value 1 sh., together 21 sh. The commodity has then fallen 1 sh. in value: The new machine has certainly increased the productivity of labor. From the point of view of the capitalist, the matter has now the following aspect: His cost-price is now 1½ sh. for wear, 17½ sh. for raw and auxiliary materials, 1 sh. for wages, total 20 sh., as before. Since the rate of profit is not at once altered by the new machine, he will receive 10% more than his cost-price, that is, 2 sh. The price of production, then, remains unaltered at 22 sh., as before, but it is 1 sh. above the value of these commodities. So far as a society producing under capitalist conditions is concerned, the commodity has not become any cheaper, the new machine signifies no improvement. The capitalist is therefore not interested in the introduction of this new machine. And since its introduction would make his present and not yet worn-out machinery simply worthless, would make old iron of it, would mean a positive loss for him, he takes good care not to commit such a utopian mistake.


The law of increased productive power, then, does not apply absolutely to capital. So far as capital is concerned, the productive power is not increased by the enhancement of productive labor in general, but only by saving more in the unpaid portion of living labor than is expended in past labor, as we have already indicated in volume I, chapter XV, 2. Here the capitalist mode of production falls into another contradiction. Its historical mission is the ruthless development in geometrical progression, of the productivity of human labor. It becomes disloyal to its mission, whenever it puts a check upon the development of productivity, as it does here. Thus it demonstrates once again that it is becoming weak with age and more and more outliving its usefulness.]*37


Under competition, the increase in the minimum of capital required for the successful operation of an independent industrial establishment in keeping with the increase in productivity assumes the following aspect: As soon as the new and more expensive equipment has become universally established, smaller capitals are henceforth excluded from these enterprises. Smaller capitals can carry on an independent activity in such lines only during the incipient stage of mechanical inventions. On the other hand, very large enterprises, such as railroads, with an extraordinarily high relative proportion of constant capital, do not yield any average rate of profit, but only a portion of it, interest. Otherwise the rate of profit would fall still lower. At the same time, this offers direct employment to large aggregations of capital in the form of stocks.


An increase of capital, or accumulation of capital, does not imply a fall in the rate of profit, unless this growth is accompanied by the aforementioned alterations in the proportions of the organic constituents of capital. Now it so happens that in spite of the continual and daily revolutions in the mode of production, now this, now that, greater or smaller portion of the total capital continues for certain periods to accumulate on the basis of a given average proportion of those constituents, so that its growth does not imply any organic change, and consequently no fall in the rate of profit. This continual expansion of capital, and consequently expansion of production on the basis of the old method of production, which proceeds quietly while the new methods are already developing by its side, is another reason, why the rate of profit does not decrease in the same degree in which the total capital of society grows.


The increase of the absolute number of laborers, in spite of the relative decrease of the variable as compared to the constant capital, does not take place in all lines of production, and not uniformly in those in which it does proceed. In agriculture, the decrease of the element of living labor may be absolute.


By the way, it is but a requirement of the capitalist mode of production that the number of wage workers should increase absolutely, in spite of its relative decrease. Under this mode, labor-powers become superfluous as soon as it is no longer compelled to employ them for 12 to 15 hours per day. A development of the productive forces which would diminish the absolute number of laborers, that is, which would enable the entire nation to accomplish its total production in a shorter time, would cause a revolution, because it would put the majority of the population upon the shelf. In this the specific barrier of capitalist production shows itself once more, proving that capitalist production is not an absolute form for the development of the productive powers and creation of wealth, but rather comes in collision with this development at a certain point. This collision expresses itself partly through periodical crises, which arise from the circumstance that now this, now that, portion of the laboring population is rendered superfluous in its old mode of employment. The barrier of capitalist production is the superfluous time of the laborers. The absolute spare time gained by society does not concern Capitalism. The development of the productive powers concerns it only to the extent that it increases the surplus labor time of the working class, not to the extent that it decreases the labor time for material production in general. Thus capitalist production moves in contradictions.


We have seen that the growing accumulation of capital implies its growing concentration. Thus the power of capital, the personification of the conditions of social production in the capitalist, grows over the heads of the real producers. Capital shows itself more and more as a social power, whose agent the capitalist is, and which stands no longer in any possible relation to the things which the labor of any single individual can create. Capital becomes a strange, independent, social power, which stands opposed to society as a thing, and as the power of capitalists by means of this thing. The contradiction between capital as a general social power and as a power of private capitalists over the social conditions of production develops into an ever more irreconcilable clash, which implies the dissolution of these relations and the elaboration of the conditions of production into universal, common, social conditions. This elaboration is performed by the development of the productive powers under capitalist production, and by the course which this development pursues.


No capitalist voluntarily introduces a new method of production, no matter how much more productive it may be, and how much it may increase the rate of surplus-value, so long as it reduces the rate of profit. But every new method of production of this sort cheapens the commodities. Hence the capitalist sells them originally above their prices of production, or, perhaps, above their value. He pockets the difference, which exists between these prices of production and the market-prices of the other commodities produced at higher prices of production. He can do this, because the average labor time required socially for the production of these other commodities is higher than the labor time required under the new methods of production. His method of production is above the social average. But competition generalises it and subjects it to the general law. Then follows a fall in the rate of profit—perhaps first in this sphere of production, which gradually brings the others to its level—which is, therefore, wholly independent of the will of the capitalist.


It must be noted here, that this same law rules also those spheres of production, whose product passes neither directly nor indirectly into the consumption of the laborers or into the conditions under which their necessities are produced; it applies, therefore, also to those spheres of production, in which no cheapening of commodities can increase the relative surplus-value or cheapen labor-power. (It is true that a cheapening of constant capital may increase the rate of profit in all these lines while the exploitation of the laborer remains the same.) As soon as the new mode of production begins to expand, and thereby to furnish the tangible proof that these commodities can actually be produced more cheaply, the capitalists working under the old methods of production must sell their product below their full prices of production, because the value of these commodities has fallen, because the labor time required by these capitalists for the production of these commodities is longer than the social average. In one word—this appears as the effect of competition—these capitalists are compelled to introduce the new method of production, under which the proportion of the variable to the constant capital has been reduced.


All circumstances, which bring about the cheapening of commodities by the employment of improved machinery amount in the last analysis to a reduction of the quantity of labor absorbed by the individual commodities; in the second place, to a reduction of the wear and tear portion of machinery transferred to the value of the individual commodity. To the extent that the wear and tear of machinery is less rapid, it is distributed over more commodities and displaces more living labor during its period of reproduction. In both cases the quantity and value of the fixed constant capital are increased over those of the variable capital.


"All other things being equal, the power of a nation to save from its profits varies with the rate of profits, is great when they are high, less, when low; but as the rate of profit declines, all other things do not remain equal....A low rate of profit is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England...a high rate of profit by a slower rate of accumulation, relatively to the numbers of the people." Examples: Poland, Russia, India, etc. (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, p. 50ff.) Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; secondly, because the growing productivity of labor is accompanied by an increase in the mass of use-values produced by the same exchange value, that is, an increase in the material elements of capital, thirdly, because the lines of production become more varied; fourthly, because the credit system, lock companies, etc., are developed, and with them the facility of converting money into capital without becoming an industrial capitalist; fifthly, because the wants and the greed for wealth increase; sixthly, because the mass of investments in fixed capital grows; etc.


The following three principal facts of capitalist production must be kept in mind:

1) Concentration of means of production in a few hands, whereby they cease to appear as the property of the immediate laborers and transform themselves into social powers of production. It is true, they first become the private property of capitalists. These are the trustees of bourgeois society, but they pocket the proceeds of their trusteeship.
2) Organisation of labor itself into social labor, by social co-operation, division of labor, and combination of labor with natural sciences.
In both directions, the capitalist mode of production abolishes private property and private labor, even though it does so in contradictory forms.
3) Creation of the world market.


The stupendous productive power developing under the capitalist mode of production relatively to population, and the increase, though not in the same proportion, of capital values (not their material substance), which grow much more rapidly than the population, contradict the basis, which, compared to the expanding wealth, is ever narrowing and for which this immense productive power works, and the conditions, under which capital augments its value. This is the cause of crises.

Notes for this chapter

The foregoing is placed between brackets, because it passes in some points beyond the scope of the original material, which I found in a note of the original manuscript, a revision of which I undertook.

Part IV, Chapter XVI.

End of Notes

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